Penny Auction Website Issues

Author

Elise Thériault, Dominique Gervais

Organization

Option consommateurs

Published

2012

Summary

A typical penny auction operates in a relatively simple way. The site announces that an article is up for auction at a specified time. The bidding starts at one penny and a short countdown (usually between 10, 15, 30 seconds) begins. With each bid, the price of the item increases by a penny (hence the name) and the countdown starts up again. Bidding continues for as long as bids are made. When there are no more, the timer reaches zero and the auction is over, and the last bidder wins.

Those wishing to participate in an auction buy “tokens” in advance that they use to bid. One “token” costs between 30 cents and a dollar. The winning bidder pays the price determined for the item at the end of the auction, plus all the bids he made to win the auction. Everyone else loses their tokens, and consequently, the money they spent.

Specifically, this study aimed to address the following questions: What are the issues related to this new type of auction? Is the industry regulated? What risks do penny auctions pose for Canadian consumers?

To achieve their goals and to answer these questions, OC carried out a literature search on the growth of penny auctions and the issues related to them; this search was primarily conducted on the Internet.

Then OC contacted relevant stakeholders to sound out their opinions on the issue and the positions they take. These people were from several domains: they included managers of penny auctions sites, police officers, heads of regulatory agencies and gambling addiction experts.

A research of Canadian laws was conducted to determine the regulatory framework governing the industry. In addition, OC analyzed the conditions of use posted on 10 penny auction sites offering its services to Canadians. Finally, to better understand how penny auction operate, OC participated in several types of auctions.

This document is available in the following language(s):

Third-Party Information Liability Disclaimer

Some of the information on this Web page has been provided by external sources. The Government of Canada is not responsible for the accuracy, reliability or currency of the information supplied by external sources. Users wishing to rely upon this information should consult directly with the source of the information. Content provided by external sources is not subject to official languages, privacy and accessibility requirements.

English and French

• French (PDF document)

OCA Funded Research
This research received funding support through the Office of Consumer Affairs' Contributions Program.

Contact information

Source: Consumer Policy Research Database