Vigilante internet detective work
April 5, 2010 6:05 AM   Subscribe

What can I do to take down a Penny Auction site in the US?

A coworker of mine only seems to talk to me is when he's having problem administrating some aspect of a site he runs on the side for another company, which is already annoying behavior. Recently, however, the site owners have taken a foul new direction: running a penny auction site (penny auctions in the blue).

The penny auction idea doesn't sit well with me, but last I heard it wasn't yet illegal. But over the last month or so, muckracking about shill bidding has pushed me over the fence on this guy's site. At one point my coworker informed me they moved to a dedicated server because the traffic / load was too high. I was surprised to hear they'd had such problems so quickly, but at the time I figured it just must be a competitive bidding market.

The point I'm leading up to is that I think the site is shill bidding. When I had a chance to check out the server logs there was an awfully large amount of traffic from localhost. The site does dismally in Alexa and other traffic analysis, despite the seemingly frenzied bidding on the front page.

I'm guessing whether or not penny auction sites are legal, shill bidding is still fraud. Normally one writes these sorts of scams off as overseas fraud that can't be enforced, but this seems to be an entirely US based operation. Servers, employees, owners, everything. I only know this one guy that's involved, but the others are publicly named and apparently are also local.

Based on this some legal questions arise that I'm not willing to pay a lawyer to answer:
1. Is shill bidding illegal and enforced?
2. Do I need to suffer some form of direct harm from their fraud to report it to police?
3. Is an anonymous tip likely to lead to enforcement?
4. Which law enforcement agencies would be interested in this?
5. Is my employer at risk for someone using their resources (internet and desktop computer) to remotely administer the auction site?
posted by anonymous to Law & Government (8 answers total)
Talk to the SEC. They don't fuck around.
posted by notsnot at 6:34 AM on April 5, 2010

Talk to the SEC. They don't fuck around.

Are you kidding? The SEC is for securities (think financial instruments) fraud, which this is not. Also, they are close to incompetent - see the Bernie Madoff case.

You want either your local law enforcement, or in the US the FBI who deal with interstate fraud. You might also contact the Federal Trade Commission, as they investigate things like this and then turn it over to law enforcement for prosecution.
posted by procrastination at 6:41 AM on April 5, 2010

Unless the operation involves securities I don't think the SEC will care. The Federal Trade Commission is more likely to take interest, but they aren't very aggressive. I'm not sure there's much precedent for the government dealing with these kinds of things. Searches in the .gov space for "penny auction" and "bidding fee auction" didn't turn up anything relevant.
posted by jedicus at 6:45 AM on April 5, 2010

This is definitely fodder for the FTC, but I wouldn't count on getting any immediate attention. If anything, they'll fold this into an ongoing investigation into such practices--assuming such an investigation even exists.

I don't think this is illegal as such, but it's likely to be categorized as gambling when relevant authorities finally take notice, with the normal sort of arbitrary, not-entirely-rational attention that gambling sites get as a result.

And no, the SEC won't care. They're mostly interested in securities and the accounting practices of public corporations, i.e. those with more than a handful of shareholders. Consumer protection of this sort isn't in their portfolio unless the merchant is marketing it as some sort of investment tool, and even then it's small potatoes.
posted by valkyryn at 7:50 AM on April 5, 2010

Talk to your manager or HR about the situation. Does your contract allow jobs on the side? Does it allow you to use company equipment for non-company use? I'd say, "I'm getting a lot of interference from Coworker X, who appears to be administering an unrelated commercial site from work. It's taking up my work time."

If you don't agree with the ethics of the site, decline to assist the coworker. An un-maintained high-volume auction site will crash and burn on its own soon enough.
posted by scruss at 7:58 AM on April 5, 2010 [1 favorite]

"Do I need to suffer some form of direct harm from their fraud to report it to police?"

No. Many crimes are only reported by bystanders. Think murder, drugs, drunk driving, prostitution.
posted by Mitheral at 8:22 AM on April 5, 2010

Is this a penny auction site like the UK Madbid, or is this something different?
posted by mippy at 11:38 AM on April 5, 2010

FTC sounds like a good idea. Probably also worth it to contact your local Attorney General's office as they usually handle consumer protection issues.
posted by reptile at 1:04 PM on April 5, 2010

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