eBay Live Shill Bidding Lawsuit…

The Balestriere/Lanza class action lawsuit against eBay, GoAntiques.com, Neiman’s Jewelers, and George Molayem a.k.a., Hot Jewelry Auctions, Hotja.com, Paramount-Auctions and Jewelry-Overstock-Auctions, may be an interesting lawsuit on the surface, however, when you scratch beneath the surface (and really dig down deep into the allegations), is this lawsuit ALL that it could be?

While the action is primarily focused on shill bidding (as stated within the complaint against eBay and its co-defendants on the eBay Live Auction platform), one may also have to explore (and investigate) how just a few sellers, out of HUNDREDS (Neiman’s Jewelers and Molayem related eBay seller usernames) were able to potentially dominate the jewelry marketplace on both eBay Live and within eBay search results.

What makes a seller successful on eBay? While some fly by the seat of their pants by using a shotgun approach by selling one dollar no reserve items, others can soar to new heights by offering high end merchandise at a big discount, an affiliate program or, by figuring out that they can get from point A to point B by gaming the system. eBay claims (as a tagline) it runs a Fair and Safe Marketplace. That’s a pretty bold statement and no doubt, one better be sure they can fill those BIG Fair and Safe Marketplace claims.

One can go back and look at the Ballestriere/Lanza action to find the mechanism, which was used to “game” the system by the co-defendants, however, sad to report that the mechanism is not found, as the action stays within the confines of alleged shill bidding, a click room and the subsequent bidding up of merchandise by the co-defendants (as alleged by plaintiff’s counsel). However, shill bidding alone, won’t generate the potential millions earned by the co-defendants, if the traffic’s not flowing into eBay Live.

Enter eBay search results manipulation.

eBay claims it’s not a traditional auctioneer (and under their user agreement) have set up a one-sided (take it or leave it agreement) that the user “acknowledges that eBay is not a traditional auctioneer“.

This brings us to former site known as eBay Live Auctions. If eBay is NOT a traditional auctioneer then how could eBay collect 5% of all auction items sold in virtual and “real” live eBay Live events?

The eBay Live buyer pays the eBay Live seller anywhere from 10% upwards to a 20% commission when the hammer falls on eBay Live merchandise and, each every time that hammer fell, eBay collected 5% of the hammer price. However, eBay states it’s not a traditional auctioneer.

The question of alleged shill bidding, by the co-defendants, may have been the result of the title on the seller bid button that was provided by eBay Live. The button was entitled “Floor Bid”. Each and every time the button was clicked, the words “Floor Bid” popped up for every bid cast by the auctioneer on the other end of the mouse.

In other words, if the auction was not really a LIVE auction and was being operated by the auction seller – on the other end (with the click of mouse) sans a live audience, the buyer on the other end may have been under the impression that they were bidding against another “real” bidder who was popping up a paddle. Sad to say, virtual live auctions held on eBay Live were never a battle between a paddle and mouse click – it was auction seller mouse click against buyer mouse click – nothing more. A hard pill to swallow when you learn that you were bid up on auction lots, thinking that you had real competition from fellow sellers, when in fact, you were actually bidding against the eBay Live Auction seller.

In reviewing an email between a former eBay live seller and an eBay Live employee, one can might come to the conclusion of – what was eBay thinking? The contents of that email have been edited, however, the segment displayed below has NOT been edited:

“We are evaluating whether we should submit a project to enable the Live Auctions platform to accept phone, fax and proxy bids. If we did this, we could disable the “Floor Bid” button for sellers that are holding live auctions without an an actual floor”.

The aforementioned email was written by an eBay employee (at eBay Live Auctions) in October of 2007. However, the “Floor Bid” button was active long before October 2007 and even though the email was written in October 2007, the “Floor Bid” button was never changed.

So, it appears as though someone at eBay was thinking that the “Floor Bid” button could have been disabled, as to stop those eBay Live VIRTUAL auction sellers, who did NOT have an “actual floor” from clicking on the “Floor Bid” button, which, in turn, may have created an appearance of shill bidding.

eBay built the system (or owned it) and it stands to reason that they had the ability (or clear responsibility) to modify and/or control the system and how it was used. In other words, it’s their technology, they built, they own it, they derived income from it and had the last say. However, they also picked up a few partners along the way who they split their fees with.

On the front end of eBay Live, bidders may have thought they were bidding against “real” live paddle pushing bidders, when they may have been bidding against themselves and ONLY the Live Auction seller.

On the back end, the game was afoot. Neiman’s Jewelers and Molayem’s related eBay user ID’s were busy listing thousands of items per week on eBay Live. However, they had an advantage in that they were able to drive their listings to front of eBay search results on an hourly basis.

Neither seller shared their new found knowledge with hundreds of other eBay Live auction sellers. Well, not exactly, as the Windsor suit alleges that those at eBay Live knew how at least one of these sellers (Molayem) was gaming the system to his advantage.

Back to the Balestriere/Lanza lawsuit..

For one to allege shill bidding (and prove it) might be an easy task once discovery is underway, however, shill bidding alone won’t generate the traffic to keep the revenues flowing. No, you need a way to drive the traffic into eBay Live Auctions, as eBay Live was directing traffic to a sub-domain known as ebayliveauctions.com. eBay drove traffic into eBay Live via its search results listings on eBay.com – it’s main site. The way eBay drove traffic into eBay Live was by way of flowing eBay Live listings through eBay.com search results. Once an eBay Live auction seller uploaded a catalog, those items would flow through regular eBay listings (at eBay.com) up and until the item came up for auction on the live platform. Nice idea in theory, however, bad idea when it comes down to regular eBay seller listings, who may have paid much more to list their items – then those who listed items on eBay Live.

Yes, there’s much confusion, as to excatly what went on in the case of these defendants and who knew what and when they knew it. Here’s where it gets a bit more interesting…

If Molayem and Neiman’s Jewelers were able to flow their items through regular eBay listings and maintain those listings every hour on the hour in the top jewelry search results on eBay.com, then it stands to reason that regular eBay sellers may have gotten the short end of the stick – when it came their time to climb eBay search results listings, which were flooded with Molayem and Neiman’s Jewelers listings. Was this a FAIR marketplace? You be the judge!

In other words, think dollars and cents, as it may be found that regular eBay sellers, (offering jewelry in the same categories as the co-defendants), may have paid way more more for their listings but, those listings may have never made it to the front of the prime listing space within eBay search results, as they collided with eBay Live co-defendant listings.

The recipe for success for the co-defendants may not only have been attributable to eBay Live’s “Floor Bid” button fiasco but, a combination of non-transparency of the entire eBay Live auction platform and the flooding of eBay.com search results with just a few direct to eBay Live Auction sellers on an hourly (daily, weekly, monthly basis).

Now, the finger pointing may go from the co-defendants to eBay and one could guess what their defense may be..

“eBay built the technology and it was their responsibility to make sure that there was transparency”.

No doubt, GoAntiques made it clear in their TOS that they bid on lots to protect the reserve so, it may be that GoAntiques.com disclosed properly to the consuming public, while eBay pondered whether it should disable the “Floor Bid” button for virtual auction sellers.

eBay is no stranger to lawsuits and was already sued in the past (along with GoAntiques.com) for alleged shill bidding on the very same platform. That suit was settled and one would think all would have learned a valuable six-figure lesson.

When that lawsuit was settled, eBay could have revamped the entire system to ensure that it was a Safe and Fair Marketplace, however, as we have learned – going back as far as October 2007 – an eBay Live employee stated that they were evaluating whether to submit a project to disable the “Floor Bid” button – huh?

Again, the Balestriere/Lanza team should be looking into not only how the alleged shill bidding occured but, how the listings of a few of these co-defendants got their listings to flow through the prime space at the front of eBay.com search results listings. It may be that there are other claims out there concerning non-eBay Live sellers who paid a premium to sell jewelry items, which never received the exposure they paid for, as a collision course, with eBay Live jewelry items, shut them out of the top eBay search result listings.

Let’s add some more fuel to the fire and go as far as to say that any eBay Live Auction seller (and there were hundreds of eBay Live auction sellers direct to eBay – such as the defendants – and there were also hundred’s of clients that went through eBay’s PARTNER Live Auctioneers) who may have also been slighted by the slight of hand listing escapades of a few.

eBay shut down eBay Live Auctions in December 2008 and maybe they simply think that out-of-sight equals out-of-mind. My guess would be that there may be many regular eBay sellers and eBay Live Auction sellers who could be consulting with class action attorneys on this matter. There’s information all over the net concerning these lawsuits and a few Google keyword searches will yield tons of results.

While eBay Live Auction buyers are being represented by Ballestriere/Lanza, regular eBay sellers (and even eBay Live Auction sellers) may want to start digging a bit deeper into the eBay Live Auction lawsuits to learn how they may have been harmed by the actions of a few and the inaction of many.