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Advice: Pay-to-bid auctions

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An iPad for $150, a flash camera for $80? That’s the promise from some online auction sites, but as with all things that sound too good to be true, it needs checking out a bit further.

Penny auctions are a twist on online auctions. Instead of a usual auction where you only pay if your bid is the highest, these auctions mean you pay a small fee to bid on the auction.

Each bid increases the price by a small amount, maybe 1 or 2 cents per bid. Each bid might cost $1. If you are the last person to bid then you get to buy the item, usually at a much lower price than the normal retail price.

The upside is that you could end up getting a bargain, but there are a few serious downsides.

The first one is that it’s a lot like gambling. You may end up spending lots on bids and not win. Or you could spend so much on bidding that you may end up paying more in total than the normal retail price. Most auctions also auto-extend each time a bid is placed, so the bidding can go on for a long time.

Not all of the sites have clear information about their fees and rules. Consumers could be caught out with charges that they weren’t expecting, or auctions that extend after the bidding was supposed to close.

Some of these penny auctions have been accused of using fake bidders to increase the price and to ‘win’ auctions that haven’t reached a profitable level of bids.

Many of these auctions are based overseas and different laws will apply. If something goes wrong with the goods you’ve bought, you may not have the same rights as you do in New Zealand, and New Zealand enforcement agencies may not be able to investigate your complaint.

Make sure you research the product you are bidding on, including the recommended retail price. Understand who you are dealing with, how their bidding process works and all the risks, including the possibility of bids being rigged. Set yourself a limit so that you don’t end up spending more than you can afford.

For more information about your consumer rights visit www.consumeraffairs.govt.nz or your local Citizens Advice Bureau