Penny auction warning

Consumers are being warned to avoid penny auction websites where the odds are stacked against bidders; and the auction limits the number and value of wins per account, places expiry dates on bids sold or has heavily restrictive terms on returns of goods.

Online penny auctions are websites that offer goods on auction for minimal or no reserve price and where bids are placed in small amounts, often less than a dollar.

NSW Fair Trading Commissioner Rod Stowe says that while these sites are portrayed as a way to pick up a bargain, many are designed to siphon your money.

“The reason many of these traders are able to make a living by auctioning cheap iPads, cameras, jewellery and other costly items is the sneaky features of the auction not advertised up-front,” he says.

Examples include:

  • the loss of your bid amount if you’re unsuccessful;
  • a requirement to purchase a ‘Bid Pack’ before you can bid;
  • the addition of extra time to the counter clock once a bid is registered in the last moments of the auction.

“With extra time being added to the countdown clock as bids come in, participants are effectively entering into a lottery,” says Stowe. “For every ‘winner’, thousands of others could be out of pocket”.

“On some of the worst sites, it’s less like taking part in an auction and more like gambling on a horse race where you can't see any of the other horses and the finishing line keeps moving away.

Traditional online auction sites have clear rules and the seller offering the goods is not also the one running the auction. 

His advice? Read the fine print, search independent sites for feedback from other users and don’t rush into purchases.

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