Shill Bidding

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Recommendation: Avoid
Avoid.jpg
Summary: Bidding on one's own auction items
Outcome: Artificially raises prices, suspicion of auction sites
Addressed by ICANN Policy: N
Addressed by Legislation: Y
Related to: no related articles at this time

Shill bidding in an online auction occurs when an individual bids on his or her own item (or has an associate bid on the item) in order to artificially raise the price.[1] With the rise in popularity of online auctions, shill bidding has increasingly become an area of concern.[2]

Public Perception

Public perception tends to be anti-shill bidding, with people viewing the practice as unfair at best and illegal at worst.

Outcome

The outcome of shill bidding is that the people bidding on an item are pushed into paying a higher price through deceptive means. It also can create suspicion and distrust of auction sites.

Historical Use

Shill bidding is basically used to raise the price of an item above its usual market value by creating the illusion of interested bidders competing for the item at the expense of actual bidders. Shill bidding is frequently used on online auction sites, such as eBay, although shill bidding is not limited to online auction senarios.[3] To combat shill bidding, many auction sites have anti-shill bidding policies.[3]

ICANN Policy

ICANN does not have a policy on shill bidding.

Legislation

Shill bidding is considered a form of Internet auction fraud as it "illegally drives up prices and defrauds consumers."[4]

  • In 2004, Jerrold Schuster, Darek Szydlowski and Francis Komsisky, Jr. pleaded guilty to shill bidding under New York's Anti-Trust Legislation, specifically Combination in Restraint of Trade and Attempted Combination in Restraint of Trade.[4] Schuster faced up to 4 years in prison for Combination in Restraint of Trade and $50,000 in restitution.[4]
  • In the UK, a man could have been fined up to 50,000 pounds, 10,000 pounds for each violation, due to eBay shill bidding under the Business Protection from Misleading Marketing Regulations and Consumer Protection from Unfair Trading Regulations.[5] However, he was only fined 3000 pounds and sentenced to community service.[6]
  • In 2010, within the domain name industry, SnapNames settled a class-action lawsuit due to shill-bidding auction practices for $2 million.[7]

DNS Award

Awardees do not engage in dishonest and illegal practices, such as shill bidding.

Additional Resources

Related Articles

  • Another article that involves interfering with market competition within the DNS is Front Running.

References

  1. Shill bidding at Macmillan Dictionary
  2. eBay’s proxy bidding: A license to shill (PDF) by Joseph Engelberga and Jared Williams (2009), Journal of Economic Behavior and Organization
  3. 3.0 3.1 Shill bidding policy, eBay
  4. 4.0 4.1 4.2 "shill Bidding" Exposed In Online Auctions, New York State Office of the Attorney General
  5. eBay seller faces £50,000 fine for auction fixing by Martin Wainwright (April 20, 2010), The Guardian
  6. Man fined over fake eBay auctions by Dan Whitworth (July 5, 2010), BBC
  7. SnapNames settles shill-bidder class action by Kevin Murphy (October 26, 2010), Domain Incite