Originally published March 6 2005
Ebay class-action lawsuit claims auction site has improper bidding arrangement
by Mike Adams, the Health Ranger, NaturalNews Editor
A class action suit has been filed in California against auction site Ebay. The suit claims that the online auctioneer encouraged bidders to increase their maximum bid for items in a way that increased the amount winning bidders ended up paying. Although the amount of money that Ebay stood to gain from each transaction is very small, the suit claims that Ebay's high transaction volume generated substantial illicit revenue.
Ebay's automated bidding system can pit bidders against themselves, a class action suit claims.
The suit accuses eBay of "shilling," the practice of bidding on an item with no intention of buying it, merely to raise the price.
"[Lead plaintiff Glenn] Block came to us," said Reed Kathrein, a partner in Lerach Coughlin Stoia Geller Rudman & Robbins, the law firm that filed the suit.
They told him, basically, 'Tough luck.'" Kathrein said his law firm did an investigation, finding hundreds of examples, and decided that the suit had merit.
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.
"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.
"EBay isn't exactly hugely profiting in my opinion," she added.
But Lerach Coughlin said that, with eBay's approximately 126 million registered accounts, those nickels and dimes add up to serious money.
In addition to the charge of inflating bids, Lerach Coughlin will have to convince the judge and jury that eBay is an auctioneer and therefore subject to California laws that govern auctioneers and auction houses.
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