eBay accused of Shill Bidding

A class action suit filed in California last week alleges fraud and unconscionability in eBay's bidding system. The suit focuses on the manner in which eBay handles proxy bids, and characterizes eBay's actions as tantamount to "shill bidding." The plaintiffs' firm has issued a press release; Reuters [alternate link] and InternetNews.com have more.

The plaintiffs may have a point, but the impact of eBay's practices isn't particularly significant (less than one bid increment) except on an aggregate level. I'm guessing this one will settle for substantial attorney's fees for the named plaintiff's firm, a thousand dollars or so for the lead plaintiff, worthless coupons for all of the other class members, and a promise by eBay to do a better job of explaining how proxy bids work.

EBay's bidding system is inherently broken -- a timed auction makes sense only where bids are sealed until the auction closes (hence the existence of eSnipe and similar services that exploit this design flaw) -- but that problem has little to do with this case.

UPDATES: Commentary on the case from Eric Goldman and Slashdot. And a printable copy of the complaint.