EBay Sued in California Over Bidding
Practices
SAN
FRANCISCO – EBay Inc. is being sued by a Pennsylvania man who charges that it
illegally forces up prices when certain high bidders raise their maximum bid to
guard against last-minute offers, an attorney for the plaintiffs said on
Wednesday.
In a proposed
class-action lawsuit filed in Santa Clara County Superior Court, lead
plaintiff Glenn Block claims that eBay raised his bid from $111 to $112.50 after
he responded to an e-mail from the auction site that said he was the highest
bidder for an item.
The email
warned that he could be outbid if he did not increase his maximum.
Block alleged that he could have
won the auction at $111, and accused eBay of forcing him to overpay by $1.50.
“Based on what we know about
what’s being alleged, it appears the plaintiff completely misunderstands the
functionality of the eBay bidding system,” eBay spokesman Hani Durzy said. He
said the company had not yet seen the lawsuit.
Durzy told Reuters that eBay only
notifies winning bidders that they could be outbid when they have hit their
preset maximum bid. Increasing a maximum bid is voluntary.
EBay only increases bids when
bidders Have raised their maximums and when the prior top bid was between
bidding increments. For example, bidding increments on items priced between $100
and $249.99 is $2.50. Durzy says eBay discloses such information on its Web
site.
Plaintiffs’ attorney Reed
Kathrein, of Lerach Coughlin Stoia Geller Rudman & Robbins equated eBay’s
actions to “shill bidding,” and said it forces bidders to bid against
themselves.
Shill bidders are often in
cahoots with sellers and work to artificially raise the price of auction items
they have no intention of buying.
Kathrein said eBay and its PayPal
online payments unit Receive larger transaction fees as a result of the
company’s alleged shill bidding.
He said eBay’s Actions have
created substantial unlawful profits for eBay and its online payment unit
PayPal.He said required restitution would run in “excess of tens of millions,
if not hundreds of millions,of dollars during the past four years.”
EBay had net revenue of $3.27
billion in 2004.