Page last updated at 06:00 GMT, Saturday, 20 December 2008

Penny web auctions under scrutiny

By Sarah Pennells
Business reporter, BBC News

Nigel Whiteoak of auction site Swoopo: 'We take transparency very seriously'

Online "penny auction" sites are similar to lotteries and should be regulated in the same way, according to a gambling expert.

Penny auctions have gained popularity over the last few months and now have hundreds of thousands of users.

The sites auction new items, often for a fraction of their retail price, and bidders pay up to 1.50 for each bid.

Professor Mark Griffiths of Nottingham Trent University believes the Gambling Commission "should look into this".

"I think bidding on penny auction sites is akin to a gambling-like experience," Professor Griffiths said.

"Obviously, when people are bidding again and again and again and they don't actually win the item in the end, that's very much like gambling."

I did not expect to get the Mini when I started bidding
Sandeep Anantharaman

However, Juha Koski from online auction site Madbid.com disagrees:

"We have two experts who have given us their opinion on this.

"This is definitely a game of skill and would not form under any circumstances under the definition of gambling."

Happy winner

Successful bidders can win anything from a television to a car or a cash sum, for a fraction of its real cost.

Sandeep Anantharaman is one bidder who has won in style. He bid less than 7 for a new Mini. Not surprisingly, he is delighted:

"I did not expect to get the Mini when I started bidding. But once I got the message from the auction site telling me I'd won, I couldn't believe it. "

Penny auction sites have grown quickly and now have hundreds of thousands of users.

Concern

Unlike eBay, where you can bid for free, users have to pay between 40 pence and 1.50 to place a bid. Bids automatically rise by 1p at a time, and some people make repeated bids.

Tony Northcott of the Trading Standards Institute believes some people may spend more than they realise on bids.

"My concern about these online penny auction sites is that people will bid for goods and not realise at the end of the day they may spend quite a large amount of money," he said.

The Gambling Commission said it could not comment on individual sites and was not convinced that penny auctions amounted to gambling.

However, it added that it would keep a close eye on developments in this area.

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