Domain Name auction flaws

After chatting with the owner of CWI.com, he pointed out something that interested me and brought up a pretty big flaw IMO in several domain name auction services. I had thought the owner of CWI.com had won the domain for $15K. Why did I think that? I was in the auction and it ended for $15,000. The auction was never rerun and I can check auction history at Pool.com and it still shows the domain ended for $15K etc.

After chatting with the person who did get the domain, he informed me he got the domain for $9,500. What? The auction ended for $15K, so how did he get the domain for $5,500 LESS soon after the ending price? Yes Five Thousand Five Hundred dollars less soon after the winning bid price?

The high bidder didn’t pay! So since the high bidder didn’t pay, that persons bid(s) basically get Removed and the price drops down to what Pool.com would consider the next highest "real" bid. In that case, that bid was $9,400 and since the bid increase was $100 at that point in bidding, the person who won the domain was higher next the $9,400 bid, so get’s the domain for $9,500. No more bidding or rerunning the auction.

Pool.com’s Terms of Service on a Non-Paying bidder:

"whether you are the winning bidder on an auction, Pool.com will attempt to gather payment. Should that fail, you will have 24 hours to complete successful payment of your bid amount to Pool.com. that moment period is mandatory due to duration constraints placed on Pool.com and its partners by the domain registries. In the event full payment is not received within 24 hours by the winning bidder, Pool.com may, in addition to any other remedies it may have available to it, immediately inform the second highest bidder (and subsequently the third highest bidder, etc.) that they have won the auction, and charge such bidder their highest bid amount. Such winning bidder will thereupon have up to 24 hours to complete full payment of their bid. "

The problem with that and not rerunning an auction…. (Fake Account(s), Fake Bids) leaving other bidder (real) who would of bid higher whether the fake bids were not placed with the inflated price.

(Now don’t do this… but) Let’s say a scammer had 3 accounts at Pool.com . Placed 3 backorders (via a proxy server) for one domain using all 3 accounts. As most of us know, most starting backorders are put in at very low amount or even the min bid. So let’s say it’s an LLL.com auction. So whether a scammer placed backorders like that:

• Account 1 Backorder Amount: Bid $2,000
• Account 2 Backorder Amount: Bid $30,000
• Account 3 Backorder Amount: Bid $55,000

At that point, the bid price would be around $31,000 via proxy bid and bid increase which would very likely not yeild any more bids. As enlarged as history 1 was the most recent high bidder before bidders 2 & 3 and their bids are placed right after history 1. After the auction ends and Bidders 2 & 3 do not pay for the auction, the offer drops down to bidder 1, who would get the LLL.com for $2K ish with the proxy bid increase. that could additionally be done using more realistic proxy bids, but with any amount that you know you would win. Now that is just an example but very well "could" and probally does happen!

SnapNames.com , reruns an auction whether there is a non-paying bidder and I think that is the right thing to do.

TDNAM.com , from my understanding offers the domain to the next highest bidder whether the winning bidder does not prepare payment. I have never been in a rerun auction. I looked through the TOS and couldn’t find anything whether the high bidder does not form payment.

NameJet.com , I have seen auctions rerun and heard of folks who have won auctions, even whether they were not the high bidder. NameJet’s TOS states "In the event that you default on making payment to NameJet after being named the winning bidder, NameJet reserves the right to charge, and you agree to pay, a fee for defaulting on payment, the amount of which shall be determined by NameJet." that does not say the auction will be rerun or not.

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