Bidding at some online auction sites could cost you a lot and leave you empty-handed.

In a strange trend, several online auction sites are charging customers for the pleasure of bidding on items.

Advertised on some New Zealand websites including PriceSpy and YouTube, websites www.bidfun.co.nz and www.bidrivals.com/nz charge customers to bid on products - predominantly big name, new electronic goods such as iPods, digital cameras and gaming consoles.

To participate you need to buy "credits" and use one of those credits every time you bid. Credits with BidFun cost $1 each (down to 80 cents each if you buy 500), and BidRivals also charges $1 per bid.

While every bid you place costs around $1, it increases the current bid by just 2 cents. The result is products that seem to sell for extremely low prices; a random look at BidRivals reveals a Sony PS3 valued at $779 sold for $8.12, a LaCie 500GB external hard drive valued at $289 sold for a ridiculously low 18 cents.

Why so cheap?

How can these companies afford to sell products so cheaply? Because the money they make from bids offsets the low prices.

Where the $779 PS3 sold for $8.12, BidRivals would have made $406 in bids ($8.12 divided by 2 cents) - still a significant loss for them overall. But take the Canon EOS 50D camera that sold on the same day for $502.74 (and has a retail price of $3149). Collecting $1 for every 2-cent bid, BidRivals would have made a staggering $25,137 from the bidding alone.

While the low prices seem compelling, there are possible problems with this auction model.

As has been illustrated by several complaining customers, there’s no guarantee you'll win the auction. You could easily spend $200 on credits, spend those bidding on an item with a retail value of say $200, and still be out-bid for the item. You're then $200 poorer with nothing to show for it (although BidRivals will let you pay the full retail price for the item if you're unsuccessful in the auction, and offset the bids you made against that price).

Neither company refunds credits – you can't ever cash-out your chips as you would at a casino. Once they have your money, you can't get it back.

“Strange” bidding?

There is also no way to confirm that the other bidders are real, not some computer-generated "bot" designed to automatically drive up the price and encourage you to bid again.

BidRivals says it does not use any systems that automatically bid on auctions. "We will never place bids to raise the price or keep an auction running," its website says.

But if some bidders on BidRivals are not "bots", then we believe they behave in some very strange ways. On a page of 51 items for sale, one user named "mefeso" was bidding on 21 of them – including 11 different packs of bids (yes, you can bid to buy more bids), two identical Canon cameras, and an eclectic group of products.

Another named "agill" was bidding on a PS3, Wii, and two identical Nintendo DSi gaming consoles at the same time. After winning one Nintendo console for just 94 cents, "agill" continued bidding on the other which was over $20 – not to mention furiously bidding on a Wii for over $24 when on the line below there was another for just $7.

These are just two examples, among many found in only half an hour of viewing, that raise suspicion of the use of "bots", of whether some sales are participated in by any real person, or alternatively ... of intensely stupid bidders.

Our advice

• We suggest you steer clear of any auction process which charges you to bid. There is a real danger you'll lose your money and not win anything.
• Unlike TradeMe, these websites offer little transparency and some that are based overseas are not subject to our consumer protection or laws prohibiting bid-rigging and misleading users about the auction process.
• Bidding on any online auction almost always means you have no consumer rights. The sole exception is if you are misled about the condition of the goods.

More from consumer.org.nz

• Auctions online - how they work, your rights, and our advice on buying and selling.
• Consumer Guarantees Act - a guide to your rights.

Got a question or comment on this topic? Share your views and experiences with other Consumer members...