SEATTLE (Legal Newsline) - Washington Attorney General Rob McKenna announced on Tuesday that he has reached a settlement with an Internet auction house that allegedly used shill bids to drive up prices on its penny auctions.
Kanwal Preet Singh, also known as Laly Singh, owner of the Federal Way-based PennyBiddr site, allegedly used phony bids to artificially increase prices and sometimes make it impossible for consumers to win an auction.
PennyBiddr, which was launched by LionHeart Mint LLC, allegedly lured bidders with cheap prices on brand-name electronics, designer handbags and discounted store gift cards.
Under the agreement, Singh will shut down the site and refund money to 85 consumers affected by its actions. Refunds will be made through PayPal and are expected to total more than $7,700.
Sing will also pay $8,000 for litigation costs and is not allowed to be involved in starting a penny auction site to generate income.
McKenna's Consumer Protection High-Tech Unit brought action against the company after receiving a referral from the Federal Trade Commission.
Unlike a traditional Internet auction site like eBay, where a bidder decides what item they want and how much they're willing to pay for it, a penny auction site bid costs money. Bids cost $1 each on PennyBiddr and the auction time extends and prices increase until no other bids are placed. For every winner, a number of losers still spent money.
PennyBiddr allegedly used shill bids by the use of a software program or by hiring people to manually place bids. The program used by PennyBiddr would allow an auto-bid to "win" an auction, in which case nobody received the item and the company simply pocked the money spent by real bidders.
Singh cooperated with the attorney general's office but did not admit any wrongdoing or admission of guilt.