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Online auction fraud rate dips

Figures released by the Federal Trade Commission show that the number of online auction-related complaints were down in 2000 because of greater protection and savvy consumers.

3 min read
Online auction fraud may be leveling out, according to numbers released by the Federal Trade Commission.

After seeing the number of complaints of auction-related fraud skyrocket from 106 in 1997 to 13,901 in 1999, the number of complaints collected by the FTC was down to 10,872 in 2000. Increased protections offered by online auction sites, savvier consumers and increased vigilance by law enforcement officials helped to keep the numbers down, FTC spokeswoman Dolores Gardner said.

"There's all kinds of laws on the books at varying levels that make it so that all kinds of law enforcement can get involved and bring cases," Gardner said. "I think that sends a message out to sellers and consumers alike that there can be law enforcement in cyberspace."

The decreased number of auction fraud complaints comes as the overall number of Internet fraud complaints increased from about 22,009 in 1999 to 25,469 last year.

Last year, after seeing the increase in the number of fraud complaints concerning online auctions, the FTC announced a coordinated effort with the Department of Justice, the U.S. Postal Inspection Service and state and local law enforcement agencies to combat auction fraud. The effort involved bringing charges against alleged auction scammers and educating consumers and law enforcement agencies about auction fraud.

Last month, the U.S. Attorney's Office in Sacramento, Calif., brought charges against an alleged fraud ring in connection with the sale of a fake Richard Diebenkorn painting on eBay. An initial hearing in the case is scheduled for Tuesday and one of the three accused scam artists is still at large.

In January, a California judge threw out a case against eBay concerning the sale of fake sports memorabilia on the leading auction site.

San Jose, Calif.-based eBay has taken steps recently to limit the amount of off-system deals that are conducted with its members. Complaints from members about spam, or unsolicited email, and fraud arising from such deals were among the most often cited complaints by members, the company said.

Among the complaints that the FTC received about auction fraud, the two most numerous were cases in which consumers never received the item they won or received an item that was substantially different from what was advertised, Gardner said. However, the agency started to see new trends last year, such as shill bidding, where a seller or his or her friends bid on an auction to drive up the bid price. The sellers of the Diebenkorn painting are accused of shill bidding.

eBay does not release the total number of auction fraud cases on its site, but company spokesman Kevin Pursglove said the rate of such cases dropped from about one in 35,000 auctions in 1999 to about one in 40,000 in 2000. Based on the number of auction listings that the company has released, that would represent an increase from about 3,700 fraud cases in 1999 to about 6,600 in 2000 because of the large increase in the total auctions listed on eBay over those two years.

Pursglove credited the decrease in the rate of fraud on eBay to the effort the company has made to educate and alert members.

"If what the FTC is saying is true, we're pleased with it," he said. "We're not altogether surprised."

Gardner said the increase in the overall number of Internet fraud complaints is related to the increase in Internet usage. Among the more popular Internet fraud schemes reported to the FTC were online advertisements for vacation scams and health products that made false claims, she said.

"Just about everything you see offline that's a scam, someone's come up with a way to do it online," she said.

The FTC's number for complaints in 2000 is not necessarily final. The agency revised the 1999 numbers upward from the 11,000 initially reported. However, Gardner said she does not expect much change with the 2000 numbers and expects the ratio of auction complaints to overall Internet fraud complaints to remain unchanged.