The Auto Co, which was the largest automotive trader on Trade Me, was fined $42,000 today for a shill bid scam
An
Auckland car dealership has been sentenced for what Trade Me has called
the biggest ghost bidding scam in the auction site's history.
The Auto Co (Millennium) Ltd, which was the largest
automotive trader on Trade Me, was fined $42,000 today at the Auckland
District Court. The company previously admitted 13 representative
charges of engaging in conduct liable to mislead the public under the
Fair Trading Act.
The charges relate to the period between June 27, 2011 and July 12, 2012.
No one from the company was in court for the sentencing, including the director Masashi Umeoka who was in Japan.
Commerce Commission prosecutor John Dixon said the
company took part in systematic "shill bidding" which involved the
vendor or people on behalf of the vendor placing bids on their own cars,
thereby artificially inflating the price.
The cars involved were placed on $1 reserve and the shill bidding forced auctions to reach an undisclosed reserve price.
"[The shill bidding] made a mockery of representing that the car is available for $1 reserve."
Mr Dixon said the ghost bidding tactic was used in
530 auctions with 7000 separate ghost bids placed. The estimated loss to
the more than 100 identified victims was about $90,000.
The fake bids meant genuine bidders paid more for the cars then they should have.
In its victim impact statement read to the court,
Trade Me said The Auto Co had "engaged in the most prolific and damaging
shill campaign in the history of Trade Me".
It said the offending was "more than opportunistic" and on an "almost industrial scale".
The previous largest case of shill bidding on the
site was the Morrison Motor Company Ltd in Christchurch in 2008 which
involved 45 auctions, Mr Dixon says.
The Auto Co had already
paid $122,000 to Trade Me for refunding victims. Trade Me had since paid
$90,000 to 110 identified victims.
Trade Me had
also identified other victims outside the period in which The Auto Co
had been charged, and the company had also agreed to refund those
victims, Mr Dixon said.
Trade Me was also seeking
$22,500 in reparation for the "considerable cost" of undertaking its
investigation of the scam. Mr Dixon said the money left over from paying
the victims would go toward that cost.
The practice of ghost bidding affected buyers, sellers and also the reputation of Trade Me, he said.
Defence
counsel Donald Webster said the company had no previous convictions,
pleaded guilty at the earliest opportunity, had paid reparations and
cooperated with authorities. The company deserved a lesser fine because
of these actions, he said.
Paying back the reparation meant he had not profited from the scam.
In
the initial interview Umeoka believed the company's actions were not
illegal. The practice was "rife" in Umeoka's home country of Japan, he
said.
The company was a large operation and Umeoka left the day-to-day running of the business.
"That's not to say he was unaware of it... In Japan they [the authorities] don't do anything about this sort of thing."
Umeoka
had since been banned from listing anything for sale of Trade Me and
earnings dropped 80 percent the day after being banned.
"He has suffered a huge financial penalty. This [Trade Me] was his main business."
Umeoka
primarily sold second-hand Japanese cars and was currently in Japan
trying to source more cars to bring back to New Zealand.
3 News
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