Bid shilling is a situation where sellers arrange to have fake bids placed on the item they sell to artificially jack up the price higher compared to bids in the normal circumstances. If the legitimate bids does not meet their expectation, they may pop in to sell the item to themselves in order to put up the item for auction again to get a higher price.
By doing this, consumers will have to pay a higher price on the products that they bidded. This will be very unfair to them, 20% illustrated in the case below.
An example of this:
A jewellery store was fined USD400,00 for directing its employees to secretly place bids on the their products auctioned at eBay in order to increase the bidding price. The company and the merchant was also barred from participating in any online auction for 4 years.
Its action actually helps to jack up the price by an additional 20% by placing 232,000 illegal bids over a one-year period. These bids itself can be accounted for almost USD5 million.
Beside bid shiling, another type of e-auction fraud is Bid Shielding. This is used by the buyers instead if the seller.
In bid shielding, phantom bidders were used to bid at a very high price when an auction begins. However, all the phantom bidders will pull out at the last minute to enable the bidder (friend of the phantom bidders) who bids with a very low price wins. The bogus bidders acted as the shield to protect the low bid of the bidder by scaring off real bidders