Penny auction fraud is on the rise as penny auction site owners race to increase market share in the hottest trend in e-commerce. Nearly every week new websites pushing penny auctions launch in the face of hundreds of online paid bid auction competitors. Despite the honorable actions by some site owners to become more transparent, the penny auction market is ripe with unfair and dishonest business practices. Below we’ve identified common techniques utilized by some owners use commit penny auction fraud and cheat legitimate bidders out of their money.
Common penny auction fraud tactics
Shill bidding – This is the deplorable act by which penny auction owners, their friends, or their employees place bids on items in an attempt to promote a bidding war with legitimate bidders. Ultimately this leads to an increase in the final sale price of an auctioned item and extending the bidding time to collect more paid bids.
Bidding bots – This is an automatic script built into the penny auction site that creates fake user profiles and then uses those accounts to place fake bids. To the legitimate bidder it looks like he is bidding against another person.
Non-delivery of items won – Because of the numerous penny auction scripts that are available, penny auctions websites are fairly cheap to launch. The low barrier to entry and the huge potential profits make this online venture practically irresistible to many people. Unfortunately, the result has been a saturation of the online penny auction market and many failed sites which don’t end up shipping products that have been won at such incredibly low prices.
Credit and debit card fraud – The opportunity to obtain products at such ridiculously low prices leads to many bidders searching for newly created penny auction sites where they may have the best chance of winning. While this penny auction strategy may seem logical, the risk is quite great. That is, new penny auction websites have little to no history by which to measure their integrity. Moreover, since most new sites are not profitable, the temptation for a site owner to use dishonest business tactics and the probability for such corruption is greater. Hence, the collection of credit card or debit card information from registered users and the potential sale of such information is a definite possibility. To combat this, you should consider using sites that allow you to use PayPal instead.
No reimbursement for losing bids – The most respectable penny auction sites reimburse their users for bids placed on items they don’t win by crediting them towards the purchase of an item of their choice. While non-reimbursement of losing bids does not constitute fraud, in many instances penny auction owners don’t clearly state on their site what happens to losing bids. In my opinion, by not disclosing this important information to bidders upfront in an easy to find location on their site, these owners are passively attempting to defraud customers.
Legitimate penny auction sites
Despite the scams, there are several trustworthy penny auction websites that are funded by honest business owners that value customer service. The key to preventing penny auction fraud is to research the sites before you spend any money on bids. For more information, tips, and strategies used to identify potential fraud, please see our penny auction guide. If you’d like to compare penny auction sites to clearly identify the differences between them and discover which ones reimburse bidders for losing bids, check out our list of the best penny auction sites and our penny auction comparison chart. These guides and tools can be very helpful in preventing bidders from becoming potential fraud victims. Moreover, if bidders will take the time to properly research these sites using the tools provided, they could potentially make money from penny auctions that are won.If you liked this article, please take this time to share it with your Facebook friends using the Facebook button (see Facebook post button to the left) or retweet it using Twitter (see retweet button to the left). You may also want to follow us or subscribe to the site to stay up-to-date with this article. If you'd rather follow us from your Facebook account, join our Facebook fan page or subscribe to our NetworkedBlogs profile.
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