Back in 2004, I worked for a SaaS startup that sold reverse auctioning services for low-cost suppliers (e.g. China) to huge US manufacturers. The biggest proble

Back in 2004, I worked for a SaaS startup that sold reverse auctioning services for low-cost suppliers (e.g. China) to huge US manufacturers. The biggest problem that we faced was that the final auction price would end up ridiculously low. The manufacturers were super happy until they found out much later that the supplier couldn't deliver. Then, we came up with a new scheme to do certification and auditing on low-cost suppliers. We even had a large team of scouts combing through these countries and conducting reviews. That way the manufacturers could limit their auctions to only suppliers that passed certain filters. Again, the manufacturers were happy. The lowest bid price would always go really low. They were happy, that is, until the suppliers started to quickly game the system. They'd pass the review criteria but they'd use other tricks - outsourcing to other companies, degrading other parts of their service offering, etc. Then, it just ended up being an 'arms race': we'd enhance our criteria and they'd find somewhere else to cut corners. Needless to say, our company was sold for a loss (mainly for our patent portfolio) and absorbed into our investor's other companies)