posted on February 24, 2005 06:52:25 AM new
Posted on Thu, Feb. 24, 2005
Fee inflation by eBay alleged
By Steve Johnson
Mercury News
San Jose-based eBay has overcharged hundreds of thousands of consumers by artificially inflating the price of goods sold on its Web site in order to boost its transaction fees, according to a class-action lawsuit.
The company's actions, ``require restitution in excess of tens of millions, if not hundreds of millions, of dollars during the past four years,'' according to the suit filed in Santa Clara County Superior Court.
EBay spokesman Hani Durzy issued a statement Wednesday saying the company's executives were unable to respond in detail to the accusations because they hadn't seen the lawsuit. ``But from what we have heard, it appears that the plaintiffs misunderstand the functionality of the eBay bidding system,'' his statement said.
The suit, which was filed last week, seeks a court injunction halting eBay from inflating the prices of its auctioned goods and demanding unspecified damages for consumers. The plaintiff is represented by Lerach, Coughlin, Stoia, Geller, Rudman & Robbins, a San Diego firm well-known in Silicon Valley for filing securities fraud cases on behalf of stockholders.
The eBay suit named only one consumer, a man in Pennsylvania who had allegedly been victimized by the inflated prices. It claimed the overcharges typically amounted to only a few dollars per transaction. Nonetheless, the suit said, the amount of the losses could be enormous, considering how many people use the site.
Posting revenue last year of $3.3 billion, eBay is the world's biggest online auction site, with 135 million registered users and millions of items listed for sale each day.
All together, those sales translate into a lot of money for eBay because of the transaction fees it charges sellers. EBay gets $1.31 for an item sold for $25, for example, and proportionately larger fees for products selling for larger amounts.
The lawsuit likened the way eBay handles auctions to a shill bidding scheme, where buyers are duped into paying more than they had intended for goods.
When consumers bid on an item on eBay's Web site -- www.ebay.com -- they specify the maximum they'd be willing to pay for it, say $100. EBay automatically compares that bid with what others offer for the product. If the next-highest bid is $99 or lower, the $100 bid wins.
In many cases, the suit claimed, eBay tricks the person offering $100 into paying more. It said the company often sends them a note informing them that while they currently have the highest bid, they should consider upping it in case someone else offers more.
As soon as the person states a higher maximum bid, the suit claimed, eBay declares them the winner. But instead of charging them $100 for the item, it said, it bills them $102.50, even though the second-highest bid remained less than $100. The amount of the inflated charges vary, according to the sale price of the product, the suit claimed.
Ina Steiner, editor of AuctionBytes, a Massachusetts publication that tracks auction Web sites, said she has heard gripes from some people who think the prices they paid for eBay items were too high.
``Occasionally we will get complaints where people feel they bid against themselves because of how the eBay system works,'' she said. But those problems may simply stem from confusion over eBay's auction policies, Steiner said.
Lerach, Coughlin also filed a class-action suit last week accusing computer manufacturer Dell of using bait-and-switch techniques. But Reed Kathrein, who helped file both suits, said the two suits were unrelated and not part of an effort by the firm to target technology companies with consumer cases.
posted on February 24, 2005 08:31:15 AM new
I don't bid very often but I have been in the position of increasing my own ending auction price by upping my proxy.
But it seems when it's on one of my items for sale the high bidder can up their proxy bid and nothing changes - this just happen this week!! I figured they must know something that I don't.
I guess it's just penny's on the dollar but when you a speaking of millions of transaction - well it could add up.
posted on February 24, 2005 08:36:45 AM new
I'll post the same thing that I posted on the Powersellers board about this:
Who's the bigger idiot -- the client or the attorney?
Most on the PS board are spectulating that there is more to this suit than what has been reported. My feelings on it is a misinterpretation of the proxy bidding system. However, either way you slice this, bad publicity can hurt overall sales and bidding.
posted on February 24, 2005 08:37:23 AM new
I had one of these. I upped my proxy and my "winning bid" increased, even though I couldn't see where anyone else had entered another bid.
posted on February 24, 2005 09:07:53 AM new
I dont really understand this.
Many times when I see an auction I want to bid on and no one else has bid, I go ahead and submit a bid that is equal to or not much higher than the opening price. I then go to my snipe program and submit what I really want to bid. I do that hoping to dissuade potential bidders (i.e. they may not want to take the time to bid if they see someone else already has). Assuming no one else has bid, the end of the auction will reflect 2 bids (both mine) but selling for the opening price because you can't bid against yourself (or I THOUGHT you can't bid against yourself!).
So in the plaintiff's scenario, when the first bidder bids a second time to increase his bid (which would be the third bid on the auction), they ARE bidding against themselves merely because there was a second bidder? If this is the case, no more opening bids for me. I need to go back to some of my winning auctions and check for myself.
However I'm not surprised if this is so because when I've gotten 2nd chance offers, the price I'm offered is my highest bid against the defaulter. Which irritates me because in my opinion, if they can't make good on their payment, then all their bids should be removed as if they never bid. I usually receive these offers when there were only 2 bidders, me and them. So I always say "No" and wait for the item to be relisted.
posted on February 24, 2005 09:28:02 AM new
I just went back through some of the auctions I won. On those where there were only two bids (both mine), my winning bid was the same as the opening bid. In other words, I didn't bid against myself and increase my bid.
I didn't have any auctions like the plaintiff's. Then of course, I don't submit my highest bid until I snipe it.
posted on February 24, 2005 09:32:59 AM new
I've upped my proxy bid many times. The original amount always stayed the same. In other words, I wasn't bidding against myself.
posted on February 24, 2005 09:35:54 AM new
I wondered if someone was going to say something about those little "worrisome" comments after one has bid.
I think in addition to that they should explain the proxy bidding system a little better.
People on another board I am on are complaining about having to "bid up" reserves.
(not to get into a discussion about reserves)
+++++
It's easier to watch a camel get stuffed
through the eye of a needle, than watch
a man use heaven to get all his friends rich
posted on February 24, 2005 10:13:30 AM new
But Reed Kathrein, who helped file both suits, said the two suits were unrelated and not part of an effort by the firm to target technology companies with consumer cases.
Bullsh*t. This is the most ridiculous thing I habve ever heard of. This is one of those cases where the judge should throw everything out and force the opposing plaintiffs law firm to cover legal costs of the defendants. You know, if they did that more often there would be a hell of a lot less of these types of suits.
~~~ ~~~ ~~~ ~~~ ~~~
If it's really "common" sense, why do so few people actually have it?
posted on February 24, 2005 10:36:36 AM new
Has anyone considered that if a bidder places a second bid when they are the only bidder, that they become more susceptible to bidding fraud?
I've often seen bidders who will bid the opening price on an item, then keep going in and increase their bidding even if no one else has placed a bid. I've actually thought how this really opens up a can of worms because a dishonest seller could use a second id to make the bidder pay more by bidding on the item as well. It would be less obvious as fraud b/c the first bidder is an honest bidder and has no clue they are being duped into their bids going up.
posted on February 24, 2005 11:10:03 AM newThis is the most ridiculous thing I habve ever heard of. This is one of those cases where the judge should throw everything out and force the opposing plaintiffs law firm to cover legal costs of the defendants. You know, if they did that more often there would be a hell of a lot less of these types of suits.
Wow, when did fenix become a republican?
I happen to agree with the statement though.
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.
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Alive in 2005
posted on February 24, 2005 11:49:49 AM new
You can bid against yourself. I have done it (unintentially, of course). It happens when you do a proxy bid that does not cover the minimun bid increment and then you come back later and increase your bid. Say you bid $100.05 initially and a secondary bidder bid $100, the next increment is really $105 but your proxy bid was less than that so the current bid on the item is $100.05. If you decide to increase your proxy bid to $120 in hopes that you won't lose the item to another bidder, your bid on the item will change to $105. You have just effectively bid against yourself and cost yourself another $4.50.
[ edited by stormypetr on Feb 24, 2005 11:51 AM ]
posted on February 24, 2005 11:52:23 AM new
LOL - I am not a republican Stone - I just believe in common sense. This is one of those suits that is 100% greed and 0% common sense.
There are actual legit issues in our courts today that get lost because of these types of BS suits and there are good people trying to build businesses for themselves that fail because they are crushed under the insurance premiums that result from these types of suits.
Sue a company because it did something legitimately wrong, and I'm in support. Sue a company because the financials say it could be a windfall and I think you should be disbarred.
~~~ ~~~ ~~~ ~~~ ~~~
If it's really "common" sense, why do so few people actually have it?
posted on February 24, 2005 08:08:13 PM new
Isn't the bottom line a case of buyer beware? If you place one bid and then come back with another and the numbers don't square up, shouldn't you retract your bid?
Some people just have to pay the stupid tax, even if it's only a few cents.
posted on February 24, 2005 11:32:34 PM new
Yes, buyer beware, but a lot of unhappy not so "wary" buyers go to other boards, work, friends, family and tell them how bad ebay is.
RG makes a good point.
two bids by the same bidder means a proxy has been set, because they were stupid enough not to set one in the first place, so they can get shilled.
Not defending the lawsuit, just throwing an idea in the mix.
It's not frivolous at all. It may only cost you a few bucks but multiply that by a million auctions closing every day, and the money eBay pockets adds up quickly. I don't know if I would call it "shill" bidding or "bidding against yourself" but it is definitely a highly questionable practice. eBay does NOT disclose this information on its site.
From eBay's "proxy bidding" page:
-----------------------------
Here's how bidding on eBay works:
1. When you place a bid, you enter the maximum amount you'd be willing to pay for the item. Your maximum amount is kept confidential from other bidders and the seller.
2. The eBay system compares your bid to those of the other bidders.
3. The system places bids on your behalf, using only as much of your bid as is necessary to maintain your high bid position (or to meet the reserve price). The system will bid up to your maximum amount.
4. If another bidder has a higher maximum, you'll be outbid. BUT, if no other bidder has a higher maximum, you win the item. And you could pay significantly less than your maximum price!
-----------------------------
You're sitting pretty as high bidder and at eBay's suggestion you up your maximum bid to pad your margin. Then eBay increases your current bid to the next bid increment. Even if no other bid has been placed. In effect you are bidding against yourself and paying the higher price.
It's easy to ridicule the bidder over a dollar or two, but IMO this is a major scam by eBay.
