Potential Problems

Most sellers and buyers in online auctions are honest. They believe in fair transactions. Unfortunately, the Internet is also wide open to the worst elements of humanity, including technology-savvy opportunists who spend their working hours trying to steal as much money and merchandise as they can from as many victims as they can find. Without even realizing it, you can become a victim of an Internet crime committed from almost anywhere on the planet.

A long list of potential problems can be associated with buying from online auctions. Yet, with some common sense, patience, and a few digital tools, you can avoid almost every bad situation. When trouble does occur, buyers and sellers often can resolve it via e-mail or other contact, without intervention from auction-site officials or neutral arbiters.

These days, a seller typically cannot be held responsible for the quality of an item he or she sells you, unless the quality has been specifically guaranteed in a warranty. Items sold through online auctions seldom have warranties, so you must learn how to quickly size up sellers and their auction items before you can become the winning bidder. You also must understand what recourse is available if you become a victim of seller fraud, one of the most common complaints against online auctions.

What are the main buyer complaints against online auction sellers?

According to the Federal Trade Commission (FTC), complaints include: (1) late shipment of purchase, (2) no shipment of purchase, (3) shipped products that are not the same quality as advertised, (4) bogus online payment services or escrow services, and (5) fraudulent dealers who lure bidders from legitimate auction sites with seemingly better deals.

Certain types of online auction listings pose greater risks to bidders simply because a lot of money is at stake. You will seldom run across computer thieves who are trying to auction nonexistent pocket screwdriver sets or “new, still in original box” radio tubes that actually were used in combat in World War II. Computer crooks generally subscribe to the teachings of a Depression-era criminal named Willie Sutton who famously admitted that he robbed banks because “that's where the money is.” For example, several online automobile auctions were hit hard by a rash of fraudulent buyers who “overpaid” sellers with fake money orders or cashier's checks, and then asked for refunds of the balance. In some cases, the thieves got away with the cash and the cars before the phony payment instruments bounced.

In the high-dollar world of online auctions for antiques, collectibles, and fine art, for example, you will encounter inexperienced sellers who make honest mistakes in their descriptions of “rare” art objects. Likewise, you may encounter sellers who knowingly traffic in fakes and forgeries but do their best to appear legitimate. They may respond to questions quickly, pack items with great care, and ship them promptly. But once the questions and negative feedback start hitting, they disappear into the digital wilderness with their loot. Later, they may re-emerge and start selling on a different auction site under a different seller name. Other fraudulent sellers use this similar pattern of operation. They may even make a few legitimate sales, earn some very positive feedback, and then draw in a few victims, take their money, and run.

Always proceed with caution and a healthy sense of skepticism on any online auction site, whether you hunt for common bargains or rare, expensive collectibles. More than once, cyber-thieves have set up elaborate fake auction sites and used them to steal money, credit card numbers, and bank account information from gullible buyers whose eagerness to bid far outweighed their common sense.

Nearly 10 million consumers were victims of identity fraud in 2004, and it cost them more than $5 billion, according to the U.S. Postal Inspection Service. Businesses and financial institutions took an even steeper hit: $48 billion. If crooks get your Social Security number, they can gain access to your medical, financial, credit, and educational records.

Anything can be made to appear genuine on the Internet. Yet, it may be just a well-crafted, sinister mirage. What seems like a friendly new bank in Michigan eager for online customers could be a pair of cyber-thieves working from a hotel room in Bolivia, stealing information. “Buyer beware” takes on new depths of meaning when you suddenly find yourself logged onto a fake eBay, PayPal, or Yahoo! site and realistic-looking prompts ask you to “update” your personal and credit card information and to enter your password. EBay has responded to the rash of spoof eBay Web sites by offering a special toolbar with an Account Guard symbol. The symbol changes colors to warn you when you are on a fake eBay site.

Bid Low, Win Low

Many new buyers become excited when they find a long-desired object for auction. Their typical reaction is to bid well above the current leader to show their determination to win. Unfortunately, their inexperience can get them into a shill game. A shill is a friend or associate of a seller. The shill's job is to push auction novices and overeager collectors into a bidding war. The shill carefully ups the ante by a dollar; the novice bidder reacts by pumping the price a lot higher. As the auction nears its end, the shill again bids a dollar higher, and the novice, desperate to win, counters with another fat bid. Now the price for the object is so high that the novice bidder begins to have second thoughts, or bidder's remorse. He hopes his “competition” will bid higher and get him off the hook, but it's too late. The shill suddenly drops out of the bidding and lets the novice or overeager collector win the overpriced object. After the seller collects her fattened fee, she pays the shill a percentage for his services.

Pick the maximum price you will pay for an auction item and stick to it. On eBay and some other sites, you can set the upper limit when you place your opening bid. Sellers and other bidders can't see it. As long as other bids stay below your maximum, you will be the leader. If you lose the bidding, don't worry. Another item like it or better will show up within a few days.

If you really want a hard-to-find computer part, collectible art object, or rare piece of jewelry, keep your impulses under control. Don't show your hand. Quietly push the bidding up by the smallest amount possible at each step. You may end up winning the auction for a lot less than you expected.

The Trust Factor

Most of us have bought something face-to-face from a stranger we thought we could trust. Then the merchandise turned out to be shoddy, counterfeit, or stolen — and we couldn't get our money back, because the seller was long gone.

The early years of online auctions were much like this. Between 1999 and 2002, online auction fraud was so rampant that federal and state agencies launched investigations and ran sting operations. Congress held hearings. Magazines and newspapers ran big headlines: “Online Auction Fraud Rises.” In 2000, CBS News declared, “Internet auction fraud is the fastest growing crime in America.”

The ongoing fight against online fraud sometimes forces auction sites to change their business model. In late 2002, for example, uBid.com “discontinued the ability for every day consumers to sell on uBid due to counterfeit, stolen and generally untrusted offerings.” Company officials said, “Even though we agree with the basic premise that all humans are fundamentally good, a few can ruin it for everyone.” Now uBid focuses on business-to-consumer auctions only.

Successful online auctions such as eBay try to make it as easy as possible for buyers and sellers to trust each other even if they are separated by thousands of miles. Still, you have to trust the seller's photographs and descriptions of the auction merchandise. You have to trust the accuracy of the feedback previous customers have posted. And you have to trust your own research and instincts. If necessary, learn how to protect yourself … from yourself, particularly if you are a compulsive shopper. Electronic access to a planet full of desirable goods can be dangerous to your bank account, as well as to your personal information.

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