FTC, states take on online-auction fraud

"Operation Bidder Beware" has resulted in 57 criminal and civil law enforcement actions in a sweep involving the Federal Trade Commission, 29 states and local agencies, the FTC says.

The Federal Trade Commission and 29 states have launched a campaign to crack down on Internet auction fraud, federal and state officials said Wednesday.

"Operation Bidder Beware" has resulted in 57 criminal and civil law enforcement actions in a sweep involving the coordination of the FTC, attorneys general of the participating states and local police agencies, according to the FTC.

Online-auction fraud is the No. 1 type of Internet-related complaint tracked by the FTC in terms of volume, according to the agency. The FTC received about 51,000 complaints regarding online-auction scams in 2002, representing about $37 million in losses, said Howard Beales, director of the FTC Bureau of Consumer Protection. That number likely represents just a fraction of the actual number of rip-offs that occurred, officials said.

Although the vast majority of complaints involve the collection of payments for goods that never materialize, the authorities are seeing a few new twists, Beale said. One involves identity theft by sellers in order to cover their tracks and throw investigations off track. In some cases, scam artists have taken over the accounts of other online sellers. Another problem, said Beales, involves fraudulent escrow services that collect either payments and merchandise or both, ripping off both buyers and sellers.

Beales, who spoke at a press conference held at FTC headquarters in Washington, D.C., offered tough words to perpetrators of such scams. "Real-world law enforcement will not allow you to get away with online fraud, and neither will the Internet auction industry," he said.

Beales conceded, however, that many states are short on the resources needed to pursue offenders and that the virtual nature of the Internet can throw a wrench into the jurisdiction of these cases. For that reason, prevention and consumer awareness are major aspects of the operation.

Beales' advice to consumers is to use a credit card--rather than cash, checks or money orders--as a form of payment. The FTC also recommends that buyers check sellers' legitimacy through member ratings and other buyers' comments offered on eBay and other sites. If the seller is a business, buyers should consult the Better Business Bureau. Consumers should also read up on the rules of auction sites and be familiar with the protections they offer, Beales said.

"The single biggest common denominator in many of these cases was that the consumer paid by a mechanism other than a credit card," said Christine Gregoire, attorney general for the state of Washington. Gregoire, who also spoke at the press conference, said her state has filed two cases and settled a third as part of the law enforcement sweep under Operation Bidder Beware.

Consumers can also file complaints about fraudulent auctions or other Internet-related scams on the FTC's online shopping Web site or by phone at 1-877-FTC-HELP.

Beales praised eBay, by far the world's largest online-auction site, for cooperating with authorities on fraud investigations. eBay has also expressed interest in doing more to help members whose accounts have been hijacked for use in fraudulent auctions, he said.

eBay has long downplayed fraud initiated through its site, claiming it affects only one one-hundredth of 1 percent to one-tenth of 1 percent of all its auctions. Beales said the FTC had no data to either confirm or refute eBay's fraud statistics.

Featured Video
This content is rated TV-MA, and is for viewers 18 years or older. Are you of age?
Sorry, you are not old enough to view this content.

The one thing every refrigerator owner should know

One key factor determines how long your food stays fresh (and how much you end up wasting). Sharon Profis shares a few refrigerator organization tips everyone should know on "You're Doing it All Wrong."

by Sharon Profis