One less voice for the consumer

As a journalist, Mitch Lipka was an objective voice for consumers. He did important work, exposing fraud and guiding readers on making educated decisions and using their resources wisely.

IMG_0095He died earlier this week of cancer. He was 53 and writing to the very end. Here is his final column, published in the Boston Globe:

Just because someone tells you something’s a great deal doesn’t mean it is.

Commercials boast of laptops for less than $100 and big-screen TVs for about $50. And, by the way, shipping is free. This is where consumers should be saying, “What’s the catch?” instead of, “What a deal.”

Skepticism is vital, but, unfortunately, it is suspended far too often. That’s the backdrop for so-called penny auctions. These online auctions make it seem as though a great deal is around every corner. But what is the catch?

Penny auctions offer the chance to buy electronics, appliances, and other items at big discounts — up to 95 percent, some sites promise. They are unlike traditional auctions on sites such as eBay.com, where low bidders simply don’t get the product they are seeking. In penny auctions, unsuccessful bidders lose what they offered.

This is done by making consumers buy bid packs, which are what appear to be small chunks of money, usually starting around $25. Consumers use the bid packs to compete with other buyers — bidding up an item one penny at a time.

Even though the numbers appear small, making it feel safe to jump in, bidders will find those pennies can add up fast. Consumer advocates who tested the sites, in search of deals for such items as iPads, have found themselves losers time and again, as someone else overbid the value of the product.

In addition to leaving empty-handed — and with lighter wallets — users are dangled the booby prize: the option to buy the product at a price typically higher than what you would pay if you had shopped around.

Legal? Typically, yes, as the sites make no secret of their business model. But consumer advocacy groups argue against using penny auction sites, noting the similarity to gambling — including that the odds are stacked in favor of the house.

Don’t rely on self-serving representations made by a company or be seduced by testimonials they toss around. Weigh the risks against the possible rewards.

And remember, the best deals most often can be found through research and an understanding of the market.