Online auctioneers smell a rat.
Individuals who sell items over online auction sites like eBay and AuctionUniverse suspect that their bidding sessions are being artificially manipulated by phantom buyers known as "shielders" and "shills"--and that the auction sites are not doing all they can to discourage the fraud.
Auction site users commonly use the term "shilling" to refer to both shilling and shielding. According to eBay's definitions, shill bidding describes the practice of colluding with someone else, or creating a false online persona, to drive up bidding prices on behalf of the seller.
Bid shielding happens when the buyer and a partner offer high prices that discourage others from participating in the auction. When the auction is near its conclusion, the shielder withdraws the high bid, allowing the partner to take the item at a lower price.
The practices are of deep concern to all auction sites, where even the perception of fraud can have a debilitating effect, just as anxiety over the safety of online transactions has stunted the growth of electronic commerce.
"Every single honest merchant on the Web is gravely invested in countering as much fraud as possible," said Maria LaTour Kadison, senior analyst for online retail strategies at Forrester Research. "The worst thing for everyone selling online is being associated with some kind of fraud. The actual instances are minimal, but the perception is big. And perception rules."
Although the phenomenon is suspected throughout the online auction business, much attention is focused on eBay because it is widely viewed as the industry leader. Users have expressed concern that the publicly traded company does not act forcefully enough to combat fraud. AuctionWatch participants describe instances in which they have reported shielders and shills whom eBay has failed to suspend.
On eBay's own discussion boards, as well as at those of watchdog site AuctionWatch, fraud complaints abound. The most active discussion thread on AuctionWatch concerns shilling and shielding and provides anecdotal evidence of the practice.
"The situation at eBay is horrible," said Cari Thompson, the thread's moderator and an eBay user for a year-and-a-half. "If there was another site that had the user base of eBay where we could get the sales we wanted, eBay would be abandoned. We're the ones feeling abandoned right now."
Thompson and other users criticize the company's recent relaxation of its penalties for shielding and shilling. Until recently, the site would suspend a user on the first offense. But now the policy is to warn the user on the first offense and suspend on the second. However, eBay reserves the right to suspend on the first offense.
"At first our philosophy was to shoot first and ask questions later," said Keith Antognini, senior manager of customer support at eBay. "But in many cases we were shutting down accounts of people that were legitimately using eBay."
Antognini pointed out that eBay has a team of 24 people dedicated to investigating complaints of shielding or shilling. A separate group of three employees is devoted to cases in which users do not receive goods for which they have paid and to the sale of illegal goods, such as pirated software.
Other online auction sites have taken similar measures to combat fraud. Yahoo Auctions, an advertising-supported site launched on September 14 and powered by Onsale, has a team dedicated to weeding out shill bidders and other swindlers.
"No one can really avoid having that today," said Susan Carls, senior producer of Yahoo Auctions. "We can blacklist both sellers and bidders. Our idea is that sellers shouldn't have to distinguish between good and bad bidders. Yahoo is going to weed them out."
Carls said the number of dishonest bidders her team has uncovered in the six weeks since the site launched has been relatively small. The biggest problem the site has had to combat so far, she said, is spammers, as the site has removed thousands of unsolicited advertisements.
While policing auction sites is largely a matter of case-by-case dispute-resolution, there are some ways that technology can help, according to Craig Froelich, director of auction site software provider WebVision.
"If you have someone committing any kind of fraud, you put them on a blacklist," Froelich said. "Included on that blacklist is everything you know about the user--user name, real name, shipping address, fax number, phone number, email address--because if someone is trying to deliberately place a bad bid, a lot of the information is going to be bogus. You have to build your systems around the blacklist, so that when the user re-registers, the system checks against the blacklist and shuts them out on any one of those criteria."
Froelich said that there was nothing new or uncommon about maintaining such a list. "But it's not something a lot of companies have really thought about," he added.