Shill Bidding on eBay: A Case Study

[PhilipCohen]

For any eBay “buyers” that are interested I have done a major update to my detailed case study of shill bidding on eBay and the abuse of eBay’s proxy bidding system—all exacerbated by eBay’s introduction of “hidden bidders”—and a detailed comment on eBay’s apparent attitude thereto, still at
AuctionBytes :: View topic - Shill Bidding on eBay: a Case Study
Also now included is a postscript containing a response from eBay to a journalist who put the matter of these cases of shill bidding to eBay. Apparently, whereas they will not tell a reporting eBay user anything, they will give an investigative journalist a response—even if it is disingenuous.

[Rulebreaker]

very good case study, thank you.

I just do not get why shill bidding is considered fraud, since the bidder has the option to increase his bid or not.

[PhilipCohen]

I can best quote the views of another that I also posted at the auctionbytes link:

What do you think about that argument by “richr” that nobody is being forced to part with money unwillingly?

Firstly, the whole point of going to an auction is to try and obtain an item for a bargain. Yes it is true that you go there with a valuation in mind for the maximum you are willing to pay. However, what you are willing to pay and what you should only have to pay are two separate things. The price should be determined by competition amongst buyers without dishonest input from the seller.

As for the second argument that bidders despise having their bids run up—that is the whole point! The bid is being run up through misrepresentation and in a fraudulent manner. By strictly interpreting the law, this is illegal. You cannot assume another identity and engage in such business. You cannot collude with other sellers/individuals to keep the price high.

So let’s rewrite richr’s argument this way—having to pay more than you should as a result of misrepresentation on the seller’s behalf ...

Hmmm—doesn’t quite seem the same now does it?

If you find out afterwards that you’ve been shilled, well then definitely you have parted with the money unwillingly. You have been conned.

It is far from a victimless crime. If it was victimless, then why would eBay have a policy (albeit spin) about not shilling in their auctions? Why did the US prosecute and jail people for shill bidding in 1999?

If shill bidding is victimless, does the same apply to insider trading on the share market? If not, why not? Aren’t these activities both designed to influence a market in an unfair manner that is inconsistent with the rules of supply and demand? ASIC prosecutes and jails inside traders. Why not shills as well?

So if there is no harm in artificially inflating the price through shill bids, why doesn’t everybody do it?—Because it would result in the collapse of auctioning as an exchange mechanism through lack of confidence in the auctioning process.

While we are shill bidding, why not just auction a misrepresented item as well? Caveat emptor—there’s no harm in that if the buyer didn’t do his/her research?

At the end of the day, buyers want to buy an item from an honest seller for a fair price. The buyer wants the item to be legitimate and meet his/her expectation regarding what the seller advertised it as. The seller wants the buyer to be happy, pay promptly and return for repeat business. The auctioneer has a reputation to uphold and wants all transactions to proceed in a harmonious manner. Government and society want auctions to function in a manner that benefits society.

Richr should ask himself this—would you do repeat business with a company that continually rips you off by having a so-called competing buyer come in to force you into paying more than you have to? No. The company has lied to you. It is common sense (and in fact the only way to survive) in the business place to obtain your goods and services for the cheapest price possible, and only do business with other reputable companies (not ones that openly lie and manipulate you).

[biglouis999]

If you go to real bricks and morter auctions then shill bidding is a fact of life with the auctioneer taking bids "off the wall". Just like a bunch of dealers colluding not to bid against one another. You just have to live with it.

Shill bidding is dirty-pool. But such is life. Any bidder can choose to not bid higher at any time they like. I don't condone it nor do I deem it reprehensible. It is what it is.

[PhilipCohen]

Shill Bidding on eBay: Case Study #2

Shining some light on the more sophisticated and therefore harder to detect shill bidding activity by some “professional” sellers on eBay auctions

Oh no, not another case study on shill bidding on eBay auctions? Yes, sorry, another one. This time a spreadsheet analysis of multiple auctions from some "professional" sellers from the US and Australia. Needless to say the analysis demonstrates, once again, that, contrary to eBay's claims, shill bidding by many “professional” sellers is rampant on eBay auctions. The full comment and spreadsheet download links at:
AuctionBytes :: View topic - Shill Bidding on eBay: Case Study #2

[Jonas]

Snipe bidding and shill bidding both do the same unbalance, one in favor of the buyer and one in favor of the seller. They're both equal in how they unbalance an auction.

Playing whack-a-mole to stop shill bidders isn't going to fix it. The problem is the basic design of the auction model itself. On my site I have it set up where buyers can do blind auctions instead wherein buyers make a secret max bid and a seller can wait for up to 30 days and then pick the highest maximum bid. I have a long essay on one of my help pages explaining about the whole problems with the online auction model that it doesn't get a fair market price because of people trying to game it.

[biglouis999]

My feeling is that someone who spends months of their time analysing a shilling ring (sic) needs to get out a bit more and find themselves some hobbies!

I have never been into the eBay gestapo culture of reporting people for this and that, I get on with running my own business.

In the tough city I grew up in we call snitches "grassers" and if you get suspected of "grassing" your neighbours even to this day you can end up getting petrol poured through your letter box followed by a match.

[PhilipCohen]

Some more thoughts on shill bidding on eBay …

For all those eBay “buyers” who are still trying to find a bargain on eBay and are (hopefully) agile enough to avoid all the shill-bidding professional sellers that now infest eBay, eBay recently touted two Diamond/Titanium PowerSellers as major success stories of selling on eBay. An analysis of bidding patterns on these two sellers’ auctions suggests that they both could be habitual shill bidders. A full comment thereon at:
AuctionBytes :: View topic - eBay-touted PowerSellers Exposed as Shills?

Why is “Noise” Donahoe trying to destroy eBay?
AuctionBytes :: View topic - Why is the “eBafia Don� destroying eBay?

[Jonas]

Phil,

Shill bidding is only a symptom of a larger problem, that eBay's auction model doesn't work. If eBay didn't charge higher listing fees for more expensive items, then shilling would be reduced to some degree, but it still is related to the flawed auction model. Snipe bidding is the flip side of the coin of shill bidding and imbalances it just as much. On my website, I have offers and blind auctions instead of shilling and I have written stuff on why it doesn't work, not that anyone else has ever read it.

The reason why 99 cent auctions are so successful is because of buyers on eBay. They view the items like they're on The Pirate Bay and want them all free. While most do payment method fraud thanks to eBay's changes (they'll have say 500 feedback and just do payment fraud for every transaction and eBay just keeps them and lets them do anything they want and eBay will even restore their feedback a zillion times over whenever someone else at eBay removes it), a few still actually are legitimate buyers and these people do something different. They go and try to get it super cheap. They snipe bid (which fails if the seller snipe shills or simply puts in a bid from another account as a hidden reserve to block shield the snipe) to try to make it basically free. But, more importantly, buyers are all full of covetousness. They covet what other people can get. If they see two of the same items and one has no bids and the other is fought over, they will join the fight and ignore the one with no bids.

Phil you seem to think shilling on eBay has increased and I think I know some factors why. eBay values the fraud buyers most of all. Second to this, and to a somewhat lesser extent, eBay values non paying bidders. A very very distant third is eBay's valuation of real buyers. As for sellers, eBay treats all sellers like criminals and abuses them so much that I think they just stopped caring at all. If nearly all your buyers on eBay are people you hate, and most who perform both credit card fraud and feedback terrorism, are you going to care about if it's nice or not to shill bid them? When eBay was respectable, shill bidding was less.

[PhilipCohen]

Jonas, You may well be right in everything you say, but it’s a pretty sad picture, and ultimately eBay stockholders will pay the price.

I “snipe” everything; it’s the only chance a buyer has of outfoxing the unscrupulous shill-bidding seller; but, the highest bidder still wins, and if the seller is unhappy with the price he gets using the nominal-start bait, then he can always set a higher starting price or use a fixed price listing format. Of course, he then might not sell anything.

eBay’s major problem is that management has tried to change it from what it was best at, a flea market for used goods, into something that it probably never can be, a retailer; too many people trying to sell the same rubbish for anyone to be able to make a living, I suspect.

eBay undoubtedly will always be with us, long after “Noise” Donahoe and his destructive policies have departed, but I suspect that eBay is finished as a rising dot-com star.

[inverser]

Originally Posted by PhilipCohen

I “snipe” everything; it’s the only chance a buyer has of outfoxing the unscrupulous shill-bidding seller.

That is unless the seller is using two different stealth accounts to create a pseudo-bid war to artificially create demand and inflate the price. Then your sneaky last second snipe bid does nothing but give the seller the sale he intended to make all along.

[PhilipCohen]

What, only two "stealth accounts"? I've noted plenty of auctions where there are more shills bidding that legitimate bidders; sometimes four or five shills; have a look at some of the completed auctions of "beckertime", a reseller of "pre-loved" Rolex watches; the shilling is so blatant ...

For all those eBay “buyers” who are still trying to find a bargain on eBay and are (hopefully) agile enough to avoid all the shill-bidding professional sellers that now infest eBay, eBay recently touted two Diamond/Titanium PowerSellers as major success stories of selling on eBay. An analysis of bidding patterns on these two sellers’ auctions suggests that they both could be habitual shill bidders. A full comment thereon at:
AuctionBytes :: View topic - eBay-touted PowerSellers Exposed as Shills?

[Victim Of Shill Bidding]

Originally Posted by biglouis999

My feeling is that someone who spends months of their time analysing a shilling ring (sic) needs to get out a bit more and find themselves some hobbies!

I don't. No, not at all... Not only do I think it is smart to analyze every aspect of your business, but it's essential. In fact, one might even say that people who do not do their homework, might just end up posting on an eBay suspensions forum.

I STRONGLY DISAGREE that shill bidding should be overlooked. Especially if you are buying product through eBay and reselling it through eBay. (I can tell that you have never been one of those people. I know that in your mind- your are in your own league, but there are a few different classes of sellers and they have corresponding habits)

The real question is: How much money does eBay generate from turning a blind eye on shill bidders? It seems as though they'd have a lot to gain by making bids anonymous.

[Victim Of Shill Bidding]

Originally Posted by Rulebreaker

very good case study, thank you.

I just do not get why shill bidding is considered fraud, since the bidder has the option to increase his bid or not.

That's why you're posting on this forum: You don't get it.

[PhilipCohen]

Shill bidding, that is, undisclosed vendor bidding, is generally defined as the making of a false representation for the purpose of making a gain for the maker or causing a loss for another. That definition is "fraud" in all civilized countries.

I guess if anyone cannot understand the principle involved, then they can only be a seller at auction and not a buyer.

The whole concept of the English auction system is to establish a market value, on the day, for an item that is of an otherwise unestablished value. This system was never intended to be distorted by undisclosed vendor bidding, and therefore such undisclosed vendor bidding is prescribed as fraud. That is not to say that it does not happen, and that you should not take great care at an auction, but that it is an unethical practice and is deemed to be unlawful.

[Wikked Tikked]

I can understand why shill bidding is wrong but I'm not sure what's wrong with sniping. The use of an automated sniper service is the only way I've been able to win anything I was after. It puts my maximum bid in with 2 or 3 seconds left. Anyone with a higher bid than my max will win. Anyone with a lower max won't. I've seen with many items I sell that there are always last minute bids. Of course with a true auction people have the option of upping the bid before the gavel comes down. There's some other auction site I've seen where a last second bid will extend the endtime of the auction to give others a chance to go higher. If eBay does that they'll lose a buyer and not only a seller.

[doughboykilla]

The only reason why its againts eBays rules is when u shill bid eBay dosent get the fees that u rack up when u put a Reserve price on the auction. Like if u sell a car on ebay and its a 30K+ car and u put the Reserve at 27K u will have to pay ebay fees on 27k which is a hell of alot of fee's as to where u shill bid u can boost the bids to the Reserve price and not have to pay that extra fee.

let us not foroget that US laws dose not apply to ebay. And if there was no such thing as a Reserve price in the listing then u can bet money ebay wouldnt be so quick to punish the seller for shill bidding.

[LadyLover]

long time no see doughboykilla

[PhilipCohen]

An update on the ugly reality for consumers dealing with the clunky, unscrupulous eBay/PayPal complex ...

"Shill Bidding Fraud on eBay: Case Study #5" ... Shill Bidding on eBay: Case Study #5 - EcommerceBytes Discussion Boards