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Online auction house uBid (Nasdaq: UBID) was sued Friday by group of bidders who claim that the Elk Grove Village, Illinois-based company defrauded them by canceling winning bids for high-dollar (US$) computer equipment.
The class action suit, filed in Cook County Illinois Circuit Court, also accuses uBid of breaching its contract with the bidders and engaging in deceptive trade practices. uBid offers items for sale itself and allows verified merchants to sell products through its Auction Community.
The bidders' attorney, Brian Murphy, of Murray Murphy Moul & Basil in Columbus, Ohio, told the E-Commerce Times that he believes uBid cancelled the orders because the "bids simply weren't high enough."
uBid told the E-Commerce Times that the items were offered for sale by another merchant through uBid's Auction Community, and that the auctions were canceled because the merchant transposed the quantity for sale with the minimum bid when inputting the auction.
"There is no doubt in my mind that if the bids had come in between $1,500 and $2,000, uBid would have found the product," Murphy said.
A Real Bargain
According to Murphy, 306 people placed bids ranging from $53 to $353 for the 959 Pentium III 733 MHz computer that uBid was offering for sale, with some bidders wanting more than one computer. The auction ended late on a Sunday night in April and bidders were notified via e-mail early the next morning that they had winning bids.
uBid followed up with e-mails mid-day that Monday telling the bidders that the orders were being sent to a supplier for shipping. The company also placed a hold on each bidder's credit card for the bid amount, plus shipping and handling.
Sometime on Wednesday or early Thursday of that week, uBid sent e-mails informing bidders that the orders were canceled and offered each of them a $50 coupon toward another uBid purchase.
The company could have avoided the problem, according to Murphy, by setting a higher minimum bid or setting a reserve price -- below which it would not sell the computers -- on the auction.
Murphy's clients are asking the court to force uBid to honor their low bids or to award the "benefit of the bargain" -- the difference between the amounts bid and what the bidders will have to pay to buy the items someplace else. Murphy estimates these damages at $1,200 per item.
No Terms of Service
Regardless of whether the company would lose money by selling the computers for such low prices, uBid had an obligation to sell to the highest bidders, according to Murphy.
Complicating the matter is the fact that uBid has no posted terms of service (TOS). To register for most auction sites, users need to signify that they have read and accepted the TOS. The E-Commerce Times did not find a TOS document at the uBid site; all that was available was online help explaining to new users how the system works.
Under "About uBid," the company states, "There are no fixed prices at uBid.com; every brand name product we offer could be yours at the price you want to pay." The introduction goes on to say, "Every item has a low opening bid -- often well below wholesale. Where the price goes from there -- and what price the item eventually sells at -- is up to you, not us."
Murphy said, "There is no TOS that allows them to do what they did."
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