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HolidayBuyer's Guide
Tech Industry

Feds investigate eBay

The online auction company issues a statement that it is cooperating with a federal probe of illegal transactions on its site, but doesn't offer any details.

Web auctioneer eBay said today that it is under investigation by the federal government for potentially illegal transactions on its Internet site.

In a terse statement released at the end of Friday's business day, eBay said it had been contacted by the government in late January.

"On January 29, 1999, the company received requests to produce certain records and information to the federal government relating to an investigation of possible illegal transactions in connection with the company's site," the statement said.

"The company has been informed that the inquiry includes an examination of the company's practices with respect to such transactions," eBay added. "The company is fully cooperating with the inquiry."

An eBay spokesman said he could not give any more details on the type of transactions involved, which agency had contacted the company, or why the statement had been delayed almost a month.

The company did say the news was unrelated to Microsoft's stepping up its scrutiny of pirated software trading on the service, however.

The investigation comes as eBay reacts to increased scrutiny of what its users do on the site.

eBay has already come under investigations from New York City officials for possible incidences of fraud on the Web site.

On January 28--a day before it was apparently contacted by the federal government-eBay said it would cooperate fully with the New York City Department of Consumer Affairs.

Two weeks before that date, the company had instituted a new system of anti-fraud rules in an attempt to cut down on illegal activity on the site.

Starting next month, eBay will ban the sale of guns on its Web site, because it is impossible to ensure that bidders are legally permitted to own guns.

And last fall, eBay disclosed in a regulatory filing it had been contacted by a state attorney general's office regarding complaints about its service. The complaints alleged that eBay did not adequately inform customers it merely provided a forum for online person-to-person auctions and did not guarantee the completion or price of the transactions conducted in that forum. eBay has not identified which state made the inquiry.

eBay today won a temporary restraining order against a dealer who was allegedly using the site to sell banned software and CD-ROMs.

The company has maintained that it is not legally responsible for fraud perpetrated by the sellers on its Web auctions, but has said it will do its best to protect buyers on the site.

eBay's stock jumped 34.5 today to close at 334 on news that it plans to split its stock and that its usage continues to rise.

The firm will split its stock Monday 3-for-1 for shareholders of record February 9. One of the few profitable companies doing business only on the Internet, eBay's usage rose 9 percent in January from December, while other online retailers' Internet use dropped after the holidays, an analyst said.

Bloomberg contributed to this report.