What to Expect on Penny Auction Sites


Roughly 165 penny auction sites can be accessed from the U.S., according to Jack Vonder Heide, president of Technology Briefing Centers in Illinois.

Three auction sites started a trade association called Entertainment Auction Association "with the sole purpose of promoting integrity within the entertainment auction." Two of the founding companies, Swoopo and BigDeal have since shut down. The remaining company, BidCactus, calls itself the oldest U.S. based company in the industry. The association did not return requests for comment.

While Geurts said the intention of the trade association is a "good start," QuiBids has not joined because he said the member criteria is not stringent enough. He thinks penny auction sites should not just have an outside auditor scrutinize its business but also require a "Buy Now" feature for its auction items.

Geurts said the company plans to start its own trade association in coming months.

As the company has grown, so have its followers and critics.

A 23-page class action complaint was filed in November 2010 against QuiBids in an Oklahoma district court claiming the site does not properly disclose the low probability a customer will receive a "financially positive outcome from using the website."

The suit, with named plaintiff Lawrence Locke of Oregon, claims the site fails to disclose the fact that the overwhelming majority of customers will lose money by using the site and the percentage of money returned constitutes violations of the Oklahoma Consumer Protection Act and common law fraud by omission under Oklahoma law.

Roger Mandel of Lackey Hershman, LLP in Dallas, is one of the attorneys representing the class suit.

"It's essentially a lottery," Mandel told ABC News. "You're paying money to buy a bid, and you lose money if you lose your bid. It depends upon chance. There are all sorts of factors beyond your control, including how many people bid, how much they will bid."

He said the class is planning to file a second amended complaint accusing QuiBids of commercial gambling in violation of Oklahoma law.

Mandel said every penny auction site is guilty of the "same problems" but the lawsuit highlights QuiBids because it is the largest.

QuiBids filed a 31- page motion to dismiss the suit in February saying it properly discloses that users may lose money and it is best to bid in the last 20 seconds of an auction, when users' bids add seconds to the countdown clock.

"There's absolutely no merit to the lawsuit as can be seen by reviewing our motion to dismiss the suit," Geurts told ABC News, adding that it is "clearly not gambling" especially because of its "Buy Now" option. Geurts said there is plenty of disclosure in the website, including in its QuiBids 101 section.

"It's in our interest for our customers to be well informed about QuiBids, because if we do a bad job, customers will have a bad experience and not come back."

Stephen Silverman, an avid penny auction player in Phoenix, Ariz., said he prefers the site Beezid.com for its user interface and options, though he has used a number of sites, including QuiBids. He told the Wall Street Journal he has won more than 60 auctions on Beezid since learning about penny auctions in December.

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