Investors and members alike have flocked to eBay, lured by the promise of its 2 million-plus member base. News of the federal investigation barely dented the valuation of eBay's stock, which fell 11 points, or 3 percent, to 323 in trading today (a 3-for-1 stock split was scheduled for after market close). The site is averaging 700,000 bids per day, but an increasing number of users say bids are falling and bargains are becoming harder to find.
"Unless you are selling very unique items, the eBay market has eroded considerably due to saturation," one user wrote on a message board. "Considering eBay's expoential growth in number of items offered, I imagine this trend will continue to spiral downward until it reaches a point where eBay is no longer effective."
Transaction volume has also led to intermittent technical problems at the site, disrupting limited-time auctions and preventing many users from accessing their auctions during the past two weeks. The problems, which the company has attributed to network capacity overload and server crashes, have forced eBay to extend disrupted auctions, leading to user confusion about who has put in the winning bid.
"I've had auctions ending last night and tomorrow and no one I know has been able to connect consistently with the site," one user wrote today on an eBay message board. "I haven't been able to connect to retrieve the info I need to close my sales from last night. Not to mention I feel the bids were way low because of this."
According to eBay spokesman Kevin Pursglove, keeping up with the increasing activity on the site is a "chore." "Volume is at the heart of some of the problems we've had over the past week," he said.
eBay's problems don't end there. Late Friday, the company announced that it is cooperating with an unnamed federal agency that is investigating "possible illegal transactions in connection with the company's site." The probe includes an examination of the company's policies in regard to those transactions.
eBay said it received notice of the investigation on January 29, just a few days after the New York City Department of Consumer Affairs launched its own investigation into complaints that fake sports memorabilia was being sold on the site.
There have been other incidents as well. On Friday, eBay obtained a restraining order against a man who allegedly auctioned pirated software, and earlier this month, a Florida merchant was convicted of wire fraud after using eBay to sell computers he never delivered. In January, the Pennsylvania attorney general's office nabbed a man accused of selling Furbys on eBay but not delivering them.
Other auction sites have so far escaped such close scrutiny. Larry Schwartz, the CEO of eBay competitor Auction Universe, said eBay's transaction volume makes it "a bigger target" for regulators.
Some members say they are uncomfortable with the attention eBay is receiving, not just from regulators but from copyright holders as well. On Friday, Microsoft said it will begin monitoring auctions for pirated software on eBay and other sites. Although eBay has already instituted a program to assist software vendors in tracking down pirates and shutting down their auctions, a court could hold it responsible for allowing the sale of illegal goods.
"I liked eBay better when it was like a wild and woolly Western town," one user wrote on an eBay message board. "I would prefer to take my chances with the deadbeats and frauds."