Ebay dealers rigging auto auctions

February 23, 2007

There have been many accusations of dealer rigging in auto auctions and some high profile cases.

More auto dealers are becoming involved in the growing ebay auto motors online auction site as it’s popularity grows.

Shill bidding, aka, ‘bid padding’ is defined by ebay as the deliberate use of secondary registrations, aliases, family members, friends, or associates to artificially drive up the bid price of an item, and is proscribed by ebay’s policies.

The shill uses a form of crowd psychology to provoke a bidding war to drive an item’s price up. The strategy generates interest in the item, encouraging other potential buyers to purchase the goods offered.

Shill is a word that doesn’t own it’s origins to ebay, and has been around much longer believe it or not. It applies not just to online auction sites, but more broadly to marketing. For instance, shills have been used to make casinos and gambling look like a winning game to attract more mug gamblers. In all types of forums on the internet shills of one type or another busily generate interests in products or people through false testimonials or through the packaging of opinions either solely or through purchasing circles. Conversely, shills can also be employed to discredit products, people and or services in the eyes of the viewer.

Shilling is a strategy thats been used in the auction context for a long time, and its difficult to detect. The placing of phony bids on items on behalf of vendors to drive up places has been going on for a long time.

The magnitude of the problem is much greater in the online environment, because users are permitted to have multiple accounts and IP addresses, and they can ‘phone a friend’ or get their associates to bid for their item.

Critics of ebay say they don’t do enough to protect buyers from shill bidders, and for keeping their methods of investigation secret. The reasons for keeping such methods secret should be self-evident.

Most self respecting members of the ebay community frown on the practice of shill bidding. Some ebayers have written guides on their experiences with shill bidders and refined their own methods of detection.

There have been dealers subjected to prosecution and punished by the law as shill bidding can violates US federal law. There are worse sanctions than being suspended or banned from ebay.

The ebay community and the ebayer is one of the most valuable repositories of information and resources on shill bidding. That is not just as victims, but have been participants in the process in some capacity. Books have been written sharing information on how to profit from shill bidding which have led to the downfall of former ebayers. There have also been ‘whistleblowers’ who have spoken out about the process.

People are already naturally cynical when it comes to large companies and monopolies, so it isn’t surprising that they would believe dealers would list cars on online auction sites, and instruct their employees to partake in the practice, particularly on high ticket items. Hopefully the prospect of being visited with suspension or criminal penalties will act as a deterrent.

On the other side of the equation, it isn’t all black and white, and there are people engaged in all kinds of behaviour on auction sites to undermine their competitors. The formation of cartels and anti competitive conduct and brand disparagement has long been a feature of the bricks and mortar world. Why would having an auction online eliminate the practice?

There is nothing more frustrating than listing items for sale on ebay and watching people with zero feedback bidding up an item you have listed. When buyers with zero feedback bid on items that can be a suspicious indicator. What is to stop some competitor or disaffected buyer from registering aliases for the purpose of sabotaging another person’s auction, by making it appear that shill bidding is taking place? What a perfect way to undermine the credibility of an ebayer, by putting buyers on guard that alienating them from partaking in bidding on an ebayer’s item.

All an ebayer seller can do is block zero bidders from bidding on their items. Persons who start buying on ebay have to start somewhere and this doesn’t seem fair nor will it enamour you to the new ebayer, the majority of whom are perfectly legitimate bidders. People who engage in these types of games on auction sites can be cunning and it is well known that those who shill bid aren’t always newly registered with zero feedback. They can often be seasoned ebayers conspiring with others in underhanded practices to maintain their market share.

Making an ebayer appear to be engaging in shilling to discredit them is an ugly practice. It is tantamount to framing someone for a crime.

Those who are against big auto companies participating in auto auctions online due to the increased risks of shill bidding, particularly on big ticket items, have a legitimate point, but should also consider that these large companies are also easy targets for competitors who want to portray them in a poor light.

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