Is a Dubli.com a scam, ponzi or pyramid scheme?

That was a question posed to our firm regarding a rumor that “DubLi is to become bigger than ebay”. As a collective group of veteran marketers, senior sales exec’s for Fortune 500’s, telcom providers and super-affiliates, of course we felt it necessary to dispell any doubt that it was “indeed a rumor and far from feasable” – knowing the milestones in ebay’s success and firm believers in the credo “If it sounds too good to be true IT IS”. Well, after 2 weeks of due diligence in viral marketing analytics, international IP traffic statistics, online auction market share research and ebay seller/shopper surveys we are extremely proud to report that we can neither confirm or deny the rumor DubLi will be bigger than ebay (although it does have major substance) but can definitely confirm DubLi is NOT a scam.!

The fact is that DubLi is unlike any other online auction platform we can use as a variable – although the features of each auction platform individually and the viral marketability of DubLi does make a compelling arguement that the rumor could be true (potential to be bigger than ebay). When applied to other “trendy” reverse auctions, it yields unbelievable projections.

I have contacted the FTC, FBI and Attorney General’s office in our state of Nevada and, to our knowledge in doing so, there are no confirmed reports of DubLi in violation of ANY laws anywhere.

However, after dedicating over 100 research hours and many international resources into looking at DubLi, we are confident in saying DubLi is a safe and exciting company for all customers and associates to use.

What is Dubli?

Dubli.com offers reverse auctions online for such items as cameras, XBox 360game stations, and iPods. Each item begins with a pre-set price. There are three auction programs, called Xpress, Zero and Unique Bid.

Common to Xpress and Zero s the purchase and use of the Dubli “credits”,sold online for $.80 USD each or in various-sized packets. Dubli credits are not usedas a substitute for currency. A member must buy credits in order to participate in anauction, and uses up one credit each time he/she checks the price ( in the Xpress and Zero Bid versions) or makes a bid (in the Unique Bid version). The act of checking also drives the item’s current price down by $0.25 – for every participant in the auction, and successively- each time someone checks. Dubli credits are non-refundable once expended in the bidding/checking process. They are not transferable, hold no monetary value and cannot be used on any other site or in any other auction enterprise.

In the Xpress version, participants keep checking until the price reaches a levelthat one of them finds agreeable. At that point the participant is allowed to formally purchase the item in question by clicking a “ buy now” button on the screen (first come first served). The item is then paid for separately. Credits cannot be used for this payment.

In the Zero version, participants successively use their credits to check/lower the item price until one final participant lowers it to zero. That participant is the purchaser and the item is his. Although any of the participants can see when the price is approaching zero, none of them can precisely predict when the price will reach zero, because no participant can know how many other participants there are, come or what any of them will do.

In the Unique Bid version, participants use Dubli credits to place bids during aset time window, again charged one credit per bid. In order to be valid however, a given bid must also be a unique bid. That is, there must be no other bid placed byanyone else for the same amount. If someone else does place with an identical bid, both bids are invalidated. Participants are informed by e-mail when such invalidation occurs. At the conclusion of the set time period, the lowest unique bid is the winner. If there is no such bid, the auction is invalidated and Dubli retains the item. Multiple bids may be placed except during the last five minutes, when each participant isrestricted to one bid only.

Dubli also has an online shopping mall with over 1000 merchants. You are able to easily pick the shopping category that you like and shop at you favorite stores. When doing so the customer can shop for free and receive cash back on all purchases. Customers will see up to 20% in rebates and 60% in discounts on several items. All purchases are made form that particular companies website. For example, lets say you are shopping at Best Buy for a laptop you can get to the Best Buy website by going to Computers and Electronics under shopping categories in the DubLi shopping mall. When you Click on Best Buy, you will be taken to the Best Buy website. You will receive all of the normal sales and discounts that Best Buy may be offering, but you will recieve cash back from Dubli on all purchases.

Is DubLi Gambling Or Legal?

Can any of the three Dubli online auctions be considered a gambling enterprise? Do any of them violate U.S. state or federal laws against lotteries, raffles, or similar forms of gambling? What can be done to minimize any such liability?

Gambling generally. In order for a given transaction to be identified as gambling, three distinct elements must be present together consideration, chance, and prize.

1. Consideration: in contract law generally, the term “considerationmay mean practically anything of value, including giving up the right to some future act or obligation. In American gambling law, however, consideration means money. This money must be risked- that is, the player gets nothing else for his money but the opportunity to win a prize , determined by chance. Just as importantly he stands to lose that money permanently for no gain, goods, or service in return.

A. Standard auction model: in a traditional auction,“consideration” in the gambling sense does not exist. The highest bidder gains the right to buy the item(s) on offer. So long as he can actually pay, the matter is resolved. The same is obviously true of the” ordinary” reverse auction

B. Dubli models: on the one hand, a participant expends one credit merely for the chance to check the price. From this point of view it may be said that he is not actually purchasing any chances to buy. On the other hand, each time the price of the item on offer is checked in the “Xpress”and “Zero” models, the act of checking forces the pricedown $.25. In the ““Unique Bid”, a participant must also expend one credit to make his bid. In that sense, and because credits once utilized to make a bid or price check are not refunded, it is clear that participants purchase the means to affect , or least enter, the contest. Therefore I conclude that the element of consideration is present in all versions of the Dubli online reverse actions.

2. Chance: there is some element of chance in everything human beings do. For the purposes of U.S. gambling law, however, “chance” means that a given event is resolved, in regard to all participants at the time, by a common random occurrence which is not under the control of any participant. To give an example, if John and Joe play chess against each other, the element of chance is minimized if not eliminated. All things being equal, the game will be won by the player with the most knowledge of the game and the best moves. Chess is a skill game. But if, one the other hand, they both purchase a lottery ticket, skill has nothing todo with the outcome. Either a given number is picked or it isn’t. This is pure chance.

A. Additionally it makes a large difference whether the bettor is a participant. To take the chess example above, it is not gambling if John and Joe agree that the loser of the chess games must pay the winner $10. The conduct of game isunder the control of the two participants. However, if two onlookers, Sarah and Sue, bet on which man will win the chess game, that is gambling, because the outcome of the game is not under the control of either woman.

B. In the case of Dubli, the element of chance does not rise to the level required to categorize the activity as “gambling”.

In the “Xpress” and “Zero” models, the resolution of the event is not dependent upon some random occurrence, but only on the conduct of the participants. The price of a given item on offer is decreased only by the actions of the participants. If, for some reason, none of the participants decided to check/decrease the price of the item, that price would remain static unless and until one or more of the participants chose to act. In fact, if no one chooses to bid on a given item, nothing happens at all.

“Unique Bid” is very much in the same vein. That is, a participant’s success in placing a “unique bid” does not depend on anything outside the efforts ofthe respective participants. Two or more participants may offer bids at the same price, but this is not caused by any random agency. This coincidence (once again, barring collusion) would be the result of the respective participants’ independent decisions, just as various runners’ independent decisions to runa little faster or hold back in a race may lead to different- but not random- results.

For this reason I conclude that the element of chance, as understood in American gambling law , is minimal to nonexistent. While the outcome of any given reverse auction is not solely under the control of any one participant, the actions of the respective participants are the only inputs to the final result. There is no random dispositive influence acting outside participatory control.

3. Prize: the definition of “prize” is essentially anything of value.Since obtaining valuable items such as iPods at a reduced price is the whole point of participating in Dubli’s reverse auctions, the element of price is obviously present.

4. I conclude that since the element of chance, as understood in gambling law, is not present in the Dubli auctions, these auctions cannot be considered either games of chance or lotteries.

U.S. State Laws :

1. Gambling : Once we have established that Dubli is not a lottery, the gambling laws of most states are not longer a worry. But not all states: even playing games of skill online may be illegal in Illinois and Iowa (720 ILCS 5-28-1(a) 12 and ISC 725.5, respectively). In addition, eight states outlaw Internet gambling ( except , of course, what they themselves choose to license). They would have to stretch a point to call Dubli an Internet game of chance; further, there is no indication of any particular benefit in doing so. [Note: the text of each State law cited in this discussion is provided in APPENDIX A.] Most importantly, since the reverse auction is neither a sporting contest, a lottery, nor a game of chance, I conclude that Dubli has nothing to fear from state gambling laws and is not gambling.

2. Need for an identified auctioneer ? At least twenty-eight states,however, require a license for an auction to be conducted.[ See TABLE I]. Some require it at state level, some at county or city level; others differentiate by what is being sold ( real estate, autos, livestock). Some require large bonds to be posted and personal background checks to be conducted as well. While the purpose behind these laws is clear enough, the prevention of fraud, in many states this has become a means to restrict competition and protect the “home market” from other auctions and auctioneers.

3. Is it conceivable that Dubli might be subject to an injunction or lawsuit for conducting auctions without a license issued by the state or municipality where a certain bidder lives? This brings us to the question of jurisdiction and the Internet. Does the transaction take place where the bidder is, and therefore, under the jurisdiction of the bidder’s home state? Or does it take place at the server of the Internet establishment? There is no American law, as far as gambling, which states this, and the case precedent is sparse and unsatisfactory.\

Federal law:

Gambling laws : generally speaking, U.S. Federal anti-gambling laws are activated when state gambling laws are broken. Since we have established that state gambling violations are not on the cards, Dubli therefore need not be concerned about violating U.S.Federal gambling law.

Auctions: Auctions, as a form of sale, are governed by at the state level by commerce laws. Those auctions which allow bids across state lines come under the Federal Trade Commission, which is mainly concerned that the advertising for such auctions is truthful, and that the items sold correspond to their descriptions. Those conditions being satisfied, there is little further cause for concern. There is no such thing as a national auction license.

Conclusion and Recommendations

Dubli’s reverse auctions are obviously not gambling games, and do not constitute a game of chance nor a lottery as far as the terms are defined in American state and Federal law.

Finally, there is the matter of “ image”: since gambling is supposed to be a social harm, associating with socially desirable goals is very good preventive medicine. Dubli’s charity-only auction is a very good example of this, and this should be a continuing standard practice, expanded where practicable.