3 On Your Side: Penny Auctions
PHILADELPHIA (CBS) -- Penny auction websites are becoming more popular than ever, promoting brand-new electronics and designer stuff for up to 99% off! But 3 On Your Side Consumer Reporter Jim Donovan finds that not everyone is a fan. Some say the sites lure you into spending money when you have no guarantee of getting anything in return.
Brand new iPhones for $15, digital cameras for $3, or Prada sunglasses for $46! Penny auctions promote great deals on hot merchandise. Pat Brown says he got an iPad for $150, and an iMac computer for $1.60! Plus a whole lot more, including a flat screen TV, iPods and three digital cameras for cheap. He did it by bidding on a site called Quibids.
Penny auctions start at zero. Bidders up the ante on an item a penny at a time. But there are costs associated with each bid too. Each time you raise your the bid, in reality it costs you an average of 60 to 75 cents and if you lose the auction, you also lose all the money you shelled out in making the bids.
Even so Brown believes he's ahead of the game. He says, "I probably spent $4,000 dollars in bids in the past five months but on the other hand I've probably won double that in merchandise value."
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Bill Larson isn't convinced. He says, "They're just sucking dollars out of your wallet." Larson spent $200 dollars bidding on a website called Bidsauce. He won two $50 gift cards but says he never got them because he didn't claim them in 30 days, something he missed in the fine print. He believes penny auction sites are addictive and lure you in like gambling. Larson says, "You don't realize it until that money is gone how much you've lost and not saved."
The Federal Trade Commission says consumers have filed hundreds of complaints with the agency and the Better Business Bureau has gotten more than 1500 complaints about penny auctions in the last year. Becky Maier of the Better Business Bureau says, "We urge extreme caution with consumers. We urge that consumers understand that it's very hard to actually win the products."
A class action lawsuit against Quibids and other penny auction sites claims companies are illegally gambling and operating a lottery. Quibids strongly denies all the allegations and says it offers shoppers fun chances to win items at good prices. Jill Farrand of Quibids says, "I know for a fact this is not gambling or any illegal lottery. What I would call it is entertainment shopping."
Quibids admits it profits from bids, but says it offers losing shoppers the chance to apply the amount they spend towards buying the item. According to Farrand, "The worst case scenario should be a customer walking away at retail price."
Bidsauce didn't respond to 3 On Your Side's request for a comment. We found that while they only have 2 complaints with the Better Business Bureau, they have an "F" rating for not responding to them.
If you decide to try one out be sure to use a credit card and not a debit card. That way you have greater protections to dispute charges when you pay for something, but don't get it.
Reported by Jim Donovan, CBS 3
