(Smart Money) — An iPad for $3.20? A designer handbag for $41.80? It is possible, due to a new and growing segment of online auctions. Yet it’s not as likely — or as cheap — as sites would like you to think.They’re called “penny auction” sites, because bidding typically starts at zero and goes up by a penny, and in the last two years, they’ve moved from the novelty fringe firmly into mainstream. Unheard of in 2009, there are now more than 120 such sites, according to Technology Briefing Centers, a consulting firm that tracks the sites. Like with other online auctions, the sites offer the possibility to buy, or win, gadgets, designer accessories or gift cards for a fraction of the retail price, and plenty are finding that alluring: Fifteen-month-old site BidHere.com, for example, boasts 1.1 million members in 22 countries and estimates that it gains 1,200 new users daily.

Complaints about the industry, however, are growing nearly as fast. The Better Business Bureau is still tallying 2010 figures, but a spokeswoman says that just four local branches reported more than 1,500 complaints about penny auction sites – more than the total number of complaints logged nationally about internet auctions the year before. And the sites’ biggest critics say they’re no better than playing the lottery or the slots – without the regulatory oversight. “It looks and smells like gambling to me,” says Joseph Lewczak, an attorney at Davis & Gilbert LLP, which specializes in sweepstakes and lottery law.

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