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eBay Accused of Price Gouging Scheme
Symbiot writes "eBay is being sued in a Calilfornia court for a practice that the plaintiff, Glenn Block of Pennsylvania, claims artificially raises the amount of a bid. The practice combines the warning emails that eBay sends out when you are the highest bidder and your bid is at your maximum, with the bid increment mechanism. It seems that if your original maximum bid settnig prevents your current bid from falling on an increment then your current bid will be raised to the next increment as soon as you raise your maximum. If the plaintiff wins this class action suit could cost eBay tens or hundreds of millions of dollars."
The seller has to pay a fee to get an item listed, the seller has to pay another fee when money is sent via PayPal. That is the real price gouging.
[o]_O
From the article: "EBay automatically increases bids only when the maximum has been hit and when the prior top bid was between bidding increments. For example, bidding increments on items priced between $100 and $249.99 is $2.50. Block, however, raised his bid increment by $1.50." therefore his bid increment would not be enough to secure the item.
Whoopty fucking doo.
We're talking about maybe a dollar more here?
And that amount is still below what you set you were willing to pay.
This seems more like a bug then some sort of evil scam.
Technology, the cause of and solution to all of life's problems.
And please keep note as to whether Ebay stops this practice before the court requires them to as an indication of the confidence in their innocence.
In the first place, no one held a gun to his head to make him increase his maximum. In the second place, if he originally thought the item was worth x$, why increase it?
Learn to snipe, cherry boy.
Just read the article, the last line of it summarises the entire lawsuit:
EBay had net revenue of $3.27 billion in 2004.
Ahh it is whoopty fucking doo though.
And a dollar is actually a lot for such schemes. For example it is illegal for a boss to shave a minute off of your clock time even though it may only be worth a few cents extra. Doing that could save a large company hundreds if not thousands of dollars per pay period. The people recieving the checks probably wouldnt notice either, but it is still cheating people of money and illegal.
The same reason the "money shaving" scheme in office space was wrong comes to mind.
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So, eBay is price gouging an -auction- whose parameters [set increments] are defined well before the customer participates?
Perhaps I'm missing some nuance of law, but this seems like something that eBay's lawyers [and the judge] will toss into the street with a nice lengthy brief which summarizes to "RTFM!".
Actually once you get above $1k, the bid increments are much higher, so it could be $25-$50 difference. Multiply that enough times, and it is a big number. But ebay is not the beneficiary, the seller is, so...
Something bothers me about the nature of civil suits and monetary awards in this country.
Why is it that we make it a habit of running off with as much money as we possibly can from a lawsuit?
The purpose of suing for this sort of stuff should be twofold: 1) to regulate company action by means of threat and penalty AND 2) reparations. Nowhere in those two clauses do I find any justification for "screwing the other guy over because he did it to me first."
It seems to me that few suits are about that anymore. While its true that you are entitled to sue if a company takes advantage of you, often times the rabidity with which "wronged" plaintiffs style their demands leads me to wonder if they are simply taking advantage of the momentary shift in power.
In that scenario, it's no longer about punishing the one who took advantage of you because he could. It's about turning around and taking full advantage of him, because now you can.
I liken this to a physical auction where the auctioneer is saying, "I have $100, do I hear $150, $150?" He's looking for $150, not for some dimwit to yell $110. If he gets no bites at $100, he may sell at $100 or ask for $125. What he doesn't do is throw it open for said dimewit to say, "I'll give you $100.01."
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
Don't worry, they're making money hand over fist and a few hundred million, if it came to that, would be a drop in the bucket. They should probably worry more about class actions suits in regard to PayPal's practices.
Personally I'm not sure I could live in a world without eBay.
Je suis d'accord. But as they keep fscking around with their formula I loathe them more and more each day.
A feeling of having made the same mistake before: Deja Foobar
"therefore his bid increment would not be enough to secure the item"
That is not correct if I understand you right, so your comment should not be moderated Insightful.
The proxy bidding system is what eBay is using to manipulate some buyers, and thus milk higher FVFees from eBay sellers.
A person CAN win an auction if their high bid is not a full official increment above the lower bidder. This happens in the following situation:
I bid $5.02 on an auction first. Then you bid $5 in the final seconds, in an attempt to snipe my bid which is showing as the starting price of $0.99. I win the auction with a winning bid of $5.02, even though the next increment should be $5.25.
My appology if you meant this and I wasn't understanding what you were saying in your post.
Why slashdot? Why not?
As someone put it well in another post, you should be bidding on the increments. Be thankful that eBay lets you occasionally get away with underbidding the next increment, rather than complaining when you do what you are supposed to.
Why are you increasing your maximum bid? You should decide the absolute maximum of how much you are willing to spend and bid that. It can be shown that, by behaving this way, you are playing the game theoretic optimal strategy. You should never need to increase your maximum.
Some people complain that they were outbid by only a dollar or two. However, since you never know the maximum bid of the next bidder, you cannot know that. You really only know that someone else valued the product more than you did; they were willing to pay more for it.
Basically, you should just trust eBay's proxy vote mechanism to work for you.
Except that that's not what happens. This issue only happens when someone else bids $80.
Your bid is now $80, but you still win because you were there first.
However, if you *then* bump your max bid higher, it'll bump your current bid up an increment.
Know how you solve this problem? Actually make your max bid the maximum amount you're willing to pay for the item to start with, like you're supposed to.
I dunno, this sounds much ado about nothing to me. I havent bought anything of ebay in a while, but my rule of thumb was to make one bid; whatever the maximum I was willing to spend and *leave it the hell alone* until the auction was over. If you always bid your max and let ebay's proxy system work the way it's supposed to then you 1) never pay any more that what it takes to outbid the second highest bidder and 2) never get caught up in ridiculous bidding wars.
Another option is to use a sniping site (I used to use esnipe, which worked great. Havent tried it in a while). It would automatically place your bid for you a few seconds before the end of the auction, so you have no chance to re-raise your bid should it fall short. It encourages you to determine how much that item is worth to you first and bid your max.
Automatically increasing the leading bid to the next increment does sound shady, but by allowing himself to be influenced by ebay's "OMFG YOU MIGHT BE OUTBID!!!11" email, he's falling right in thier trap. Ebay takes a percentage of the final sale value, so anything they do to increase the sale price just puts more money in thier pocket.
.... if the one doing the gouging is making no extra money from it? That aside from the fact that: 1) (and most importantly) You agree to bid up to and including your maximum bid. Legally. As long as eBay doesn't put you up for more than that bid, STFU and go home. 2) The amount in question is generally about 2-3% of the sale price. Whoop-de-fucking doo. 3) It's probably a bug anyway.
Thanks for the relevant info. That helps show where the problem lies, but it really helps support the suit, not defend it.
One problem here is that the bids in question were not tied, unless you accept Ebays twisted definition of tied as "closer than the bidding increment".
Two, defining the raising your maximum proxy bid as a new bid is contrary to any other proxy auction ever held. Even if you accept that it is a new bid of the same amount, isn't your previous bid still the oldest at that price?
IANAL, but redefining commonly accepted practices in a contract or license almost never stands up in court. For example, if the fine print in a contract says "We define "purchase" to mean we come and take it back in 3 months", a court would throw that part of the contract out because it runs counter to the commonly accepted definition of "purchase".
The last paragraph you refereneced at least tells you outright what will happen. But it's so counterintutive and counter to common proxy auction practices that I don't think it will matter in court.
-Ryan C.
However, your solution misses the same scenario that eBay's cut 'n paste response does: What if I'm bidding on multiple items within a single budget. In those cases, I bid less that I'm willing to pay for each individual item to keep my commitment below a certain level. Each time I'm outbid on something, my total commitment goes down, then I can increase my bids on one or more remaining items.
If you enter a proxy bid of $125, then you are entering into a contract with eBay and the seller to pay up to $125 if yours is the winning bid. If you end up winning at $102.50, then you should be happy for getting the item for $22.50 cheaper than you were willing to spend. It doesn't matter if you were initially willing to spend $100.01 before, your new bid of $125 supercedes this, and by your own free will. If you weren't willing to pay $102.50, then why did you place a bid of $125?
You see? You see? Your stupid minds! Stupid! Stupid!
here is something that might stop the last minute frenzy bidding ...
Each time a new bid is entered the auction will last at least another 5 minutes. That in my opinion will be more auction like, more sport like and also fair.
OK, everyone is complaining that this system doesn't make sense but lets break down what is going on.
Say I am bidding on an item and my maximum bid is £101.
The auction is currently at $90.
The auction has increments of £5.
Someone makes a bid of £100, my maximum bid is greater, but less than the increment so it is used.
The auction now stands at £101.
I'm getting worried that I might loose the auction as its right on the max, so I increase my bid to £120.
Ebay then increases the current bidding to £105.
This seems to be what the lawsuit is about, ebay raising the current bidding, when you increase your maximum bid just because your original maximum bid fell between increment levels. In this case it fell between £100 and £105.
If I originally had bid £120, instead of £101 then when the other bidder placed a bid of £100, my bid would not have incremented to £101, but instead to £105 as that is the next incremental level.
If ebay is found to be at fault then they may have to set it so that you can only bid on the increment levels.
If ebay just change the system so that the current bidding price increases when you increase your bid then bots will probably be written to take advantage. They will just place a bid 1p above the next incremental level, if it fails then 1p above the next level. Keep going until you reach your maximum bid. In the case of the example auction that I highlited above the bid could save £4.99, so it would seem like a way of saving money.
At the risk of repeating stuff I posted elsewhere in more depth, it's probably worth pointing out one thing:-
Conflict of interest.
EBay are acting both as an auctioneer and as a proxy bidder on your behalf. The line between the two roles gets blurred in practice by the EBay system, but their purpose is clearly different; one is working for you, one is out to get your money.
Increasing your maximum bid should be akin to phoning up the proxy (automatic) bidder during the auction and informing him that *if* you are outbid, he should counter up to your new maximum bid.
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I'm sure the claim was noticed under the policy, but it should not be paid. This type of claim is not what D&O policies are designed to cover. Also, D&O policies have what are known as conduct exclusions, which carve out coverage for fraud, among other things. However, if the suit proves legitimate and this causes the stockholders of eBay to sue the D's and O's for failure to supervise or some other such cause of action, the policy might then respond (depending on the specific policy terms, like whether there is severability for the innocent D's & O's).
Secondly, I doubt eBay has "hundreds of millions" of limit in their D&O program. Even if every insurance carrier who cared to was participating on a given program, there's limited capacity. I think the most even an AIG would put up on a risk is $25 million, perhaps up to $50 million if there is reinsurance. Large companies build a program with many layers to a total of maybe $100 million, sometimes (but rarely) more.
Disclaimer: I am an underwriter, but the statements above are not professional advice or opinion. I am not an underwriter on eBay's program.
If you're raising your bid after your initial bid, you deserve an idiot tax. Changing bids reflects a complete misunderstanding of the basic premise of the eBay auction.
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Yeah, it's always been like this. Amazing sombody is suing 'cause they found a loophole to screw themselves!
"Flyin' in just a sweet place,
Never been known to fail..."
How does it support the suit? It's documented procedure. When you sign up with ebay, you're expected to read and understand how the process works. Just because you're too lazy too, doesn't make you eligible to sue them for something you should have known before you started bidding.
Ebay tells you it works this way. If you use the system you agree to those terms. The suit is frivilous.
You might make money on ebay, but without a doubt, ebay is the one getting rich. And good for them, to a point. The Paypal shit, though, will get them burned in hell.
Why are there only 19 people folding@home for slashdot?
No shit. It's like people can't understand what "maximim bid" means. I mean, decide what the highest amount you're willing to pay for that item is, and set it. If you win you win, if not then you didn't overpay for that item. Obviously, if you need to go back in and raise it later, then you didn't actually put your maximum bid in to start with.
Either that, or they caught the "auction bug" and can't help themselves from trying to outbid someone. It's as bad as gambling "sickness" sometimes.
Suppose hypothetically you always bid your true maximum and win every auction. Since your true maximum is by definition the exact amount that the item is worth to you, that means you make zero profit from each auction. Unfortunately, it is rarely the case that one enters an economic transaction with the goal of gaining zero profit. In fact, quite the opposite is true. Usually the reason for entering a transaction is to gain more value in the trade than you give away. Economists even have a name for this type of profit: it's called consumer surplus, and you as a rational buyer are always trying to maximize the amount of consumer surplus in any economic transaction.
Now, back to eBay. In eBay, the buyers each place a semi-secret bid and and the highest bidder pays the amount of the second highest bid. It doesn't take much effort to prove that, assuming all players are rational, bidding your true maximum is always the optimal strategy. However, just because you bid that amount doesn't necessarily mean your goal is to pay that amount. Since not every bidder has the same true maximum, the winner is effectively "gambling" on what the difference between his true maximum and the second highest true maximum will be. I find that this perspective provides a much clearer framework for rigorous discussion of profit and loss in eBay auctions. In particular, it should now be obvious that any raising of the selling price does eat into the expected profits of a rational buyer, and directly affects that buyer's consumer surplus even if the higher price is still less than his true maximum.
I have completely ignored finer subtleties such as the non-rationality of other eBay bidders and the effects of imperfect information or collusion among buyers, which in practice mean that optimal bids (even for rational buyers) turn out to be lower than the true maximum.
One problem here is that the bids in question were not tied, unless you accept Ebays twisted definition of tied as "closer than the bidding increment".
This is probably ebay's definition of tied because this is probably what the internal definition of "tied" is according to the computer program that runs the site.
From the perspective of a programmer the definition they're using makes perfect and immediate sense, they're just using an internal representation based on the bid increment rather than dollars and cents.
IANAL, but redefining commonly accepted practices in a contract or license almost never stands up in court.
I don't really see that as relevant. Ebay invented the ebay bidding system, they defined how it works, and it's never worked any other way.
I have trouble sympathizing with the accusers in this case at all since the best they can come up with is "but the web page didn't describe the policy as clearly as it could have!" even though eBay's FAQ explains things in more detail.
It seems pretty obvious that the policy is what it is not because ebay's scamming money, but just because their software is written in a certain way. Maybe this isn't "intuitive" but I don't see why ebay is under a legal obligation to be "intuitive".
Irritable, left-wing and possibly humorous bumper stickers and t-shirts
Not only is this summary 1/4 as long as the article summary published by Slashdot, it displays a superior level of understanding by its author. More importantly, it encourages readers to read the entire article, rather than pissing them off with typos or stupid statements like this
and this
This is a case where, if I were a schoolteacher and "symbiot" was my student, I would encourage plagiarism.
What nobody is talking about is that there are two aspects to the proxy bidding system: the maximum bid and the timestamp associated with that bid. Each named bidder is only allowed one such pair to control their bidding.
.09 cents, less than the next increment? It is the timestamp of your proxy bid. But when you change the value of your proxy, you changed the timestamp.
The plaintiff here wants to get out of this one "max/timestamp pair" situation with the best of both worlds -- they want to use the later and larger max, but they also want to keep their earlier timestamp, which allows them a non full increment bid.
Think of it this way: you told it to max you out at 100.09. Somebody else bid it up to 100.00. What makes you think you have the right to increase that by
The kicker here is that the priviledge of winning by less than the bid increment comes with a definite disadvantage -- your auction opponent looks out and sees his bid of 100.00 beat by your bid of 100.09. He should fairly be able to ask "why is that jerk not required to bid up to the increment". The only fair answer is if he can rely on the fact that your 100.09 top bid reveals that you are maxed out and that he surpass your proxy max by bidding 101.09. If you are allowed to raise your proxy max without raising your current bid, he should be able to bid 101.09 and force you to bid 102.09. Instead, your new proxy max and timestamp puts you with the high current bid of 101.00 and forces your opponent to bid 102.00, which gives you an advantage towards winning the item since this is higher than the alternative where they could bid 101.09. This may be enough of an advantage to cause you to win. In short -- there was NO GUARANTEE you would have won with your original 100.09, since you are not able to decide for your opponent what his course of action would have been.
The reason the plaintiff will lose this case is that
1) the rules were clear ahead of time
2) raising your proxy max invalidates your old proxy timestamp which is what permitted the non-increment raise
3) there is no guarantee your original high bid would have won (and thus no proof of harm)
4) You cannot prove that you didn't actually pay LESS because of this system.
A) you were less vulnerable to sniping because your opponents could no longer infer that your current bid was your proxy max, and
B) your opponents would have had to raise two full increments above their previous bid to test you.
I mentioned this in another post, but it bears repeating. eBay is--first and foremost--an auction house.
They behave like other auction houses do, and increase bids in an incremental fashion. This prevents ninja-bidders at the last second from bidding pennies more then someone else and winning the auction. (Imagine that you're bidding on a 4.1M dollar house, and someone comes in with 0.01 seconds to go and bids $4,100,000.01).
This practice is NOTHING NEW. Where eBay had to modernize the concept was the fact that everyone is a proxy bidder on their site, no one is bidding in person. This means that they follow the other rules that auction houses follow, which is that when two proxy bids are registered for the same amount, the first person whose proxy bid arrives gets the bid, and the other person has already been outbid.
This is effectively the same thing that would happen were one to visit an actual, honest-to-God auction house. Two people would raise their paddles at the same time. The auctioneer would pick one of them (probably the one whom he sees first), and would accept a bid from them. The other person would either then keep their paddle up for the next bid increment, or they would put it down because that really was the highest dollar amount they were willing to pay.
Ignorance of how auctions work shouldn't entitle one to any amount of payout in a lawsuit. It should entitle one to a swift "ha ha" and a kick in the pants for wasting the rest of our time.
I currently have no clever signature witicism to add here.
The premise being Ebay has bad code. The code should NOT allow you to bid against yourself. They can justify it with "that's how the code works, we like it like that" but it's bad code. It's a bad design to allow you to bid against yourself. People shouldn't have to guard against bad code when making bids. They should put a check, where if you up your maximum it checks to see if your the highest bidder.
Not doing this at best is bad code, at worst it's deliberately ripping people off.
Who here, expects to bid against themselves when bidding (online or offline)? I don't think many people would say they do (unless they already know about Ebay's questionable code).
I have had enough problems with ebray that I will not buy from there. Did you know that if you camplain, the seller can block you from buying again. It happened to me. I purchased something (a Sabre saw) from the Sears eBray store that was sent broken. (Physically in two pieces - and it was not caused by the shipper! Also it was the 3rd or 4th thing I had bought from them.) They treated me like dirt and it took a long time for them to agree to take it back - so of course I gave them a negative feedback. A few months later, I tried to buy something else from them and I was blocked. The reply was that they did it because I gave negative feedback. - Thus the feedback ratings are at best a sham. The real funny thing is that I went into my local Sears and bought a better similar item on sale for less.
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For "not significantly better than" in first paragraph, read that doing anything special in the case that a high bidder raises their maximum is not significantly better than doing nothing.
Oh, and I totally forgot. eBay has SELLERS TOO! For the tiny amount this hurts buyers, it HELPS SELLERS, to whom eBay has just as much loyalty and responsibility. Unless anybody wishes to complain that eBay is prejudiced toward sellers (in contradiction to the obvious time and effort put into the rest of the system to make it equitable), there's now officially nothing whatsoever with this maximum bid thing.
Kindly consider this comment as part of parent when modding ^_^
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