SEATTLE (Legal Newsline) - Washington Attorney General Rob McKenna announced a settlement on Thursday with an Internet penny auction company that allegedly rigged its auctions by programming software to cheat the system.
ArrowOutlet.com put electronics and other goods up for auction using a bidding system that required consumers to buy bids in packs of at least $20. Auctions took place over the course of multiple hours or days with each new bid increasing the time remaining in the auction by 15 seconds. Arrow Outlet allegedly secretly intervened in the process using a software program.
"Arrow Outlet programmed 'bidbots,' software that runs - that cheats - automatically," McKenna said. "These programs created bogus bids that rigged results. And the bidbots sometimes won, allowing Arrow Outlet to walk away with all the bidders' money and the auction item."
Under the terms of the consent decree, Arrow Outlet will pay $50,000 in restitution to Washington state consumers, $20,000 in attorney fees and $15,000 in penalties. An additional $35,000 in penalties is suspended as long as the company follows the terms of the settlement.
The settlement also bars Arrow Outlet from running penny auctions and violating the Consumer Protection Act by misrepresenting online services and products.
The restitution fund will provide up to $250 for each consumer who purchased bids between Aug. 1, 2010, and July 31, 2012.