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Back You are here: Home News Local and State News Crime Attorney General: Online Penny Auction Sites Can Cost You Plenty

Attorney General: Online Penny Auction Sites Can Cost You Plenty

By Attorney General Roy Cooper
RALEIGH, N.C. : September 7, 2012 - Laptop computers for $20, gift cards for cents on the dollar, and diamond jewelry for 97 cents? These are among the great deals touted on what are known as penny auction websites. These sites lure bidders with the promise of deep discounts on prized items, from iPads and flat screen TVs to designer apparel and sports equipment.
 But don’t log on to these sites and start bidding just yet. With penny auctions, you’ll have to pay money before you even get a chance to bid. You’re required to buy a certain number of bids, called a bid package, for as much as 50 cents to a dollar per bid before you can start bidding.
The auctions don’t operate like traditional online auction sites. Instead of having a set time for the auction to end, the bidding period for a penny auction can be extended as others place bids. Whoever happens to bid last wins.
With penny auctions, you’re bidding on the chance to buy the object at a supposedly discounted price. But when you add up the cost of buying bids, plus the price you’ll pay for the object if yours is the winning bid, your expected discount can evaporate. Of course, bidding on an object is no guarantee that you’ll win it, no matter how much money you spend in the process. If you don’t win the auction, you’ve lost all the money you spent on bids with nothing to show for it.
Once you’ve participated in one penny auction, you may be bombarded with online ads and spam trying to entice you to spend your hard-earned money on other penny auction sites.
Some penny auction sites face legal challenges that they may violate gambling laws, so you may want to check with your local district attorney or a lawyer before you place a bid. Other penny auction sites want you to do more than just place bids, encouraging bidders
to become investors or “affiliates” in the site and recruit others to pay to participate in the program.
Zeekler, a penny auction site headquartered in North Carolina, lured thousands of people across the world into what the U.S. Securities and Exchange Commission (SEC) called a Ponzi scheme.
My office and other law enforcement agencies opened investigations against
Zeekler and its owner recently shut its doors and entered into a settlement with the SEC.
Consumers who were part of Zeekler should visit http://zeekrewardsreceivership.com/ for information from the receiver appointed by the court to handle Zeekler’s assets.
Our best advice: steer clear of penny auctions.
But if you’re set on participating in one, consider these tips before you start bidding:
 Compare prices. It’s hard to know if you’re getting a good deal unless you know the going price for an item. Find out what retailers charge for items before you
bid on them. Penny auction prices may not be the great deal you’ve been led to believe.
Know your limits. Set a price you aren’t willing to go over and stick with it. Don’t get caught up in the excitement of an auction, blow your budget and pay way more than the item is actually worth.
Look at the true costs. Remember, you have to pay money upfront in order to bid, whether you end
up winning win any auctions or not, so factor those costs when comparing prices and setting a budget.
Read the fine print.  Before you sign up with a penny auction service or
pay for a bid package, read the company’s policies on refunds and returns, and make sure you know who and how to contact them if you have a complaint. Beware of bots. Some penny auctions have been accused of rigging the system by using computer programs called “bots” to bid on items and increase the prices artificially.
Check out the company. Contact my Consumer Protection Division at 1-877-5-NO-SCAM or your local Better Business Bureau to see if they have complaints against a penny auction before you decide to participate. Common complaints about penny auctions include that items can be slow to arrive or never arrive, and that refunds can be difficult to get.
And remember: if something sounds too good to be true, it probably is.
Source: NC Department of Justice.