Penny Auction- Are Penny Auctions i.e. Swoopo a scam?

"It's too good to be true" is your initial reaction isn't it? How can penny auction companies make a profit? Well the answer to that question is, easily. If a customer pays 50p a bid the company make £50 off every £1 the penny auction reaches. So if an ipod nano reaches £10 in a penny auction the company makes £500 on a £100 product.

Is this fair? Well that depends on what you deem to be fair. As a lawyer, the 50p as the cost of each bid can be seen as consideration. Consideration is a legal term which basically means, you give something to get something. So in a penny auction you are paying 50p per bid to enable yourself to win a product at really cheap price. I would therefore say penny auctions are fair but one must enure not to go over the top with the number of bids placed. Therefore, for the reason that penny auctions i.e. Swoopo are a scam because one must pay for bids is not a reasonable arguement.

Is it gambling? Again, penny auctions have been acused of being scams as they are allegedley gambling. This again is an untrue accusation. The reason is because you have to pay for something you may not win i.e. 5 bids worth £2.50 and not win anything. However, there is no luck involved. Gambling works on probabilites, for example in Roullette you have a nearly 1 in 2 chance of hitting black and get paid out double the amount wagered. In a penny auction, luck does not determine whether you will win. If somebody outbids you it is not bad luck, it is somebody doing something which is certain i.e if you make a bid you WILL become the highest bidder. Therefore, penny auctions are not gambling.

However, some new websites have started asking for ways to cheat the system. Look what the owner of one penny auction site asked for on scriptlance.com.

"I’ve started a penny auction site, I need a script that will use a couple of members from a list of about 200 made up members, that will autobid specific items upto a specific price after a member has placed a bid, within the last 1-5 seconds of the auction."

This is when the penny auction system is abused, therefore one must steer clear of any websites that seem like a scam. 

I hope this helped but it is only my opinion, type in "Swoopo scam" on google or penny "auction scam" and read others opinions. However, remember what I have written as my opinion is one of logic rather than an angry customer who has wasted all of his bids in a silly fashion.