Penny auctions are becoming popular with people who enjoy high-risk entertainment. Unfortunately, they've also ensnared some less savvy consumers, who don't really understand how they work. One website called is gaining notice thanks to an aggressive online marketing campaign. Although the site is relatively new, there's already significant online chatter regarding a supposed Dibzees scam. Before you sign up, know what the FTC is saying about the company's auction model.

A warning from the FTC

If you like to risk your hard-earned money for a slim chance at bargain merchandise, penny auctions are exactly what you're looking for. At least, that's the Federal Trade Commission's take, according to a warning it recently issued to consumers. According to the agency, it doesn't matter if you are using Quibids, Dealdash or Dibzees; if you're participating in this type of auction model, you stand to lose big.

The FTC recently issued a report outlining potential problems associated with these companies, including delayed shipping, no shipping and damaged merchandise. What's more, the federal agency warns that the vast majority of users end up losing money, while winners tend to pay much more than they expected.

Why people lose

According to the FTC, users tend to fail at penny auctions like, because they're forced to buy bids, which they must then risk for the right to purchase an item. If they win, they get to buy the items at a low rate; however, if they lose, they forfeit their bids without getting anything in return. Additionally, because winners are usually forced to use multiple bids to win an auction, they often end up paying much more than they thought they would in the long-run.

Is Dibzees a scam?

Many penny auctions have been accused of using bait-and-switch tactics and/or automated software that makes fake bids on behalf of the company. That said, there's no direct evidence that does either of these things. On the other hand, it is clear that the FTC does not endorse the company's auction model, and the Better Business Bureau recently issued its own warning to consumers regarding similar bidding websites.

If you understand how these bidding sites work, they may offer some form of online entertainment. If not, be sure to follow the FTC's suggestion to thoroughly read each site's terms of service prior to signing up.