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Consumer Updates


Penny auctions can cost consumers hundreds




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December 13, 2011 | 2,605 views | Post a comment

BBB advises consumers to understand penny auction sites

AUSTIN, Texas -- With the promise of high-end items at a 95 percent reduction in price, many consumers have been lured to penny auction sites and ended up losing hundreds of dollars, Better Business Bureau reports. BBB has received more than 500 complaints about penny auctions this year.

Statewide, complaints on several different sites have skyrocketed, ranging from deceptive marketing practices to delivery problems.

“Penny auctions may look like a good deal, but many consumers don’t factor in the cost of bids,” said Carrie A. Hurt, president and CEO of BBB serving Central, Coastal, Southwest Texas and the Permian Basin. “As a result, they sometimes end up paying more than the item is worth.”

Penny auction sites charge consumers a set price for each bid, usually around 50 cents to $1. The auction’s expiration time increases by 10-20 seconds every time someone places a bid.

Proponents say the setup allows companies to make a profit while offering huge discounts to their customers. However, others argue the pay-per-bid model equates to illegal gambling. Several penny auction sites have been sued on those grounds.

“The winner of the auction is not the highest bid, but rather, the last bid when time runs out,” a lawsuit filed in February reads. “Every time contestants bid they are playing a game of chance hoping that time will run out before another player bids.”

BBB cautions consumers to be sure they understand how such sites operate before signing up.

For those who decide the reward is worth the risk, BBB offers the following tips:

· Know what the item is worth. Consumers have complained that while they thought they were getting a good deal at the time, they later found out they could have purchased the item they won for much cheaper somewhere else. Do your research and know what other retailers are charging for the same item.

· Watch out for ‘bots.’ Pranksters, greedy bidders or disreputable companies may create a program that does nothing but bid up the price for certain items, causing you to lose money bidding against it. If bids are coming in too fast from a single bidder, you may be bidding against a computer.

· Set a limit and stick to it. Know how much you can spend and keep your total costs below that number -- including the item price and the money you are spending on bids. Be prepared to walk away from the bids you already made if the price gets too high.

· Read the terms and conditions. Know the company’s refund and delivery policies and who to contact if your product arrives broken or defective or if it does not arrive at all.

· Know what you are buying. Do not provide your credit card number, bank or other personal information unless you are prepared to make a purchase. Some sites offer free registration, but require customers to buy bids before they are allowed to view the auctions; others charge a membership fee.

· Start small. Competition on smaller, less expensive items is usually much lighter than for flat screen TVs or other high-end items. This means fewer bids and lower prices.

· Review the company. Visit bbb.org to view the company’s BBB Business Review, including complaint history, BBB rating and more.

To check the reliability of a company and find trustworthy businesses, visit bbb.org.

About Better Business Bureau:

BBB's mission is to be the leader in advancing marketplace trust. BBB accomplishes this mission by creating a community of trustworthy businesses, setting standards for marketplace trust, encouraging and supporting best practices, celebrating marketplace role models and denouncing substandard marketplace behavior.



Businesses that earn BBB Accreditation contractually agree and adhere to the organization's high standards of ethical business behavior. BBB is the preeminent resource to turn to for objective, unbiased information on businesses and charities.



Contact BBB serving Central, Coastal, Southwest Texas and the Permian Basin at (512) 445-4748.
 
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