AGCM

PRESS RELEASE

FINE OF €1.0 MILLION BY THE ITALIAN ANTITRUST AUTHORITY TO TWO OPERATORS OF ONLINE PENNY AUCTIONS

A fine for a total amount of €1.0 million was imposed by the Italian Antitrust Authority on two operators of the so-called “online penny auctions”: €0.7 million on the company Flamingo Intervest Ltd, based in the British Virgin Islands, for unfair trading practices; €0.3 million on Marcandi Ltd, based in England, for misleading information and failure to act on its own business proposals.

Online penny auctions are a service, provided through the internet, that is particularly attractive to consumers because in theory it offers the possibility to win a product – usually consumer goods in the high tech sector that are mostly sought after – at a ridiculously low price. An auction of this kind differs from a usual auction especially in view of the fact that in this auction a participation fee is imposed: in fact in order to place bets, use must be made of previously purchased credit.

Another fundamental characteristic of these auctions consists in the fact that, starting from the initial price, consumers can increase their offers only by a penny at a time. The customer who makes the final instalment wins the right to buy the product at the final auction price. If this amount is then not paid, the value of the credits that are spent throughout an auction that has been awarded may be used by consumers within limits established by the contractual conditions, to buy online products offered, on average, at market prices.

In this context, on the basis of more than three hundred reports received by the Italian Antitrust Authority, it resulted that the conduct of Flamingo Intervest Ltd was particularly serious and aggressive: through the websites www.dandybids.com, www.wippy.com, www.bogabids.com and www.ziinga.com, the company by means of omissions and incomplete information on the service being provided, charged the credit card of consumers with the cost (from a minimum of almost €40 to a maximum of almost €80 per month) of a particular subscription for participation in online penny auctions that would never have been requested by the client. The operator would obtain the number of the credit cards of consumers (or other methods of payment) linking up with them while browsing on the internet, through pop-up windows or through intensive mailing campaigns. Furthermore, while enticing them with the prospect of obtaining a prize by just paying a small shipping fee (equivalent to €2), the company would persuade them to register on one of its own sites. Having in this way obtained the name for the inscription, Flamingo would not only fail to deliver the prize that had been promised but would issue requests for payment or would immediately debit the account used by the consumer to pay the sum of €2 demanded as a shipping charge.

The Italian Antitrust Authority also sanctioned the conduct adopted by Marcandi Ltd in the field of information: in particular, it appeared that the operator envisaged the possibility of obtaining products having a particular appeal for consumers at a ridiculously low price, without explaining properly its randomness and at the same time omitting to specify the main characteristics and the economic features of the commercial offer: for example, the nature and operation of online penny auctions and the costly character of individual bets that need to be placed in order to participate. The same company, through an internet page that seemed to be a blog but that actually had an advertising nature, appeared as a consumer who expressed enthusiastic comments regarding his own shopping experience from that site (www.madbid.com).

Rome, 25 September 2015