Shill bidding is one evil method by those wishing to raise the selling price of their items on eBay. This type of bidding is against eBay rules, but very hard to detect because the pattern is difficult to follow. It works this way:
Someone who is not really intending to buy an Item makes a bid or series of bids to drive up the price of the Item for sale in an auction. This Buyer is related to the Seller, or in the case of internet auctions could even BE the Seller using a second account either set up by them or lent to them by a friend. While eBay can control most cases of someone setting up multiple accounts, they would be powerless to prevent anyone borrowing a genuine second account from a friend or accomplice. The fake Buyer is sometimes called a 'Shill.' By bidding, this Shill flushes out higher bids which may have been placed previously or are placed after other legitimate Buyers see the price go higher. In the end the Shill tries not to be the winning Buyer, but if that does accidentally happen both parties can agree to cancel the sale and the Seller can re-list for free. A Seller can also choose to sell to you even if you are the second highest bid if their Shill has won the item.
Here is a (simplified) example of how you might easily be conned by Shill Bidding:
Let's say you wanted to buy an item at the lowest possible price. The item is currently selling for 5 (of whatever currency). You are willing to pay 10, but really prefer to buy for less if possible. As you probably cannot watch the bidding all the time, and may even be away from your computer when the Bidding ends, you might place a maximum bid of 10.
Once you have bid, the Seller either has a second account in another name or uses friends to bid against you - let's say by bidding 7. Your bid now automatically becomes 8. If you then win the item you have paid 3 more than you would have if there had been no bidding against you. You don't complain because you believe you paid a fair price. In reality the Seller took 3 off you that they weren't entitled to. They tricked you into paying more than necessary to buy the item. This is a form of fraud.
How can you protect yourself from Shill Bidding?
It is almost simpler to say that you can't. As long as there is not an extensive amount of bidding between two (supposedly separate) people on eBay, there is no reason for eBay or anyone to notice any pattern that might be evidence of this type of fraud. In other words, if a Seller only rarely engages in Shill Bidding, they will not easily be caught. Also the more sophisticated eBay's investigative procedures become the more creative the Shill Bidding can be.
You can look at the price of closed items already sold to get a good idea of the right price range. You can see who is bidding against you and check if they have been bidding with the same Seller repeatedly. If you suspect you are being forced to bid higher by someone who is not really going to buy the item then don't raise your bid. eBay is working hard to fight this type of fraud, but you must still think before bidding to give yourself the best chance of buying at a fair price.
Ultimately you must be on your guard, and never overpay for an item believing the demand for it is huge and therefore the price should be really high. Unless the item is unique there will be other similar items for sale and you can use the Bid Assistant to buy one of them.
You can't protect yourself completely from Shill Bidding but you can report any suspicious auctions to eBay and I know from personal experience they will act if you are right.
Let's work together to keep eBay the safest auction site it can be.
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