Feature Article
eBay's Auto Bidding - Another Scam

January 1, 2003
By Scott Lewis

Having recently bid on something on eBay for the first time in my life I discovered something interesting. I call it "auto bidding." It is a scam. Let's see why?

Auto Bidding, What is it?

I call it auto bidding. eBay calls it Proxy Bidding. What is Proxy Bidding? In a nutshell it is a way for you to enter the most you are willing to bid for an item right up front. eBay will compare your bid to the current bid and all other's "maximum" bids and will increase your bid by the minimum bid necessary for you to "win" the item... until it reaches your maximum limit.

The idea is that as others bid for the item eBay "proxy" bids for you so you don't have to return again and again.

How Does It Work?

(Pay attention this could get confusing.) Let's say I bid for an item that has a current bid of $25. I am willing to go as high as $75. I enter the $75 as my maximum bid. eBay puts up a $26 bid for me. Simple enough.

Someone else bids $30 for the item. Now my bid is automatically raised to $31, and the new bidder is told he has been out bid. The new bidder thinks this is weird, and decides to bid again at $40. Again my bid is raised to $41 and the new bidder is told he has been outbid.

Now let's assume the new bidder realizes he is up against a bidder who setup the proxy bidding. He does the same and sets a maximum of $65. eBay raises my bid to $66 and the new bidder, once again, is told he has been outbid.

The Scam

Let's say I see an item that is way under bid. I am only mildly interested in it at a super low price. I bid on it and get an immediate notice that I am outbid. O.K. Someone is using proxy bidding. I don't like the proxy bidding because I think it is unfair to the bargain hunter, so I keep increasing my bid a few dollars at a time until the item is close to the value I think it is worth.

Now I have artificially raised the price of the item for the proxy bidder (he is now obligated to pay the higher price) and I have raised the price for any other bargain hunters out their.

In fact, I did "artificially" raise the price of several items because I was frustrated by the large number of items being proxy bid by the same person. And there in lies the real scam. I can bid slightly below market value for a bunch of the same items. If I do this enough I will either get a bargain, or finally be outbid and the actual buyer has no chance of getting a screaming deal.

The easiest way to spot if there is a proxy bidder in the mix is to look at the bidding history. They don't show the prices bid until the auction is closed, but they do show the date & time the bid was placed. If the current bid was placed BEFORE the other bids it is a proxy bid.

The Bigger Scam

O.K. So people can spot the proxy bidding, and if they don't like it they can probably drive the price up with minimal risk. Obviously there is some risk in trying to raise the price because you don't know what the proxy bidder put in for his maximum bid. After all, you don't want to buy the item just because you were driving the price up.

The bigger scam is that the seller can drive the price up. The seller can use an account to proxy bid for an item he is selling and set the proxy amount close to the actual value. The only thing he has to lose, since he doesn't actually have to pay himself for the item, is that no one buys it and he puts it up for auction again.

I have seen this. Here is the case I saw. I was trying to find a 1GB IBM Microdrive for my MXP 100 MP3 player. I found several on eBay for under $100. I was only willing to buy one for about $100. Not that it is not worth more, but I was only interested in a bargain... even if it was used. When I bid on some I discovered I was up against proxy bidders. I searched for other Microdrives up for auction and found the same buyer proxy bidding on a number of 1 GB Microdrives. Considering that there were A LOT of Microdrives listed as "Buy Now" for $219, and most of the auctions had them going for more than that, I am pretty sure the "buyer" I was going up against for the Microdrives was actually the seller or an agent of the seller to keep the price high. Either that or "gander169" needed a LOT of Microdrives, since I saw him as the highest bidder for many auctions, one of which I noticed had a quantity of 5 available. Clearly gander169 was not shopping for Microdrives or he could have saved a boat load of time and effort buying many of the $219 drives. In fact, the auctions I did bid on I checked on later. Not one of them had gander169 as the buyer. Strange that one person would have so many active proxy bids going, and then not buy any. I can't believe he wanted that many drives... even if they were all a bargain, unless he was a dealer looking to resell them or a dealer's agent trying to jack up the price.

Since I didn't want to pay much more than $100 for a Microdrive I couldn't do any serious price driving for fun. I didn't want to take a chance and be obligated to buy multiple drives. So I only forced a few auctions with gander169, and a couple of others.

Why have proxy bidding?

My biggest complaint is that proxy bidding is not necessary. eBay sends you an e-mail notification as soon as you are out bid. All you have to do is check your e-mail to see if you need to bid again. Proxy bidding can only be useful in the final minutes (maybe hours) of an auction when global timing on internet connections could make it difficult to track an auction to the final bid. That being the case it would be better to only enable proxy bidding during the last 3 or 5 hours of an auction. Then there would be a lot less price driving.

What about the Microdrives?

Did I get a Microdrive on the cheap. No. In fact I was thrown for a loop by some of the prices I saw at the end of the auctions. The lowest price "I" saw for a 1GB Microdrive was $180. Not bad if they are selling for $219 new. However, the $180 drive was used. All the other auctions I followed, and bid on, went for over $200 and one even went for $275. Why would someone bid $275 for an item when there were dozens of "Buy It Now" drives available for $219. I can only wonder.


Overall I think this proxy bidding is a way to drive up the price of items on eBay. I'll bet it was invented buy the people that make the most money from items for sale on eBay. Again, the Internet's ability to eliminate middlemen and provide a way to dig up a great bargain has been squashed again.

ebay Sucks!