Penny auctions are gaining in popularity, but the online commerce is generating a number of complaints from consumers who feel they've been taken, according to the Better Business Bureau.
Unlike traditional online auction sites like eBay, penny-auction sites entice participants with the possibility of winning popular electronics, housewares and other merchandise for a fraction of their value. But there's a catch: Participants must pay simply to bid, with no guarantee of winning.
The sites sell "packets" of bids for prices that typically range up to a dollar per bid, depending on the site.
If someone buys 100 bids at a dollar each, that person is out $100 regardless of whether he or she is ever a successful bidder.
Whenever somebody else places a bid, the end of the auction is extended by 15 seconds, which gives other bidders a chance to keep bidding and extend the action for hours.
Dana Badgerow, president of the BBB of Minnesota and North Dakota, recently conducted her own "secret shopping investigation" on a company called Grabswag and found herself taken for $99 before placing a single bid.
Badgerow responded to an offer for 10 "absolutely free" bids for new customers. Grabswag.com advertises frequently through Facebook pop-up ads and falsely claims BBB accreditation, the BBB said.
Badgerow discovered the site required a credit card number and other personal information in order to receive the "absolutely free" bids. Shortly after signing up, Grabswag billed her for a $99 "starter pack."
Badgerow eventually got a refund, but only after employees at the company's Philippines call center tried to talk her into various compromise deals.
The BBB offers some tips to consumers considering bidding in a penny auction.
• Educate yourself by watching several auctions before bidding.
• Don't accept free offers that require a credit card.
• Pay for winning bids with a credit card whenever possible because if you don't receive the merchandise you can challenge the charges.
• Be suspicious if you click on a website's BBB accreditation logo and you aren't directed to the company's profile on the BBB's website.