Penny auctions nothing more than an illegal game of chance

RIP-OFF ALERT: Have you seen pop-up ads or ads on the rails of websites that promise unbelievable bargains on electronics and some consumer goods? Who can resist those come-ons about getting, say, an iPad for some ridiculously low price like $2?! There’s one particularly popular ad with a supposed anchorwoman giving an update on what looks like a local TV station, where she talks about this amazing way to save money.

But it’s really just an illegal game of chance in my book. Here’s how these so-called penny auctions work: You enter bids for the items being advertised while others do the same across the web. You are required to pay more money each time you enter a bid. Only the final winning bidder actually gets the item.

So yes, it is true that the winner gets stuff ultra-cheap. But I cannot believe the various state attorney generals are asleep at the switch on this one. Lotteries can only be run by states. Gambling can only operate when permissible under state law. So anytime money is collected from losers in a game of chance is patently illegal. (I expect the legal actions to ultimately follow at some point in the future.)

Know that these kinds of offers are deceptive on their face. MSBNC reported there was one auction for an HDTV where the winner got a $1,500 model for $228. But 22,000 bids were placed and the bids exceeded the cost of the TV by a 9:1 ratio! That is ultimately a lottery and it patently and totally not OK.

If you get involved in this kind of bidding, know that it can be addictive. In addition, you will probably spend far, far more in bids over time than you recoup in the value of an item you may win on occasion. It would probably be cheaper for you to outright buy whatever it is you want.

So when you see these penny auction pop-ups or ads on the rail of a webpage, know what you’re getting involved in and know that the house always wins.