Penny auction sites prompt consumer warning

The Better Business Bureau is warning consumers about online or penny auctions, including an operation run by an Edmonton-area entrepreneur who was sued by Oprah Winfrey last year.

The BBB has received dozens of complaints from around North America about Swipebids.com, a website where people can bid on items such as computers and cars. It is run by Jesse Willms of Sherwood Park, Alta.

The prices are appealing: There are claims iPods have been auctioned for less than $30, Honda Civics for under $2,000.

However, what participants don't realize is that when they bid in a penny auction, they're being charged money even if they aren't the successful bidder, said Rayn Fraess, who is with the Better Business Bureau of Central and Northern Alberta.

"Some people have stated that they lost quite a bit of money because they've done a lot of auctions before realizing that it was already charged to their cards," he said.

"So they're essentially purchasing additional packages continually and by the time they got their card, it was hundreds or thousands of dollars depending on how many bids they did on items they wanted."

Different from online auctions

Some of the complaints have been resolved by Swipebids, Fraess said. The company currently has a "C" rating with the Better Business Bureau.

Willms could not be reached for an interview on Tuesday. In an email, a representative said someone from the company would speak with CBC News on Wednesday.

The Better Business Bureau is warning consumers about penny auction sites because people may not know what they are getting into, Fraess said.

In penny auctions, people buy bids in advance with their registration fee or as part of a package.

"They don't understand the difference between a standard auction where when you win, you pay and if you lose, you don't, compared to a penny auction, where everyone pays whether you win or lose," he said.

Consumers need to be aware of the terms of the website, including sign-up fees, minimum bidding activity, subscription fees, refund policies and full contact information. Some sites use "bots" computer programs used to bid up the price of the item, the bureau says.

The Province of Alberta has no regulations regarding online auctions, andthereis little oversight over the penny auction industry as a whole, thebureau said.

In December, Oprah Winfrey's production company, Harpo Productions, sued Willms and 40 others for allegedly using the images of Winfrey and Dr. Mehmet Oz to market his weight-loss products.

Oz is a former Oprah Show contributor who now has his own television show, which is co-produced by Harpo Productions.

Willms has also faced legal troubles over the sales of tooth whitening products.

Two American companies dazzlesmile llc and Optimal Health Science LLC accused him of deceptive marketing, trademark and trade name infringement. Other companies were also named in that lawsuit.