DealDash.com Class Action Says Penny Auction Site is ‘Illegal Lottery’

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DealDash.com, a popular “penny auction” website, was hit with a class action alleging the company operates illegal lotteries and falsely markets its products as expensive luxury brands.

Lead plaintiff Grant Pstikyan alleges in his class action lawsuit that he lost thousands of dollars in bids on DealDash.com. According to the class action, DealDash.com is a “penny auction” website that allows customers to bid on supposedly high end items in online auctions.

The plaintiff alleges that DealDash is a “sham.” “Rather than running true retail ‘auctions,’ DealDash is actually running a series of illegal lotteries through its website on a daily basis,” Pstikyan says.

According to the class action, DealDash operates its auctions online and via mobile app. Consumers set up their own accounts and purchase “bidpacks,” or an intangible number of bids that allow them to bid on items. Consumers pay between 12 and 15 cents per bid using the bidpacks. Consumers then use bids to bid a penny on an item in competition with other consumers.

“[W]hen a consumer loses a DealDash ‘auction,’ the House wins. When a consumer wins a DealDash ‘auction,’ the House wins. Even ‘winning’ consumers unwittingly lose,” argues the plaintiff.

“DealDash’s penny auctions are perverse lotteries in which U.S. consumers have lost tens of millions of dollars in their fraud-induced pursuit of sham merchandise,” the DealDash.com class action lawsuit states.

The class action lawsuit also alleges that DealDash.com falsely represents its products as top of the line, but “the luxury ‘brand name’ products that DealDash offers consumers are not true luxury brands at all.” Pstikyan says “They are cheap, generic brands that do not sell in substantial volumes anywhere, except through DealDash and one of its affiliates.”

According to the class action, the “brand names” advertised on DealDash.com are fake and advertised at outrageously high retail prices to trick customers into thinking they are bidding on high value items. However, “consumers are betting on products that are not worth even half their advertised values, and in some cases, not worth one tenth of the advertised value,” alleges the plaintiff.

“DealDash secretly creates and offers its own generic brands and grossly misrepresents their true value to the public: all to induce consumers’ paid entry into DealDash’s unlawful lotteries,” the class action lawsuit states. The plaintiff alleges that the supposed “brand names” advertised on DealDash are fake.

The complaint includes a description of six items sold on DealDash.com as high-end luxury items. “But strangely, none of these six disparate brand names—among others—that flood DealDash’s daily ‘auctions’ have any substantial offices, phone numbers, distribution or retail sales channels outside of DealDash and its affiliates,” the lawsuit claims.

“These ‘brand name’ products are offered only on DealDash, on each brand’s own barebones and similarly-styled website, and sometimes via Amazon.com, social media or elsewhere on the internet. But these ‘brand name’ products are not selling much (if at all) anywhere outside of DealDash, much less at the extremely high ‘values’ or retail prices that DealDash ascribes to them.”

The plaintiff seeks to represent a nationwide Class of people who purchased bids through DealDash.com or DealDash’s mobile app. Pstikyan alleges DealDash violates Minnesota state consumer law, advertising law, trade practices law, and has been unjustly enriched by its allegedly deceptive marketing scheme. He is seeking damages as well as an order halting DealDash.com auctions, disgorgement of profits, and attorneys’ fees.

Pstikyan is represented by Daniel C. Hedlund, Daniel E. Gustafson and Eric S. Taubel of Gustafson Gluek PLLC, and Jeffrey R. Krinsk, David J. Harris, Jr. and Trenton R. Kashima of Finkelstein & Krinsk LLP.

The DealDash.com Illegal Lottery Class Action Lawsuit is Grant Pstikyan v. DealDash Inc., Case No. 0:17-cv-01164, in the U.S. District Court for the District of Minnesota.