Things to take note to prevent e-auction fraud when a consumer participating in an e-auction

What is e-auction???
E-auctions also call online auctions. It refers to those auctions conducted through the Internet with the bidders (from one or more locations) simultaneously bidding to be selected for supplying the items on auction. In other words, the venue for the auction is on an Internet website or platform.

The performance of online auctions has excited purchasing managers who are looking to reduce their costs. The leading web auction sites such as eBay www.ebay.com, Priceline www.priceline.com and Freemarkets www.freemarkets.com have shown the business how to use the Internet to shape the price paid for goods and services. Since eBay launched its pioneer person-to-person auction site in September 1995, online auctions actually have become an important type of web-based business and seem to be becoming more popular.

However, e-auction also got its frauds. There are bid shielding, shilling, fake photos and misleading description, improper grading techniques, loss and damage claims, fake escrow services, bid siphoning, and so on.

But, there are ways of prevention on e-auction fraud. Lets us view the example of the largest internet auctioneer, eBay, which has introduced several measures in an effort to reduce fraud. The following are:

1. User identity verification - eBay uses the services of Equifax to verify user identities for a $5 fee. 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.

2. Authentication service - Product authentication is a way of determining whether an item is genuine and described appropriately. Authentication is very difficult to perform because it relies on the expertise of the authenticators. Because of their training and experience, experts can (for a fee) often detect counterfeits based on subtle details. However, two expert authenticators may have different opinions about the authenticity of the same item.

3. Grading services - Grading is a way of determining the physical condition of an item, such as “poor quality” or “mint condition.” The actual grading system depends on the type of item being graded. Different items have different grading systems. For example, trading cards are graded from A1 to F1, whereas coins are graded from poor to perfect uncirculated.

4. 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.

5. 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.

6. Escrow services - For items valued at more than $200 or when either a buyer or seller feels the need for additional security, eBay recommends escrow services (for a fee). With an easy-to-access link to a third-party escrow service, both partners in a deal are protected. The buyer mails the payment to the escrow service, which verifies the payment and alerts the seller when everything checks out. At that point, the seller ships the goods to the buyer. After an agreed-upon inspection period, the buyer notifies the service, which then sends a check to the seller. An example of a provider of online escrow services is tradenable.com.

7. 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.

8. Appraisal services - Appraisers use a variety of methods to appraise items, including expert assessment of authenticity and condition and reviewing what comparable items have sold for in the marketplace in recent months. An appraised value is usually accurate at the time of appraisal but may change over time as an item becomes more or less popular in the marketplace.

9. Verification - One way of confirming the identity and evaluating the condition of an item is through verification. With verification, neutral third parties will evaluate and identify an item through a variety of means. For example, some collectors have their item “DNA tagged” for identification purposes. This provides a way of tracking an item if it changes ownership in the future.