Internet Auction Fraud - A Guide for Buyers and Sellers
Whether you're looking for a collectible or thinking about selling an antique, an Internet
auction may be just the place for you. Since they began in 1995, Internet auctions have
become perhaps the hottest phenomenon on the Web. They offer buyers a "virtual" flea
market from which to choose an endless array of merchandise from around the world, and
they provide sellers a worldwide storefront from which to market their goods.
But online auctions can be risky business, according to the Federal Trade Commission
(FTC), a federal agency that works to prevent fraud, deception and unfair practices in the
marketplace. Among the thousands of consumer fraud complaints the FTC receives yearly,
those dealing with online auction fraud consistently rank at or near the top of the list.
The complaints generally deal with late shipments, no shipments, or shipments of
products that aren't the same quality as advertised; bogus online payment or escrow
services; and fraudulent dealers who lure bidders from legitimate auction sites with
seemingly better deals. Most complaints involve sellers, but in some cases, the buyers
are the focus.
Understanding How Internet Auctions Work
Internet auctions are online bazaars. Some are the scenes of business-to-person activity,
where a Web site operator physically controls the merchandise for sale and accepts payment
for the goods. But most specialize in person-to-person activity where individual sellers or
small businesses auction their items directly to consumers. In these auctions, the seller - not
the site - has the merchandise.
The person-to-person sites require sellers to register and obtain a "user account name"
(or "screen name") before they can place items for bid. Sellers also must agree to pay a fee
every time they conduct an auction.
Many sellers set a time limit on bidding and, in some cases, a "reserve price" — the lowest
price they will accept for an item. When the bidding closes at the scheduled time, the highest
bidder "wins." If no one bids at or above the reserve price, the auction closes without a "winner."
At the end of a successful person-to-person auction, the buyer and seller communicate
- usually by email - to arrange for payment and delivery.
Successful bidders usually pay by credit card, debit card, personal check, cashier's
check, money order, or cash on delivery. Credit cards may offer buyers the best
protection in that they allow buyers to seek a credit from the credit card issuer
(also known as a "charge back") if the product isn't delivered or isn't what they ordered.
Typically, sellers on business-to-person auction sites accept credit card payments.
In contrast, most sellers in person-to-person auctions require a cashier's check or money
order before they send an item.