Obviously not all exchanges are free and ideal, but both the cases you cite (Starbucks and EA), it's pretty close. I'd say 100% in the Starbucks case (you can get coffee from lots of places) and a little less so in EA's case due to the fact they have an IP monopoly on EA games (you can not obtain a Madden game from a non-EA source), but still, nobody's forcing you to buy Madden games either.
Swoopo is not like that. It is not a mutually-beneficial exchange between two parties; one party wins and numerous parties lose, with only one other party winning in theory (the auction "winner") and that still only at the discretion of Swoopo (if the "winner" is a plant, how would you tell?). Because the losing party entered into it freely and with reasonable knowledge of what is going on, I do not favor forcibly shutting it down either, as I can not imagine what such a law would look like anyhow. But we can still call a spade a spade; this is not like a free market exchange. This is a con game.
(The other possible out is that the auction losers are paying for an intangible feeling of fun or something, which is a valid thing to do if you choose not to judge people's value functions, but I suspect that a fair analysis would show that they are not really winning on this front either. Part of that analysis would be to show that Swoopo is the best way to obtain that feeling and I have to imagine a conventional casino is a better choice there for most people.)
Till this point, I thought you were defending Swoopo and your logic actually made sense to me because the parties involved in the auction have different valuations. If a person spends USD 10 bidding on a product, the mere possibility of having a USD 1200 product for such a low price may be more valuable to him than Swoopo's valuation of the transaction (USD 10). Plus the suspense and thrill adds to the valuation by the bidder :)
And no one is forcing someone to bid on a Swoopo auction as well.
Read fail?
Perhaps not everyone, but it seems to me that a large portion of firms in a capitalist economy prey on some human weakness or another, to varying degrees.
Wow.
I take it you have a really, really broad definition of "human weakness" for this belief system to continue working for you.
Car broken and I can fix it for 20 bucks? You have a weakness for not knowing how to do auto repair. Need a good resume and come to my resume service? You have an inability to write and a lack of work, due to a weakness of the system. Need a program to balance your checkbook? You obviously have a problem with math, could be lazy in your account habits, etc.
This kind of definition will work anywhere -- suggesting that perhaps a new one would be better.
I could easily make a dozen arguments where respectable companies do exactly that. For instance, is Starbucks preying on the "weakness" of humans that desire caffeine? Is EA preying on the weakness of humans that desire an escape via gaming? By your definition of evil, everyone and everything participating in a capitalist economy is evil.
Frankly i see nothing wrong with Swoopo, even if some end up worse off than they would have been had they not participated. This is because i place the burden of responsibility on the actor, not the facilitator. Caveat Emptor.