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Hello, and thanks for the question.
Penny auctions work by selling bids (usually between $0.50 to $1 per bid); hundreds of people may "spend" the bids they have purchased on an auction item, but only one person wins! The auction website rakes in the money from all the losing bidders, in addition to the one lucky winner. While in may well be true that a 55" LED TV was won with a bid of $47.32, the site probably made several times the retail price of the TV from bids purchased by all bidders on the item. There is nothing illegal about penny auctions (although they sometimes receive complaints about insider bidding to jack up prices), just that they are a gamble that rarely pays off.
Hope this helps!