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Suit Targets eBay’s Proxy Bidding System

Plaintiff claims sellers are being cheated.
By · January 9, 2012 · 26 Comments
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A class action lawsuit has been filed against eBay, claiming that eBay’s bidding system defrauds sellers of potential income.

Since its launch, eBay’s bidding system has allowed bidders to privately place a maximum bid they are willing to pay for an auction. The highest bidder may win the auction by only one incremental amount above the second highest bidder’s maximum bid.

In other words—using eBay’s example—if Tom places a maximum bid of $12 on an item, but Laura places a maximum of $15, then Laura becomes the highest bidder. Laura’s bid supersedes Tom’s at $12.50. If no other bids are placed after that moment, then Laura is the winner for $12.50.

The lawsuit is based on the premise that the seller is cheated out of the full $15 Laura was willing to pay.

The lawsuit reportedly states that eBay “inject[s] itself into the transaction by intercepting the bid amount before it is received by the seller.”

About the author

Sarah Brown
Sarah Brown is a freelance writer who writes about e-commerce and small businesses. She recently graduated from Chico State with a journalism degree and is also a budding online entrepreneur, having launched two Web businesses and her own line of handmade products. Opinions expressed here may not be shared by The Online Seller and/or its principals.

  • hugo

    I am not realy a seller but a buyer. The plaintif is 100% correct and filing a class action is also the corect way. Althoiugh we as buyers do win the way Ebay is operating sellers are losing out..

  • kgb

    Pretty stupid lawsuit. If you leave an absentee bid at a live auction, it works the same way. Local auctions would be guilty of any wrong doing (for this at least) if Ebay were to lose.

  • Of course eBay “inject[s] itself into the transaction”. The entire web site, and Paypal are set up for the exclusive benefit of ebay. The system is so weighted against the seller it is obscene. BUT they are unfortunately the only game in town. No other auction site has a fraction of the business, and Paypal is the only functional payment system. So us sellers just have to bend over and take it. I paid over $10,000 in ebay and paypal fees last year, but my sales would have been terrible without them. The old between a rock and a hard place. Unfortunately the lawsuits don’t do much, I was part of the last one, and I just threw away my $ .16 (yes 16 cents) settlement check in disgust. As always the lawyers get all the money and ebay makes billions so it doesn’t bother them.

  • Henry Stamm

    This one has “frivolity” written all over it. For once, eBay is doing right here, or at least is following long-standing auction traditions. When I bid in a live auction, I hope I can win the lot at a price far lower than what I am willing to pay. When I sell at auction, I set a reserve for the minimum that I will accept for the sale of my property. If the bidding exceeds my reserve/minimum, I’m very happy. If the bid matches the reserve so that the lot sells, I’m still happy. I don’t care if the buyer was willing to pay more. Trying to use a lawsuit to force a bidder to pay the maximum they’re willing to pay seems like a no-win situation to me. It also defeats the entire purpose of absentee bidding, which is really what the eBay system encapsulates. If sellers want more money, set the reserve higher, or simply use buy-it-now. This is certainly not a case of eBay defrauding sellers.

    • M. Walton

      I agree 100 % .. regardless if I am a buyer or a seller, Ebay is absolutely in the right using it’s current practice. By nature of absentee bidding, I as a bidder want to win for the lowest possible price, when I as a buyer tell ebay to act on my behalf and I am willing to spend $X as a maximum bid.. I would not expect them to bid any other way than I would, the least possible amount to win the bid.

  • If this was a “proper” auction then Laura would start her bidding low, possibly nearer to Tom’s top end bid (Tom presumably had decided his maximum bid, and then he was out)- to test the water and, if necessary, continue to bid up to her predetermined maximum. But, she would still have won at $12.50. I don’t see what the problem is, it just seems like another way for the litigant to try and make money!
    The rules are set, we know what they are and how they work, if you don’t like them don’t take part! From a disgruntled buyer and seller.

  • Stupid Lawsuit.
    All sellers Know the rules before they list the first item for bidding.
    If they do not understand them, they need to blame themselves.

    A seller has several ways to sell.
    No reserve Auction.
    Auction with reserve.
    Auction with Buy it now.
    Fixed Price Only.

    If the seller wants a specific price for an item, they should chose the item that will fit their needs best. THEY get to chose.

    Usualy I choose fixed price GTC because our stuff is so esoteric that you never know when a customer is going to want one. And when they Need it, they need it at the price we charge because you can not get it anywhere else.

    I could not rely on the auction format, because usually a customer would have no one to bid against them.

    But, On popular items, I trust that ebay has brought multiple buyers together to compete with each other. These buyers want to buy for the lowest possible price. And they should be allowed to do so. And, the lowest possible price may be a lot higher if there is a bidding war.

    I have seen times where an item does not sell, or sells for very little.

    Other times, I would think an item would sell for $175 and it brings $500+

    Without ebay attracting buyers with the proven practices they have which allows buyers to expect to get a bargain, then there would be NO sales what so ever.

    Personally, I think the Ebay fees are totally outrageous.

    But, again, considering the alternative, they are outselling our own website 2 to 1 and we carry the same products.

    Stupid Stupid Lawsuit.

  • James W

    Stupid, stupid lawsuit. Not a chance in hell of winning.
    If I go to a live auction, and am willing to go as high as $100 on an item, and I bid in increments and win at $50, then that is the way the cookie crumbles.
    E-bay works the same way.

    • tom

      You guys are all stupid. Lawsuits are what keeps the US revolving. We have the worst reputation in the world for suing whoever, whenever and for whatever amount. Keeps the lawyers in BMW’s and their wives in Gucci. Most lawsuits will win or most likely compromise and “settle.” It’s cheaper than fighting the fight. Any lawsuit has validation these days……after all, once a case if filed it is now in the system and benefitting many supposedly.

  • Leonard

    Just ridiculous. If the seller has a problem with the way this works, he/she can always list as a buy it now with best offer, and then can take the offer that suits. Alternatively, dont use ebay, as this is the way it works
    Ebay is also about the buyer bagging a bargain and if this were to be taken away, sales would drop dramatically… Mmmm they say there is one born every minute

  • What a stupid lawsuit and I hope Ebay asks for damages. BUT what ebay does do and I’m surprised there isn’t a lawsuit about it is that Ebay doesn’t allow the seller to decide if he wants the auction to end on a predetermined time or allow 30 second over bids. Then everyone has a chance to win the item and snipe bids are gone. That one is costing me a ton of money. There is no reason not to allow another 30 seconds for a bidder to come back. Same as a regular auction.
    Scott Neuman
    Ebayer since 1996 and a power seller.

    • lawrence

      i would hate it if they had 30 seconds more. im a powerseller of old toys and just love the way its sets up. ebay rocks but r greedy as well.

  • judderod

    If they don’t like it, don’t use ebay? There’s nothing new here, it’s always been the same. The seller fails to realise that without ebay they seller would have probably got less for their auction anyway because they would have offered it to a smaller market. And hasn’t the seller heard of buy it now?

  • Terry

    I agree this is so frivolous.  I am both a buyer and seller on ebay and like the way the format is set up.  I have the choice to sell or not, and hope this is laughed out of the courts.  Check out the fees charged by your local auctions to sell products for you.  Most places around here anyway are getting 25 to 35% now from the seller plus 10-15% from the buyer.  I was disgruntled a little about the commission rate being charged on shipping as well…..but this was primarily caused by sellers as well by selling a $5 item for 49 cents and then tacking $12-$15 shipping on it.
         Another way to look at it is that without the proxy bidding, “Laura” may not have even been a player.  Then the seller would have lost the .50.  I am not a big time seller on Ebay, but I can see where that .50 per sale loss could add up to thousands for those who do sell a lot.

  • Dawnie

    I like the idea that I can maybe put in a bid for a little extra “just in case”, but am oh so pleased when I feel that I have change from the deal too.  I hope they leave well alone

  • Molover444

    To whom it may Concern: 
      Please leave this the way it is. It is PERFECT! I’m a PowerSeller and have been using eBay for over 10 years. I think I would loose a lot of auction sales if eBay took away. I also buy about $5k TO $10k/year on eBay. Oh No! a lot of the items I bid and purchased, I would have passed on because I wouldn’t have “the opportunity of chance” to win the item at a lower cost than my highest bid.   That means, every time I put a highest bid I’m willing to pay, I automatically get obligated to pay that amount. Heck No! as a seller I will loose those buyers have the “bid it and forget it” attitude, which is most serious bidders these days. See, as a super-frequent bidder, I solely rely on this automatic bidding process to do the work for me until my limit is reached. Without this, I will have to come back to the item and more often then none, miss the opportunity to win because I didn’t put in a bid. 
      Forget the .50, sellers would loose thousands of dollars. All auctions that is not face to face needs incremental bidding to work for both buyers and sellers.

  • I don’t sell a lot on Ebay but I do buy a lot of high priced itemes.  Do sellers actually see the price I’m willing to pay? 

    Or do they only see the proxy bids?

    I usually place my bid a little higher than what the item is worth to me so I don’t lose it to a snipe bid.  That’s part of the fun of Ebay.  I’m not sure I’d bid as high if they took away proxy bidding.

    • J. Barrett

      Sellers do not see your highest, only the increment above the next highest bidder.

  • Sorry but feebay is right on this issue here FOR ONCE I’m glad WWW meg is GONE with MILLIONS of OUR MONEY 1%ers almost RUINED feebay!

  • dingledell2books

    Hi.
    If I see something I like at my local auction but cannot stay and bid I leave a figure at the office which I am willing to pay, if a bid is  under the sum I left I win the auction, however if someone bids even by a small ammount over my figure they win.
    Its that easy.
    So what is this guy beefing about ! 

  • Gdewizard

    as both a buyer and seller I LIKE this feature but one I do not like is the one listed above, auction sniper. This is not fair and should go away as swiftly as posible.

    • Anonymous

      Why is it not fair? If they dont bid you end up getting less. Snipers can still lose out because they dont have a chance to up their bid, so if they bid too low… oh well, but the net result is that the item sells for more in either case. Why do you think that’s unfair. If everyone has the same opportunity as the next guy then its called “fair”.

  • Denpatsta1954

    Have these people ever attended a “real – live ” auction? Whether automobiles or dishes, the auctioneer asks (suggests) an  opener, only to start the bidding at rock bottom, often 90% some percent below the items value. As a bidder I have a dollar amount in mind,(what I’m willing to pay/spend) but never just ‘spend’ it on the next bid, I hope to come in under that amount; or, as bidding progresses, even need to assign more money, as I am now ‘out’, as bids  have exceeded my expectations. So if on eBay, an item potentially worth (for example) $1,000, has an opening bid of $10, and I’m willing to “pledge” $500 right now, the law suit suggests that the bid be logged in at full value ($500 that is) on that very bid, even though the auction (now – no longer an auction) has a low opener, and just one bid, it is now at a high number. First off, if I were that bidder, I would no longer be willing to place bids (on that item, or any other item -‘ever’ – again), unless they were of the nickel dime variety. Reason I was willing to pledge a number – say I’m at work, or sleeping, I want the opportunity to ‘buy’, with-out loosing sleep over it, you get the drift. And if I were not the person who placed that bid, and seen it going up in astronomical leaps and bounds, I would walk away, thinking the seller has his or her ‘friend shill bidding or protecting the item. And if you end up loosing an item you are bidding on, by one bid, wake up people, as no matter if a bidder offers more early on by placing a proxy, or if they sit up (loosing sleep) to place a beats all bid, to hopefully fulfil their desire to ‘win’, and ultimately beat you; “Quit your Whining”, as stingy people, who hope to buy low, often find them selves win-less / The way the proxy service is set up , in my opinion is correct and fair; and to quote a wise person from long ago, “an Item is only worth what you can sell it for” / So if these sellers think they can ‘TRAP’ bidders, to get every penny out of them, by locking in their ‘max’ bids, soon all bidders would pull in the reins, and ‘Cheapen-up’, so every one would end up selling for less, effectively lowering income for all who sell. To finish, I will often place proxy bids ‘over’ the actual items value. Why? why not, as to loose the item by one bid, well would that be sensible, or stingy- people?
    To the sellers who want my extra $-dollar; I will refer you to my law firm ~ “Dewey-Screwum- and Howe” ~ you’ll find their rates, much like you – ‘Ridiculous! —— Now “Let the ‘AUCTION’ begin = hopefully put an end to this …………………………

    • Anonymous

      I think that’s “Dewey Cheatum and Howe”

  • Thomas-Francis Jones

    I’m a seller and a buyer. I think the lawsuit is ridiculous. I think there are some of my fellow sellers (a small percentage I hope) that are greedy, greedy, greedy! This is really unfair to the person who’s bidding the high bid. If the item is worth the $15 the market will show that. Most of the time I put a highest bid on an item I end up paying a lot more than I expected. More than if I don’t bid a thing and then decide what my high bid will be at the last minute. That’s when I get my best deals. As a seller I don’t want my customer (especially if I want return business from them) to have to pay the highest last ditch amount. This is draining the market to soon and it ends up causing a buyer with low immunity and a market that’s sickly and prone to disease. Think about your fellow sellers in the community and the health of the market as a whole. Too much greed and nit-picking makes for a week market on a microcosm and a week economy on a larger level. 

  • Strebor

    As both buyer and seller I think the bidding system is fine – at a normal auction the bids go up in increments like they do on eBay, it’s just that the highest amount that I am willing to pay is in my head. If I’m willing to pay $100 for an item but the last person bids $75, I won’t then bid $100, I will bid $76 or $80 or whatever the next bid is, and win it for that, not my $100 limit. I find this lawsuit quite bizarre!
    And as for those who don’t like sniping – this is also a legitimate way to win an auction and is equivalent to someone not bidding until the very last minute of a normal auction.

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