US Accuses Online Car Auction Platform of Inflating Prices with Fake Bids
The online car auction industry is under scrutiny due to allegations of price inflation through fraudulent bidding practices. The U.S. Department of Justice (DOJ) has uncovered a bid-rigging scheme involving two companies, one of which is Eblock, a dealer-to-dealer auction platform.
Details of the Bid-Rigging Scheme
The alleged conspiracy began after Eblock acquired a competitor, referred to as Company A, in November 2020. Despite the acquisition raising red flags, Eblock reportedly failed to intervene promptly to curb the fraud.
According to the DOJ, from November 2020 to February 2022, employees at Company A collaborated with those at Company B to manipulate the auction process. Their actions involved:
- Suppressing competition for used vehicles on Company A’s auction platform.
- Engaging in “shill bidding” to artificially inflate vehicle prices.
- Sharing confidential bidding information between the two companies.
Methods of Fraud
The scheme was sophisticated, involving several key tactics:
- Employees shared user permissions, granting access to private bidding data.
- They pooled resources to relist purchased vehicles at inflated prices.
- Developed software that placed shill bids using dealership names without consent.
Consequences for Eblock
In light of the investigation, Eblock reached a deferred prosecution agreement with the DOJ, agreeing to pay a $3.28 million fine. The company will also implement a compliance program and assist in ongoing inquiries.
Whistleblower Reward
A whistleblower played a crucial role in alerting authorities about the conspiracy. As a result, this individual was awarded $1 million by the DOJ’s Antitrust Division. This reward marks a significant milestone, being the agency’s first of its kind.
The DOJ emphasized the importance of whistleblower information in dismantling this fraudulent operation, which risked financially harming American consumers.
Eblock has been contacted for further comment, and any updates will be provided as they become available.
