eBay Sued Over Bidding Practices

This is getting out of hand. Is this lawsuit week here in California or what? But now on the heels of Dell and HP, comes a new lawsuit aimed at auction giant eBay.

“EBay Inc. is being sued by a Pennsylvania man who charges that it illegally forces up prices when certain high bidders raise their maximum bid to guard against last-minute offers, an attorney for the plaintiffs said on Wednesday.

“In a proposed class-action lawsuit filed Feb. 17 in Santa Clara County Superior Court, lead plaintiff Glenn Block claims that eBay raised his bid from $111 to $112.50 after he responded to an e-mail from auction site that said he was the highest bidder for an item.

“The email warned that he could be outbid if he did not increase his maximum. Block alleged that he could have won the auction at $111, and accused eBay of forcing him to overpay by $1.50.” Source: Reuters via Yahoo News

Maybe I’m missing something but I thought that’s how it works. If you are the highest bidder you can sit and wait praying that no one else swoops in, or you can re-set your maximum to ward off a last minute bid.

Is that wrong? Any eBay bidding experts out there who want to weigh in?

UPdate From InternetNews.com: “Bids on eBay must be raised by minimum increments; for example, if someone wants to top a bid of $100, he must bid at least $102.50. Bidders can wait and watch to see if anyone else places a higher bid, or they can set a maximum bid amount and let eBay’s system automatically bid for them. According to eBay, the system will only bid enough to maintain the bidder’s top rank, that is, one minimum increment above the second-highest bid.

“When bidders reach their maximum bids, they get an automated e-mail confirmation that they’re the highest bidder. But it includes the warning, “Important: You are one bid away from being outbid. If another user places a bid, you will not win. To increase your chances of winning, enter your highest maximum bid.” The bidder would assume that his bid would only be raised again if someone outbid him. However, in some cases, the system automatically increases the bidder’s already high bid by enough to meet the minimum increment.

“Said Kathrein, “Essentially, they’re saying, ‘even though we don’t tell you this, when you place that next highest bid, we’ll put it a full increment above the bid behind you.’” For example, if that person with the $100 bid accepted the invitation to raise his maximum, the system in some cases would immediately raise the bid to $102.50 — even if no one else had bid in the meantime.

“If a user accepts eBay’s request to provide a higher maximum bid, eBay then acts as a shill bidder on behalf of the seller at the price level of the highest former competing bidder. As a result of eBay’s hidden shill bid, eBay automatically raises the hapless buyer’s bid so as to out-bid eBay’s shill,” the suit charges.

“David Reiley, associate professor of economics at the University of Arizona, and an expert on eBay bidding, said, “What eBay is doing is a little bit glitchy, not it’s real cheating. It could fix this problem by requiring people to submit bids on a fixed grid.” Source: Internetnews.com

To be honest, I am still confused….