Fraudulent bidders or non paying bidders pose problems for both domain investors and auction websites. The question that comes up is what is the best way to deal with a closed auction where either the auction site detected fraud, or the winner did not pay for whatever reason?
Some say the best way to handle this is to award the name to the second highest bidder, that can be gamed rather easily. (I will get back to that).
Others believe the domain should be re-auctioned, and we start with a whole new round of bidding.
There is a third group, they don’t come out into the light often but they are in the shadows, they are also small in numbers. This is the group that believes no registrar or aftermarket site ever had the right to make money off of other people’s drops. I have had emails for over a decade from people asking me, “Why does godaddy get to make thousands off the misfortune of others?” They got lucky, that’s always been my reply, if ICANN had decided to have a rule about drops and force everything to just expire well a lot of companies would be a lot less wealthy.
But the reality is only the first two choices are relevant.
On Namepros there was a good discussion between Abdul Basit and Michael Sumner from Namebio.
Instead of re-auctioning the domain, it’s better to award the domain to 2nd highest bidder. Similarly what GoDaddy does when the 1st bidder fails to make payment. That will also save everyone’s time.
I actually like re-auctions because they are more transparent, awarding to the runner-up means only one person knows the winning bidder didn’t pay and it is kind of swept under the rug. I’m a little biased though because it helps with our tracking, when our software sees a re-auction we can easily remove the data from the prior auction.
A huge issue with the runner-up idea, which GoDaddy had very serious problems with for the better part of a year, is this: scammers create two accounts which they use to run the price up extremely high within minutes to the point nobody else will join in, and then when it gets rolled back the scammer gets a domain that is worth thousands for $69. Replace the one banned account and rinse and repeat. It wouldn’t be terribly easy with DropCatch because they have one of the tightest account verification systems in the industry, but with enough family and friends you could scam them out of tens of thousands of dollars before you run out of IDs.
Michael brings up the point I made about second highest bidder being easy to game.
scammers create two accounts which they use to run the price up extremely high within minutes to the point nobody else will join in, and then when it gets rolled back the scammer gets a domain that is worth thousands for $69.
So which option do you prefer?