Florida has become the latest state to reach a settlement with the defunct penny auction website ArrowOutlet, which it accused of rigging auctions to get more money from customers.
Florida residents have until Aug. 16 to make a claim (PDF) for a piece of the $425,000 in consumer restitution Attorney General Pam Bondi obtained from the online auction site, which shut down in 2012. The state accused the site of using an “auto bid” script that artificially inflated the number of bids required to win a given auction.
To obtain restitution, Florida residents or those who were residents when they did business with the site must submit a receipt, credit-card statement, canceled check, or other documentation showing the amount they spent purchasing bids on the website. The maximum amount each person will receive depends on the numbers of claims made and the amounts requested.
Penny auction sites advertise what seem like amazing deals. To bid, you click a bid button and when the clock runs out, the last and highest bidder wins the item at the final price, which can be very low. That’s because bidding starts at or near $0, and each bid raises the price by usually just a penny or two. So an item that gets 1,000 bids in one-penny increments sells for $10, even if it otherwise would cost you hundreds. Participants can bid many times during a single auction and even set the site to bid for them automatically within set limits. But unlike with traditional auctions, bidding isn’t free. You must buy bids up front—usually for 60 cents or so each. And any bid money you spend is gone, whether or not you win.
Florida officials said the auto bid script that the Massachusetts-based ArrowOutlet was using was designed to place bids at certain intervals, thereby prolonging the auction, increasing the number of bids purchased and used, and preventing actual users from winning the items.
In January 2013, Attorney General Rob McKenna of Washington announced that his office had reached a $120,000 settlement with ArrowOutlet, including $50,000 in consumer restitution.