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How eBay Sellers Fix Auctions
Boj writes "The Times online is carrying stories on fraud carried out on eBay using shill bidding. Citing eBay's changes to security as aiding the shill bidders and this fraud:
"Last November eBay changed its rules to conceal bidders' identity — making it even more difficult for customers to see whether sellers are bidding on their own lots.""
Ebay knows about this type of fraud and other types and they do very little to combat.
Go to ebay and do a search on 'wholesale list'. You will find people attepting to deceive the buyers, I'll even say that much of this is fraud.
I would bet that among the 'power sellers' (and others) there were organized 'teams' of people that artifically jack up the prices for profit.
Now, if ebay KNEW about these practices and did nothing to stop them, could they be found liable?
I have been a victim of Ebay fraud, complained and heard nothing back. I sucks, but I now expect that from both ebay and paypal.
"Last November eBay changed its rules to conceal bidders' identity making it even more difficult for customers to see whether sellers are bidding on their own lots."
What this also does is it keeps people that wish to help fix the problem from doing so. IE, I see an obvious fraud attempt on EBAY and try to contact the people that are about to be screwed. I can't do it.
It could be worse, it could be Monday.
Am I the only one failing to see the damage done here?
Ok, so I've used eBay and I know there's a "Reserve Price" option for an auction. You set it when you start the auction and if the bids never crest that benchmark, you are under no obligation to provide product/service for amount tendered.
Now, that said, I will concede that a "Reserve Not Yet Met" sign on an auction will cause me to over look an auction. I feel less like I'm getting a deal if that phrase is staring me down. I will also mention that the more bids on an auction the more desirable it is to me (childish, I know, but hey I'm human).
Now, on the other hand, if I were an seller, I could think of a thousand ways to simulate bids. Configure a friend's computer on the other side of the country to forward my internet traffic, for one. And then the cat and mouse game between eBay and I would begin. And what would happen? eBay would have to spend a lot of time investigating this stuff. A lot of time and resources. Only to do what? Send me a nastygram asking me to use Reserve Prices next time? Place a black star next to my name to let bidders know I've been known to use shill bids? Social stigmas of some other sort?
In the end, who cares? eBay should keep it in their TOS & simply let people know that professional seller often practice this. You're not going to find the same deals on eBay that you'd find at some middle of nowhere country farm house liquidation auction where you have to show up in person and stomach 8 hours of farm tools and the worst BBQ lunch sandwiches you've ever tasted.
My work here is dung.
Am writing this book. Pre-register to buy it on Ebay! now.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
Correct me if I'm wrong, but it doesn't seem to matter all that much if you can't see the identity of the bidder. Isn't it pretty trivial to have some small network of people that agree to shill bid for each other?
Apology to Ubuntu forum.
Only pay what you can afford and what you think something is worth. If a seller out bids you on their own product. Fine, let them keep it.
Personally, I avoid eBay like a plague. it's got sucker written all over it.
Tom
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Perish the thought!
Monstar L
The way eBay pricing is set up (percentage of winning bid amount plus flat fee), eBay welcomes the shill whether they act like they do or not. eBay still gets their piece of the action and the seller is still stuck with the item they need to sell. The seller could just create new shills each time they're needed and cry dead bidder to eBay, but once you start to hurt eBay's bottom line, I'm sure they'll notice and take action.
As another poster said ebay makes money off ALL auctions. Fraudalent auctions earn ebay the same amount of money as real auctions.
Just remember Ebay is a flea market. The kind most people wouldn't enter if it existed as a real building. Treat going there as such and you won't get burned.
i thought once I was found, but it was only a dream.
Then what the seller does is send you a "second chance" email if you are the last bidder saying that the original bidder didn't pay or what not and lets you pay what they were offering for the item. The Second Chance is now an offical Ebay thing... which of course is being abused by the Shrills...
I tend to agree with the people saying "Who cares?" about this practice. When placing bids on eBay, you should know from the start how much you're willing to pay for the product you're interested in. If you think "Cool! I'm winning this radio for only $5.00 and it's easily worth $200!" and then the seller enters a number of shill bids, bumping the price up to $150 - fine. He/she is *really* saying "Sorry pal! I'm not letting go of this $200 radio for only $5.00!" Fair enough. The auction hasn't ended yet. The worst he/she really did to you was get your attention with the artificially low starting price and make you think for a little while you were getting a "steal" on the radio.
Now, you have to make a decision. Will you pay a "fair price" for this radio, or will you duck out, saying "Oh well, I don't want one THAT bad. I was just hoping the seller was going to lose his/her ass on the sale." ? It's still completely up to you. And if you bail out, the seller has a real good chance of not getting a buyer at all, causing him/her to pay the listing and re-listing fees for nothing.
You ultimately vote with your dollar on this one.
-If an auction costs more then you want to pay, DON'T BID.
-If a seller looks like they are cheating, DON'T BID.
And ultimately if you feel you have been cheated don't pay, sure you might get a negative feedback but why put up with unfair pricing. If you don't pay people will STOP doing it because they won't sell.
Shill bidding or not... the buyer still enters their maximum price that they are willing to pay for that particular item. If you don't want to pay that much, then don't bid that high! The complaints seem a little misplaced to me. Plus, the fact that everybody and their brother uses eBay now doesn't help prices.
I don't have a problem with it. It has happened and will continue to happen. What I have the biggest problem with is the "Second Chance Offer." I have bid fair price on many (one of a kind) items only to get out bid by something that looks like a shill account. After the auction ends the seller makes a second chance offer to me at the price of the highest bidder.
So I bid 10$ on an item that I am willing to pay 10$ for, Some one outbids me and the number goes to $11, I up the bid to $15 and am again outbid 1$ at a time. At this point I walk away. I then get a second chance offer to buy the item for the 17$ high bid. What makes me even more suspicious is when the same item is then relisted and the pattern repeats itself.
In all honesty, it's e-bay, It is not worth getting worked up over! You win some and you loose some. If you think the seller is a ripoff, add them to your favorite sellers list and put a note stating your opinion of them. Then make sure you do not buy from them again. It would be nice if E-Bay offered a way to tag sellers you do not want to do business with and let you ignore there listings.
if you don't want to pay more than $50 for an item, DON'T BID MORE THAN $50 FOR IT. for christ's sake, this isn't rocket science.
The problem with shill bids is that there's no similar recourse for the buyer. If the buyer's bid is a contract, then why shouldn't the seller's offer to agree to the honest outcome of the auction also be a contract?
its just ridiculous because they're already determined its a valid dispute.. the stupid bastards cancelled all his auctions and suspended the seller's account.. doesn't that give me the right to automatically start this damn dispute so I can get my money back? of course not.. I could of stopped payment on the Money Order, but I rather keep this fight with eBay going.. there's still quite a bit of work they need to do to stop all this fraud.. I've filed formal complaints with I3C and with the USPS for mail fraud..
I guess what is equally as ridiculous is the fact that someone would go through so much time listing auctions for a measley 30 bucks, and having the possibility of getting charged for mail fraud and being under investigation by the IC3..
*plays the Apogee theme song music*
Not true. Ebay is much worse. At a flea market, I can look at the product and I have it in hand when I give the guy my money.
"The legitimate powers of government extend only to such acts as are injurious to others." Thomas Jefferson.
a fair auction isn't one where you pay the maximum price *YOU* would be prepared to pay for something... its where you pay the maximum price *THE NEXT HIGHEST BIDDER* would have payed for it.
Shilled auctions DEFRAUD the bidder of the difference between those prices. Period.
Oh and btw (not directed at parent poster...) shilling is NOT equivalent to setting a reserve price on an auction. Reserve prices are set before an auction starts and represent the lowest price the seller would be willing to sell for. Not the same thing AT ALL.
That's a ridiculous argument. If a kid is going to bully someone into bidding on an eBay item, they're just as likely to bully them for any other reason. Bullies actually existed long before eBay.
Never bid higher than you think something is worth. Further, I would suggest just bidding once: the maximum bid you would make... adding cents to the bid is often helpful to that end. (ex: max bid of $20, I might make it $20.03 or something like that)
Another rule is never risk more than the amount of money you feel comfortable risking. Determinations for that level of risk vary from person to person, but don't decide how you feel about it until you have read that seller's feedback and looked at the other items this person has bought or sold. If you still get a good feeling about it, then great!
*ALWAYS* look at the forms of payment accepted. People get caught up into uncomfortable payment situations when they don't notice beforehand.
*ALWAYS* know what the shipping costs are. This is a great one to pay attention to. If you think a PS3 for $20 is a great deal, check the shipping cost. It might be well over $500 or something ridiculous like that. Shipping costs are rarely, if ever, refundable.
These may seem like common sense for everyone, but common sense goes out the window when a buyer "really wants something" bad enough. It's that "really want it" disorder that really gets people mixed up into things they shouldn't... this "really want it" disorder is the reason spammers are so successful. Most sane people know they shouldn't buy from people who hide their identities, but when they "really want it" common sense just fades away. It's really like religion and beliefs in gods... they really want it, so logic, reason and common sense just fade away where that issue is concerned.
But I don't do any sniping, or bid hunting, or anything else. I just add things to my eBay watch list, and wait until 5 minutes before auction close, when Unwired Buyer calls my cell phone. I then either bid a bit higher than the current price on the item
Entering a bid minutes before the auction ends *is* sniping.
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Personally, I avoid eBay like a plague. it's got sucker written all over it.
Well, that may be. But they stay in business for a reason. If I have something to sell, I can reach a larger market than I can locally. And when I'm looking for some uber rare item that it would take years and thousands of dollars in gasoline to find by scouring every used record store, book store, person's home, etc., ebay comes in very handy.
I've only been burned a couple of times (out of several hundred transactions) and then only for low value items.
My own personal strategies for a succesful transaction include:
1) Never bid on camcorders, computers, automobiles, or any other high dollar item.
2) Always do an extensive check of the seller's feedback.
3) Don't bid early or get involved in bidding wars. Snipe instead.
So it's ebay's fault that your country is full of parents who can't control their children's behavior?
I guess you should close down brick & morter storefronts if you see too many 5th graders inside using their parents money as well, right?
Your entire argument is nonsense.
First time I've seen the think-of-the-children argument used against ebay.
Yes, it does matter, because dishonesty is dishonesty and fraud is fraud, but it seems to me that there is a perfectly simply buyers' algorithm:
a) Look at the item. b) Ignore any minimum bids, reserves, "buy it now" prices, current bid, history, etc; look only at the item itself. c) Decide how much you are willing to pay for it, shipped; d) determine the shipping cost; e) bid your maximum less shipping; f) take no further action whatsoever. Do not change your bid in response to any other ongoing bidding. If you are willing to raise it later, you weren't being honest with yourself when you determined your maximum earlier.
It seems to me that this makes you completely immune to sniping, shill bidding, etc. The only issues that remain are: a) the possibility of frequently being disappointed by not winning the auction; b) the unfairness of being unable to distinguish in advance between honest sellers, with which you may have a chance of getting a bargain if there are few other interested bidders, and dishonest ones, where there are always other interested bidders (i.e. shills).
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I see all kinds of accusatory posts which I would have to disagree with. I've been a long time eBay user and that's mostly as a seller (a silver powerseller for a chunk of it). Now I never participated in shill bidding and would even ban friends of mine from bidding on my auctions. Occasionally I'd shoot them a link to just show them what I had posted and they'd bid on it (usually to get it started) thinking they'd be doing me a favor. For example, if I was selling a $500 monitor they might have bid $40 or something. However, I want absolutely nothing to do with this and I will add their user IDs to be banned from bidding on my auctions the second I see this.
Why? Because I have seen/spoke with people that took part in shill bidding. This will include people that just did it every few auctions and were Gold Powersellers, with well over 1000 positive feedback. Guess what happened to them? Two different things - automatic account termination and/or warnings. I've seen a huge seller (makes $$ for eBay you know) have their account closed, no questions asked. This (AFAIK) was not as a result of a complaint either. We're not talking these retards that bid up the auction and then cancel once they see what the first place bidder's amount was.
Anyway, I would say eBay does a good deal to try and stop this practice. So I'd ask that some people not post unless they know what they're talking about. It seems like a lot of people are talking out of their asses. It can be difficult to catch everything on a site that busy. Why don't you just go solve the problem for them instead of posting useless bullshit here.
Imagine your wife's grandma's heirloom china set is worth $400 on the market, but priceless to her. You have recently dropped one plate, and it's irreplaceable. The plate is worth $80 on the market. 6 months later, you see the plate on Ebay, drawing insipid bidding, reflecting relatively low demand, stuck at $40. Your web design business has been doing well, and you can afford $200 to get back in grace with your wife. You therefore bid $200, raising the current bid to $42. On the final day, you see a series of bids in , all by the same person, raising the price to $160. This is the point at which the shiller did not dare to raise the bid for fear of outbidding you.
Effectively, he got free information about how much you are willing to bid. Information is money. It's like when you're bargaining on a used care--you start with your offer. You don't tell the salesman how much money you brought, and then start bargaining.
In the example above, you pay less than the item is worth TO YOU, but more than market, because the shiller was able to tease that info out of you.
The fixing auctions, with shill bidders on the other hand, isn't as bad in my book. Just don't pay more than you want to pay for it. This is the sellers way of saying they don't want to sell it for less. Getting "caught up" in an auction for a common item is just dumb.
Just stick to the fixed price items, or just set your bid once (at the price want to pay for it) for the item you want. If you're bidding multiple times on an item, you're caught up in the game and have a problem.
-- these are only opinions and they might not be mine.
ebay is a great place to find automobiles but admittedly you have to be careful and you have to be willing to get up off of your butt and go look at the car. I've bought two cars off of ebay and in both cases it took me a long time to find the vehicle I was looking for. When I did I was entirely comfortable paying that sellers "Buy it Now" price and in both cases I went to look at the car in person.
For basic transportation it's not necessarily the way to go. Chances are most people have at least as good a selection within driving distance of them at various dealerships in their area. If you want something a little out of the ordinary though it's a good place to find it.
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How is sniping being an asshole? I'm under no obligation to fork over as much money as a seller is willing to take. Nor am I under any obligation to get into a bidding war with some fanatic to whom winning the auction (at any price) is more important than obtaining the item.
Sure ebay isn't a brick'n'mortar auction house, and it has a different set of rules. So what? In the real world, people don't always pay the asking price --- they are free to haggle in an attempt to bring the price down. Is that also being an asshole? That's the way the market works --- the seller wants to maximize the selling price, and the buyer wants to minimize it. You understand the framework. My advice: If you are a buyer intent on winning, put in a high bid, or snipe it yourself. If you are a seller, set a reserve price. If you don't like the game, don't play.
Hidden referrals are weak.
I think there is a world market for maybe five personal web logs.
But in eBay no one's waiting around the corner to knife you and take it back...
Ok guys I know this has probably been said a hundred times already but why don't you really think about it. Why is this a big deal? You go on Ebay, you bid on something. You then win it or not, nobody is holding a gun to your head making you bid more till you get it. SO WHAT IF THE SELLER UPS THE PRICE YOU DON'T HAVE TO PAY IT. You only pay what you want for the item! It is ridiculous to even call this fraud and you should all grow up and think for yourselves.
I had a shill bidder push me up, then literally bid OVER my price, winning the bid themselves. And I stopped bidding. Then they RETRACTED their bid (which is supposed to already be suspicious) to make sure they didn't win.
I reported them to Ebay, back when the names showed, along with various evidence that the accounts were tied together. (The previous-name of one of them was real-name type username with the same last name as the real-name type username the other one was using... from the same city.)
I did not get my money back - although it was only $1, and it was still a reasonable deal on the item. And I wasn't willing to refuse to pay because I didn't want to screw up MY feedback, and I didn't have enough transactions to make it unimportant.
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No.
In economics, there is a long established and useful concept called consumer surplus. It is based on the fact that some consumers value an item at much higher than the going rate, but that their number is small enough that it would not be in the seller's interest to sell a smaller quantity at a higher price.
For example, say that I am extremely hungry and have a class in 10 minutes. I might be willing to pay $5 for a slice of pizza at the cafeteria nearest to my classroom, due to reasons of both timing and hunger. However, since the cafeteria can't read people's minds, and because of various local trade laws and issues of practicality, they must charge the same price to everyone. Say that the optimal price based on average demand and the cost of supplying pizza, both in labor and materials, is $1.50. So I buy a slice for $1.50 and I am left with a consumer surplus of $3.50.
This example is to say that people often value an item above the market clearing price (or below it, in which case they don't buy), and that the fraud being committed is fraud, because it artificially inflates the market price with bids of buyers who do not intend to pay, and who are in collusion with the seller.
In our pizza example, if a store employee out of uniform had stood next to me and tried to outbid me on pizza, until my reservation price ($5) was reached, that would be fraud. When someone misrepresents themself in a commercial transaction, it is fraud. All the bidders are transactors in an auction, not just the winner.
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Right, that's the way real world auctions work. Ebay has different rules. I do believe back when ebay started and there was actually serious competition, there was another online auction house for which snipeing did not work. On that system, whenever a bid was placed, the auction was extended to last at least another 5 minutes. Thus, you couldn't snipe. Now, similar to an ebay auction it meant you might have to go to the site or read your email and rebid if desired. It also meant you didn't know how long you'd have to watch that auction before it would finish. In the end, we can see ebay didn't go that route. I think people found just bidding their maximum offer works just fine and haggling for an hour at the end of the auction wasn't worth everyone's time.
If you've bid the maximum amount you'd be willing to pay for an auction, the only thing a snipe bid denys you is the better deal you were hoping to get. If they bid earlier, you'd still not get that better deal. The sniping just let you hold onto the hope a bit longer. Why do I snipe? I don't want to deal with the people who don't bid their maximum amount, watch the auction for competition, get emotionally invested in winning the auction, and push up the price I have to pay. By sniping the auction for the amount I'm willing to pay, I win the auction for what I'm willing to pay, and don't if the auction goes higher. There are 2 useful differences between this and a standard bid:
1. People don't get to look at my bid and respond to it. Their bid of how much they're willing
to pay is the only response they get.
2. My bid is retractable up until the time of the auction. This means that I can bid on 10
auctions for identical (to me) items, and stop the other bids if i win an auction.
I find the 2nd benefit quite useful. Ebay doesn't offer anything like this ability. I often shop for items on ebay, find 10 perfectly reasonable auctions, but on ebay I can only bid on 1 auction at a time. Using a sniping system, I can bid on all and set it up to stop when it wins an auction.
Sniping isn't about being an irritant to anyone else. It's just more efficient. If ebay itself offered this bidding option, the seller would essentially get no feedback on his auction until the end, and there wouldn't be any bidding wars to raise the prices. There also wouldn't be any shill bidding, as a reserve bid would work just as well. In my opinion, using sniping bids makes you be diciplined about your bid. You must carefully decide what your maximum bid amount should be (but, you can also change that before the end of the auction, but you can change it up _or_ down). In my opinion, if you're not using the snipe bidding, you aren't shopping as efficiently and carfully as you could.
Andrew
but it's still an asshole move most often capitalized upon by people with less active lives that have time resources to snipe in whenever their auction of interest happens to be ending.
Here:
http://www.jbidwatcher.com/
Now you too can snipe w/out having to sacrifice your active lifestyle.
Just configure it with the auction number to snipe - the amount you want to snipe - and go on with life.
First they burn books, then they burn people.
Sure it's easy enough to justify the action of sniping, just like paying some kid for his spot in line to get a playstation, but it's still an asshole move most often capitalized upon by people with less active lives that have time resources to snipe in whenever their auction of interest happens to be ending. I'm not sure if it's just laziness on the part of programmers at eBay, but I imagine they could gleam a better profit margin by emulating certain aspects of the time tested traditional auction format where bidding is extended upon attempted sniping.
In an ideal world, sniping should have absolutely no effect on the outcome of an auction. It shouldn't matter whether you put your bid in one second after the auction opens or one second before the auction ends, the winner will always be the highest bidder, sniper or not. Unfortunately, eBay is infested with morons. These morons think that they need to bid the minimum each time, like they do in the auction houses they've seen in old sitcoms. When they see that they've been outbid, they bid another dollar, then another, and another... In the span of thirty seconds, they'll place a dozen bids or more, each just a dollar higher than the last, not stopping until they have the high bid (regardless of what the item is actually worth). Considering that you are supposed to bid the maximum you are willing to pay, this behavior makes no sense; if the price you are willing to pay fluctuates that quickly, you should be too stupid to use a computer (unfortunately, this never seems to be the case...).
This problem is easily avoided by not signaling your intent to bid on the item until it is too late for the morons to place more clueless bids. You aren't cheating anyone, you are just holding the morons to their initial bids. People only have a problem with sniping when they think "I would have been willing to pay that price." They'll keep thinking, "It's just another dollar..." even though the fact is, someone was willing to pay more; the high bid is all that matters. If you can't make up your damn mind, you shouldn't be bidding at all.
Snipers do nothing illegal, immoral, unfair, unkind, rude, or unexpected. They place bids, just like everyone else on eBay. Sometimes they win the item, sometimes they don't (and many times they will pass on bidding on an item entirely because the price in the last few seconds is higher than they are willing to pay). Sniping actually forces a handicap on the bidder; by sniping, the bidder has only one chance to place a bid, and even then only if there are no technical issues that prevent the bid from being placed in time.
As for the idea of extending auctions when late bids are placed, that's just idiotic. In most cases you have 5 or 7 days to place a bid. If you can't figure out what you are willing to pay in a week, what good will another 15 minutes do? All I can see is that you might get swept up in the heat of the moment and bid way too much, raising prices for other bidders and giving the sellers the pleasure of trying to collect money from people who are incapable of making decisions - and driving an increasing number of users to alternatives that don't play stupid games with the auction's end time.
I have a solution for all of you who whine about snipers. It is really simple, 100 percent effective, and completely free. Bid more than you are willing to pay. That's it. If you get outbid, it's no big deal, because you never wanted to pay that much in the first place. If you win at your high bid, you may have spent too much, but you get that joy of winning that you seem so concerned about. Best of all, it requires no changes to anything else, so it couldn't be easier to implement.
Yeah, you went for Funny and you got it, but I really can't see the problem here, so please help me out.
I'm bidding on something and I get outbid, let's say the seller himself outbid me. I decide to go somewhere else. The seller is now stuck with the item and he still has to pay eBay their cut. He took a risk; it's a game and he lost. Or the buyer might decide to bid again if he feels that it's still a good deal.
What does it matter who bid before you? It doesn't. You look at the highest bid and then you ask yourself whether you'll pay more than that or not. It doesn't matter if there are 0 or 100 bids on the auction and if all bids are by different people or they're all by the seller. Just look at the highest bid, ask yourself whether you will bid or not, it's so simple.
I don't even see what fraud has to do with a seller bidding on his own auctions and I would hate to try to explain it to the police:
Me: "I think I got ripped off!"
Police officer: "OK, what happened?"
Me: "Well, I bought a shirt for $20 on eBay!"
Police officer: "Ah, and you never received it?"
Me: "Yes, I did!"
Police officer: "Ah, and the shirt turned out to be a knockoff?"
Me: "Nono, it's real, I'm very happy with it!"
Police officer: "So what happened?"
Me: "Well, I saw the shirt, it said $19 and that's cheap, so I bid $20 and won!"
Police officer: "So you saw something you liked, thought it was cheap and bought it. Where's the problem?"
Me: "Well, I suspect that someone else had bid on it before me, possibly even the seller!"
Police officer: "And this is a problem because...?"
And I would have NO idea what to say to that.
I realize it's very hard to catch people doing this if they take their precautions, but I don't even see what they're doing wrong. If someone wants to spend all his time outbidding his customers on his own auctions, thereby making no money and then paying eBay a percentage of every single non-existent sale, then I think we should just let him. I simply don't see what this has to do with fraud.
"This is the sellers way of saying they don't want to sell it for less."
Last I checked, that's what the reserve price is for. Shill bidding is the seller's way of setting a reserve price while hiding that fact from the bidders. It's deceptive at best.
Ebay is an AUCTION SITE, not a retail marketplace. If a seller isn't willing to sell for the market value, he needs to find a different sales format.
It is against the ebay rules. And if you're in a situation where it seems apparent that it might be happening, they have submission form in their documentation specifically for shilling complaints. And in fact, they do enforce the policy in my experience.
/not/ illegal, and they get a larger cut for auctions configured for reserves. Simply setting a reserve guarantees that ebay will receive no less than 1% of the reserve price (and substantially more for items less than about $150). If they allow shill bidding to take place, they lose money. For example, suppose you have a playstation 3 you want to sell and you don't want to let it go for less than $850. If you start the auction at $850, you pay $4.80 to insert it. If you start the bidding at less than a dollar, you take the risk of not meeting your final price, but the insertion fee is cut to only 20 cents. If you start bidding under a dollar and place an $850 reserve, it's %8.70 to start the auction. In each case, closing costs would be 3% of the winning bid plus 56 cents (since it's 5.25% on the first $25). So in this example, if a shiller were to start bidding under a dollar with no reserve, they would have to push the price up to about $1000 or $1130 for the closing fees to match the higher starting bid and reserve situations above, respectively. And the lower the final price, the bigger the difference is in the fees. In the case of an item with a 49.99 reserve selling for $50, the same item would have to sell for $83 without a reserve to generate the same fee. While it is possible that they could make more money by looking the other way for shills, there's a strong chance they'll alienate their users with high prices and frustrating auctions, face legal action if it can be shown that they looked the other way, and in all likelihood make less money than if they were to do the job themselves with reserve prices. Behold the almighty dollar.
I took part in an auction a few months ago which seemed to me to be a clear cut case of shilling. I put a low-ball bid in on a video game, got outbid, and came back the next day (after purchasing it elsewhere) to find that the winning bid that outbid mine had been cancelled but that my bid had been extended to its very top value (I think it was at $1 when I first took the top spot and I'd only offered up to $2). So before paying, I inquired with the seller as to why the other bidder's bid had been retracted. I made no statement toward either having bought the item elsewhere or toward ebay's narrow criteria for allowing retractions. I simply asked why it happened, and the reply to me was something like "Well if you don't want to pay, you should have said something sooner" or some similar BS. So then I wrote a message to the shill bidding department asking for advice of how I should proceed since, as far as I could tell, the anomolous bidding had disrupted the integrity of the auction. A few days later, I recieved an email from their loss prevention department stating hat the seller's account had been terminated and that I should not pay for the auction, as well as informing me of a few options for how I could get a refund if I had already paid. My only complaint about the process is that the form letter said I would be informed of the results of their investigation in 24-48 hours, but it was more like 72.
But anyway, there's are two strong motivations for ebay to enforce a strict anti-shilling policy: first, it's illegal in many places. Second, and more importantly, is that setting a reserve price is
Ebay only pushes your bid up to the reserve if your maximum is over the reserve. If your bid is below the reserve it allows it to stay at the starting price (or does the normal bidding war between you and the other seller).
Paul