The suit, filed in California Superior Court in Santa Clara, was brought on behalf of Glenn Block and a class of bidders who purchased items on eBay during the past four years.
Block accuses eBay of raising a bid for an item he was trying to purchase from $111 to $112.50, after he responded to an e-mail warning that he had reached his maximum bid limit and was the highest bidder, according to a report by Reuters. Block says he didn't need to pay the extra $1.50 in order to win the auction and his lawsuit accuses eBay of pitting buyers against themselves, and profiting from the increased bids.
Block's lawyer, Reed R Kathrein, said:
"While the difference often may amount to no more than a dollar or two, the volume of transactions affected – the company has approximately 51.7 million active users and approximately 126 million registered accounts – suggests that 'winning' bidders are collectively losing millions of dollars to eBay, its sellers and its PayPal financial arm."
It has been compared to shilling, the practice of bidding on an item with no intention of buying it, merely to raise the price. Shilling, or shill bidding, by users is strictly forbidden by eBay and may result in suspension from the site.
However, according to the lawsuit: "If a user accepts eBay's request to provide a higher maximum bid, eBay then acts as a shill bidder on behalf of the seller at the price level of the highest former competing bidder. As a result of eBay's hidden shill bid, eBay automatically raises the hapless buyer's bid so as to out-bid eBay's shill."
The suit also alleges that eBay has violated the state's Consumers' Legal Remedy Act and California's Unfair Competition Law.
EBay spokesman Hani Durzy told Reuters: "Based on what we know about what's being alleged, it appears the plaintiff completely misunderstands the functionality of the eBay bidding system."
According to the eBay web site, it can sometimes appear that a person is bidding against himself if his current high bid is between bid increments – a preset amount by which a bid will be raised each time the current bid is outdone. A minimum increment is set for different price ranges.
In this situation, says eBay, "if you were to place another bid, your bid will increase to the next round bid increment."
The company continues: "The high bid will always try to be a full bid increment over the next highest bid. If you are currently less than one bid increment over the next highest bid, then raising your maximum bid will increase the current high bid to a full bid increment above the next highest bid."