If this is a scam, so is, say, charging folks 15 cents to send a text message.
In both cases, the end company ends up making a windfall of money. In both cases the customer knows exactly what he is getting and agrees to it.
it's ripping stupid people off left and right
To the first-time visitor it is not clear at all that they are basically playing a lottery with a very low payout. Calling it an auction is misleading because in an auction you only pay if you place the winning bid. This is more like a raffle, but it's not labeled as such.