Their Own Employees Bidding to Jack up Prices

What’s the Deal?
Well this is something that goes on everyday. Domain auctions. Nothing new. Because people will pay huge amounts to get a domain name that might be profitable, and even more for even better domain names.

A Little Bit of History
This has been going on for quite some time and there are many companies that do it. They get together a list of “Squatters,” or People who have lists of the domain names that are about to get deleted, or thrown back into the general domain name pool because they are expiring. The companies use the services of these squatters to scoop up a whole bunch of these domain names and then auction them off to the highest bidder. The system worked fine for a very long time and was very profitable.

So What Happened?
What happened is that one company, SnapNames, was using its employees to pad the bids. They bid on the names they own to jack up the prices so that when the domain does sell they get top dollar for it. This is not only unethical, it is illegal.

According to TechCrunch.com in an article on Nov 4th, an executive form SnapNames, which is owned by Oversee.net, was doing this between 2005-2007 at the rate of 5% of all auctions, but claiming less since then. According to a Nov 7th Article by TechCrunch.com, this is what has been going on since 2005-

What happened at SnapNames is much worse. The company is the seller and has the most to gain by shill bidding. And the company is also in control of all auction information. Sometimes an auction may have two bidders, with one bidder putting in a maximum bid of $100,000 (yes, they go this high sometimes). Another may bid just $10,000, and so the winning buyer would just pay some small amount over $10k. From SnapNames perspective that isn’t a $10k gain. It’s a $90k loss.

Getting the picture? So then SnapNames decided to let this executive bid at the auctions at almost no risk to himself. What I mean by this is that the executive was allowed tlo bid up to 90,000 without losing money if he “accidentally” won the auction. SnapNames would secretly refund him the money.

So What Now?
Well, SnapNames is asking all customers to sign a waiver saying they will NOT sue SnapNames if the customers accept the refund agreement. The problem with the refund agreement is there is no way to accurately calculate how much a company was affected by the shill bidding or is at all.

So for example, if SnapNames offers a refund of 20,000 to company “A” and later Company “A” is able to determine that the refund should have been over 100,000 then there is nothing Company “A” can do about it because they signed the agreement. Crappy deal, I say.

What makes this even worse is SnapNames has apparently DELETED information form the client accounts. There is now no way to look at any information. And SnapNames is offering the refunds while saying if the company wants to dispute the amount, they have to show proof of the differing amount. How are they supposed to give SnapNames the info they want if they themselve deleted it?

And The Verdict Is?
Bad Business all around. In my opinion, I say sue SnapNames. teach the company a lesson. Their customers trusted them and they let them down. There is no reason to let the company off easy. They showed bad business morals, no ethics and they are looking like the con artists, they are. How is the public going to let them get away with this? With the economy the way it is in the first place, I say sue SnapNames and let them go into bankruptcy. Make them go down. They deserve it for not being honest in the first place.