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Shill bidding on eBay gets penalised

Eight traders have been ordered to pay almost $90,000 for artificially inflating the prices of artwork, sports memorabilia and cars that they were selling on eBay, the New York Attorney General announced yesterday.09 Nov 2004

"The use of shill bids in on-line auctions illegally drives up prices and defrauds consumers," said Eliot Spitzer, the State Attorney General. "These cases and continuing efforts to monitor transactions should help maintain the integrity of on-line auctions."

Shill bidding, or as eBay describes it, "the deliberate placing of bids to artificially raise the price of an item," is strictly forbidden by the auction forum and may result in suspension from the site.

It may also result in criminal charges, as Jerrold Schuster, the former owner of the New Windsor Auction Gallery and his former employees, Darek Szydlowski and Francis Komsisky, discovered recently.

All three men pleaded guilty to violating New York antitrust laws by casting bids in over 1,100 of each other's eBay auctions for the sole purpose of driving up the price of the merchandise that they offered for sale, Spitzer said yesterday. Schuster now faces up to four years in prison, and his employees face up to one year in jail.

As part of the settlement Schuster is also expected to pay $50,000 in restitution and fines.

Two other investigations have also resulted in civil settlements with the Attorney General's office.

In the first, Robert Baranovich and his son, Steven Baranovich, of West Babylon, have agreed to pay $10,000 in penalties and restitution to consumers harmed by their placing of 170 phony bids in 165 of their own e-Bay auctions of sports memorabilia.

In the second, Richard Eggleston, Darryl Lien, and David Printy, together with a related corporation, Daryl Lien, Inc, have agreed to pay more than $28,000 in penalties and restitution for their placement of 610 bids in 106 of their own auto auctions under the user ID "Mother's Custom Automotive NY Dealer."

The Attorney General's office has identified more than 120 consumers who paid more for items as a result of shill bidding activities in the three cases – up to several thousand dollars more in some cases, said Spitzer. The settlements will provide compensation to these individuals.