One cent and penny auction investigation

We delve into the murky world of one cent or penny auctions.
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02.Getting you hooked

US magazine Time has likened participating in these auctions to doing drugs: “For anybody who finds a bargain even mildly stimulating, this is like pure heroin. In recessionary times, it’s like heroin that will also save puppies.”

And these sites work hard to get you hooked. The flashing signs, urgent countdown timers and testimonials from successful auction-winners are very tempting. 

One of the sites, QuiBids, demonstratively parades some of their winners on their front page. Lurker saved $1985, it proclaims, newtopgun saved $1680. But what does the fine print say about these windfalls? "Results are of highly skilled QuiBids users. Prices do not include the cost of bids".

Gambling by any other name

“The definition of gambling is betting something of value on an uncertain outcome that has elements of chance. You’re outlaying something valuable – money - hoping to win something valuable, like an iPad. If there’s an element of chance, then it fulfils the definition,” explains Professor Nerilee Hing, head of the Centre for Gambling Education and Research at Southern Cross University.

Dr Mark Griffiths, a professor of gambling studies at Nottingham Trent University in the UK, agrees, and believes there is a large element of chance involved in one cent auctions.

“To me, [one cent auctions] are all but gambling in name and they don’t seem to be regulated by any organisation or authority,” he wrote in an article for the World Online Gambling Law Report. He outlined several parallels between these websites and gambling, and believes regulators need to intervene.

“Theoretically a person can bid again and again (on either a single product or multiple products) with no certainty that they will ever win… it does not seem to depend on any discernible skill and it is more like a chance-based lottery. If there is no real skill and it is essentially a chance activity, how is this not a form of gambling?

“Any bidder who just misses out on winning an item on a penny auction website also experiences a near miss experience. [This] may lead to further bidding on other items as a way to relieve the frustration of not winning.”

“It’s chasing your losses,” says Hing. “People are continually chasing money they’ve already lost, which is very conducive to losing control over spending.”

CHOICE members' cautionary tales

Teacher and CHOICE member Vicki Northey was one of those taken in by the puff. “I wanted an iPhone, so I searched for it on Google and I saw this really cheap price come up - it was just $12 at auction. But to bid I had to buy points, and the more you buy the cheaper they are. So I started with $100. After I spent it all I thought, ‘Well I’ve been bidding on this for a long time, I’ve got to be close.’ So I bought another $20 worth.”

Vicki soon regretted her decision to take a punt.

“You think you’re just about to win - you’ve got the highest bid, and then in the last second someone puts in another bid and the clock goes back for another 20 seconds. That goes on and on and on.

“I realised I wasn’t going to win, and I’d wasted $100-$150. I went to school the next day and felt like an absolute fool, but I spoke with another teacher and she had also fallen for it! But she said she had invested so much, she was just going to keep going. She won in the end, but paid the same amount in bids as she would have paid at the store.”

“It’s worse than the pokies!” says Greg James, a concerned CHOICE member who nominated one such site for a Shonky. “I do a lot of online shopping on eBay and other sites around the world, and DealFun was cropping up advertising iPhones and iPads at 80% off. So I signed up on a basic package of 150 bids for $65 just to see how it works.”

“They’re throwing a lot of money into search terms [to ensure they appear at the top of Google] to attach their advertising to iPhone and iPad searches. And it’s a trap. Once they’ve got you they send you emails offering free bids and cheap bids, ‘Get in in the next few hours and redeem them.’ They’re carrots to get people to log on. I think it’s no different [to] casinos.”

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