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Feedback system's weakness may hurt online auctions

In the world of online auctions, feedback isn't foolproof. At least, that's what more than 100 eBay users found out earlier this month when a seller allegedly defrauded buyers out of thousands of dollars.

In the world of online auctions, feedback isn't foolproof.

That's what more than 100 eBay users found out earlier this month when a seller allegedly defrauded buyers out of thousands of dollars. As first reported by CNET, the seller allegedly duped his victims into bidding on his high-priced auctions by manipulating his feedback rating.

The case sent a shiver through customers who had grown to trust the feedback system and could dissuade Net users from buying through online auctions in the future, Gomez Advisors analyst Martin DeBono said.

"These people found a method to defeat the system," DeBono said. "They did significant damage."

The feedback system on auction sites such as eBay, Yahoo and allows buyers and sellers to rate each other and their transactions. The system serves as a guidepost for future buyers and sellers, giving them an indication of the trustworthiness of a particular user.

The feedback system is crucial to the success of online auctions, because users seldom are able to see the merchandise in person before they bid on it and rarely know the person with whom they are dealing.

But the feedback system is far from perfect. As online auctions have grown in popularity, so too have allegations of fraud. The Federal Trade Commission, which investigates consumer fraud, reports that complaints about online auctions jumped from 107 in 1997 to some 11,000 in 1999.

One auction user who recently came close to being defrauded was John Gerbus of Cincinnati, who has been buying and selling on eBay since December. He recently bought and sold tickets to the NCAA men's Final Four basketball tournament through the site, in both cases dealing with users who had no previous feedback.

When he bought the tickets, the lack of feedback didn't turn out to be a problem: the transaction went well. But when he sold the tickets, the high bidder on them never responded to his email and never sent the check.

Gerbus says he declined to send the buyer the tickets because he never heard back from him, but his experience illustrates a shortcoming in the system: users have no way to determine the trustworthiness of new buyers or sellers.

"On high ticket stuff, you really need to be careful because it's all about trust," Gerbus said. "Feedback's very important because it's the only thing you can go on."

But even when dealing with users who do have feedback, other buyers and sellers have few ways to determine the legitimacy of the comments. In the latest eBay case, the seller apparently operated several different accounts on the site, possibly conducting hoax auctions where he himself was the high bidder and leaving himself false feedback, investigators said.

This type of manipulation is not new, Yankee Group e-commerce analyst Rebecca Nidositko said.

Most auction companies See special report:
The high price of auctionstraditionally disclaim any control over problems with feedback or with actual sales. But consumer complaints have led companies to take steps to stem fraud and protect consumers.

eBay and Amazon, for instance, offer consumers insurance on their transactions, although both have their limitations. eBay will insure users only up to $175, while Amazon insures most transactions up to $250 and others up to $1,000 if users pay for their auctions using the company's payment system.

eBay has also recently moved to limit bogus feedback by requiring that all comments users leave for each other be related to actual transactions.

"Lots of Internet systems are under scrutiny right now in terms of security," Nidositko said. "The environment is being shifted right now in terms of consumer rights."

Auction users do have some things they can do to protect themselves. Gerbus said that before he sent the ticket seller $740 for the Final Four tickets, he contacted the seller and called his office to confirm his identity.

Eric Hann, who has been buying and selling used computer equipment and other items on eBay since the online auction site opened its virtual marketplace, said he goes beyond just looking at feedback. Often, he checks how long a particular user has been registered on the auction site and whether the user has changed names recently.

Despite his efforts, the Broomfield, Colo., resident said he has been scammed twice by buyers who didn't pay him.

"The feedback system is not 100 percent, but it's the only thing you have going for you," Hann said. "A lot of it's a matter of doing your homework and let the buyer beware."