Washington state strikes back against rigged Internet auctions
SEATTLE – Bidders on electronics and other goods auctioned on ArrowOutlet.com thought they were competing with other human beings. But it turns out, according to a lawsuit filed by the Washington State Attorney General’s Office, they were often battling “bots.”
“Arrow Outlet programmed ‘bidbots,’ software that runs – that cheats – automatically,” said Washington State Attorney General Rob McKenna. “These programs created bogus bids that rigged results. And the bidbots sometimes won, allowing Arrow Outlet to walk away with all the bidders’ money and the auction item.”
McKenna’s office today announced a settlement with the so-called “penny auction” site. The company, which voluntarily shut down its auctions before it became aware of this investigation, will provide restitution to its customers.
Inside penny auctions
Arrow Outlet’s site required bids to be purchased in “packs” that cost at least $20. Auctions would generally take place over a period of days or hours. When the remaining time ticked below 15 seconds, each new bid increased the remaining time by 15 seconds. But Assistant Attorney General Jake Bernstein, who handled the case, says Arrow Outlet’s bidbots were engineered to secretly intervene in the process.
“By deploying hidden programming to simulate bidding, Arrow Outlet increased the number of bids required for real consumers to win an auction,” said Bernstein. “That practice is obviously unfair and deceptive – a clear violation of our state’s Consumer Protection Act.”
In a consent decree today filed in King County Superior Court, Arrow Outlet is, among other restrictions, barred from running penny auctions. It agrees not to violate the Consumer Protection Act by misrepresenting online products and services. The company will pay $20,000 in Attorney’s fees and $15,000 in penalties, with another $35,000 suspended as long as the company follows the terms of the settlement.
Arrow Outlet will pay the Attorney General’s Office $50,000 to run an Arrow Outlet restitution fund for Washington state consumers. Up to $250 will be available for each Washington state consumer who purchased bids between Aug. 1, 2010 through July 31, 2012. In order to receive restitution, Washington state consumers must contact the Attorney General’s Office and request a claim form. The claim form will be available in about two months.
This is the third penny auction site taken down by the Washington State Attorney General’s Office. In 2010, the office negotiated a deal to shut down PennyBidr, which, like ArrowOutlet.com, programmed fake bids. In 2011, the Washington State Attorney General’s Office stopped another penny auction site that was failing to deliver items to the winning bidder.
Do these cases make Washington’s Attorney General skeptical about penny auctions?
“Yes,” says McKenna. “Bidder beware.”
Janelle Guthrie, Director of Communications, (360) 586-0725