NY settles with auction house over eBay fraud

Way back in the 1920s, the Marx Brothers made fun of the Florida land boom, with Groucho hiring Chico to be a shill for his land auctions. Unfortunately, Chico didn't quite understand the concept and Groucho wound up buying most of the lots himself. The concept of shills has been updated to the Internet now, as EMH Group, the huge U.S. jewelry auction house, settled with the New York Attorney General on charges that it used shill bidding on eBay, reports the Associated Press.

The company asked their employees to secretly bid on the items the company was selling, thereby driving up the price. Items sold in a no-reserve auction have no minimum or reserve price set. The lowest bidder begins the auction; the highest bidder wins. eBay brought the scheme to the attention of authorities and assisted in the investigation.

Camille Thompson who has been buying and selling jewelry online for almost 10 years, said that she became suspicious when she placed two bids on rings and necklaces, but did not win the auctions.

"I want eBay to be a safe place," Thompson said. "People can hide behind the computer without being monitored."

Under the terms of the settlement, EMH Group will pay $400,000 in restitution and penalties and will be banned from the online auction industry for four years, said the Attorney General's office.