Buying Bid Pkgs for Online Auction-Legal?

[lchaim]

What is the name of your state (only U.S. law)? Virginia
There are some fairly new online auction sites in which the buyers are required to pay in order to bid. The sites offer brand new merchandise and they market the site showing that you can win auctions for a small fraction of the retail price of the item (eg, $25 for a $1300 camera).

But the potential buyers lose everything if they don't win the auction, and even though there is a set auction end time, as long people are bidding within 20 seconds of the initial auction end-time the end-time keeps getting extended.

I called in to a sydicated radio show hosted by a well known consumer advocate. His staff did some research on this one site I questioned and on air I was told that since the site is run by a for-profit company, the bids cost money, and that there's no real set auction end time, it's really a game of chance which is illegal.

Is this true? If so, who can this be reported to? (I'm in Virginia)

[justalayman]

well, I don't see it as a game of chance since you can win by spending more money. Not sure it would be illegal at all. It is simply an auction with a bidders fee.

it simply sounds like a scam although nothing I see would be illegal, simply unethical.

I would contact the local prosecuting attorney or the states attorney general office.

[lchaim]

Thanks for the reply. Something still doesn't sound "kosher" about this. What exactly is the legal definition of a game of chance?

Everyone has the same odds of winning, no skill is needed to play this, and the odds of winning are based on when someone else will eventually give up the bidding. Whomever (whoever?) gives up loses all their money. This is different from an auction site like eBay in which you are not paying to bid on an item.

Perhaps it is just a scam and legal. I believe the home office of the company I' m referring to is in Germany, though a local office of this company is in California.

I found out about this place by seeing an ad on a Coca-Cola web site. When I approached Coca-Cola about this they had said that they had received several other complaints and were going to be pulling the advertising out.

Thanks again....

Dave

[justalayman]

a game of chance is just that; you cannot control the result. In an auction, you can ensure winning simply by continuing to agree to pay more for the item, therefore, no chance of losing.


There are many auctions that require a "buy in" or the purchase of a right to bid. It's not all that uncommon. This simply sounds like a company making promises that are unrealistic in their expectations. It would appear they actually make money by charging the buy in from many parties and then auctioning the item. Whatever appears to be a deal for the eventual winning bidder is actually due to the loss of the other bidders payments being used to buy the item with the auctioneer keeping anything remaining.

The fact that they allow the bidding to continue until the more reasonable parties simply refuse to bid any higher results in higher earnings for the auctioneer.

Like so many other scams, legal or illegal; this uses the desire of a person to get something for nothing, or an unrealistically reduced cost which results in the scammer making money from their lack of understanding the realities of the game.