Things to take note to prevent e-auction fraud

When buying at e-auctions, sellers are increasingly motivated to sell surpluses and even regular products via auctions. In some cases, e-auctions provide an opportunity to buyers to find inexpensively or unique item fairly quickly. A prudent corporate buyer should certainly look both at those manufacturers and distributors that conduct auctions periodically (e.g. GM or Dell) and at third party auctioneers (e.g. eBay or auctions.yahoo.com)

E-auctions have several limitations, including Possibility of fraud. Auction items are in many cases unique, used, or antique. Because buyers cannot see the item, they may get a defective product. Buyers can also commit fraud. Thus, the fraud rate in e-auctions is very high.

There are several types of e-auction fraud:

• Bid shielding (a buyer’s action) - Having phantom bidders bid at a very high price when an auction begins; they pull out at the last minute, and the bidder who bid a much lower price wins.
• Loss and damage claims (a buyer’s action) - Buyers claim they never received an item or received it in damaged condition and then ask for a refund. They might be trying to get a freebie. The seller sometimes cannot prove whether the item ever arrived or whether it was in perfect condition when shipped.
• Fake photos and misleading descriptions - In reaching for bidders’ attention, some sellers distort what they can truly sell. Borrowed images, ambiguous descriptions, and falsified facts are some of the tactics that sellers might employ to convey a false impression of the item.
• High shipping costs and handling fees - Some sellers just want to get a little more cash out of bidders. Postage and handling rates vary from seller to seller. Some charge extra to cover “handling” costs and other overhead intangibles, whereas others charge to cover the cost of packaging supplies, even though such supplies are often available for free.
• Selling reproductions - A seller sells something that the seller claims is original, but it turns out to be a reproduction.

The largest Internet auctioneer, eBay, has introduced several measures in an effort to reduce fraud which is:

• User identity verification - Verified eBay User, a voluntary program, encourages users to supply eBay with information for online verification. By offering their Social Security number, driver’s license number, and date of birth, users can qualify for the highest level of verification on eBay.
• Feedback Forum - The eBay Feedback Forum allows registered buyers and sellers to build up their online trading reputations. It provides users with the ability to comment on their experiences with other individuals.
• Insurance policy - eBay offers insurance underwritten by Lloyd’s of London. Users are covered up to $200, with a $25 deductible. The program is provided at no cost to eBay users.
• Nonpayment punishment - eBay implemented a policy against those who do not honor their winning bids. To help protect sellers, first-time nonpayment results in a friendly warning. A sterner warning is issued for a second-time offense, a 30-day suspension for a third offense, and indefinite suspension for a fourth offense.
• Authentication services - It is to determine whether an item is genuine and described appropriately. It difficult to perform because their training and experience, experts can detect counterfeits based on subtle detail.