Consumer Blog: Beware the Raffle that masquerades as an Auction

insideMoray’s online consumer blog – part one, beware the ‘auction’ that is more of a lottery …….

If there is one type of story I hate having to do on insideMoray it is relating tales on how people have been scammed out of their hard earned cash.

This is a modern disease that plays on a mixture of ignorance and trust – as the digital age of technology has grown so has the ability of dishonest and just plain nasty people to lie and cheat their way into our pockets.

Of course there are different levels of scamming going on – most of it is illegal but often it is very difficult to bring those responsible to justice, but there is other methods going on that I would describe as ‘legal scamming’ – misleading schemes that can play on your desire to find a ‘bargain’ and are perfectly legal, but can leave you with empty pockets and nothing to show for your efforts all the same.

In this series of features I hope to highlight a few of the current legal and very much illegal methods that abound to your attention, if you heed the warning or not is of course entirely down to you!

Auction Mania

Online auction sites are actually a great use of the internet and a lot of fun for everyone – and there are very real bargains to be had using this method of shopping. Sites such as EBay have made their creators very rich (we will take a look at EBay at some point in the future).

A relatively new type of auction site is now appearing, backed by national television advertising and apparent endorsement by mainstream media features.

Sites such as www.madbid.com give the outward impression of being a stunning new approach to purchasing high-value goods at ridiculously low prices. Just remember though that warning we have always known but all too often ignore – if it looks too good to be true then it probably is too good to be true.

The newspaper headlines that Madbid like to draw your attention to are of people who successfully bid for a Mini One car worth £12,135 – and got it for just £6.83. Or the iPad that went for 6p – the laptop computer for £30.

So just how is all this possible?

Quite simple really – what you need to remember here is that if you join in the bidding at Madbid you are not really taking part in an Auction at all, what you are doing is buying a raffle ticket.

Traditional raffle’s for high-end products leave you in do real doubt – you buy a ticket knowing full well that there are perhaps thousands being sold at £1 a time, and your chances of winning that £12k car are likely to be in the region of 25,000-1. You handle your expectations accordingly.

On sites like Madbid they don’t want you to be thinking that way, so up front you see all the glitz and glamour, sparkling pics of high value items going at ridiculous prices. To use the term often adopted by television shopping sites….. But Wait!

How it works

When you sign up to Madbid you are invited to purchase ‘credits’ – these will cost you from £9.99 for 80 credits up to £374.99 for 3750 credits. So individual credits are going to cost you from 10p to 12p each.

Each time you then make a single bid for an item on the site, you use up six of your credits. Each and every bid made raises the ‘auction price’ of the item by 1p – and extends its closing time by up to one minute.

You can bid as often as you like – but of course everyone else is doing just that, as long as people keep bidding the price of the item keeps going up. Only when you bid is actually the last one place will you win the ‘auction’ – by that time the site itself will very likely have raked in far more than the value of the item they are selling, and everyone else who has bid ahead of you has effectively lost their cash.

Of course Madbid would likely claim that they can and do lose cash on some items – but much as a bookmaker will lose out on some bets, at the end of the day it is gambling and the bookie will rake it in at the end of the day.

Madbid.com say that it is a ‘misconception’ that the auction site is a scam, insisting that they do not make false claims in their advertising. They said: “We have been reviewed by the world’s fifth largest independent accounting network, BDO, which looked at the specific control procedures used by MadBid.com to ensure the legitimacy of our auction model.

“It concluded that MadBid.com winners had average savings of 81% (including final auction prices and cost of bids) when compared to the RRP.”

That may well be so, I would leave it to the customer to make up their minds. But my tip is that sites such as Madbid.com are best left well alone – unless you are fully aware that what you are entering into is not a guaranteed bargain but is a gamble, and one with pretty poor odds at that.

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