The Federal Trade Commission's recent report on top frauds in 2003 might make eBay (Nasdaq: eBay ) shoppers tentative to pull the bidding trigger. The report issued last week found that 48% of reported Internet-related fraud was tied to online auction scams, prompting who knows how many people to declare, "I'll never use eBay again!"
An alert reader pointed out how some auction-related frauds aren't actually legitimate auctions. The crooks start by staging what appears to be a bona-fide auction, but is really just a ruse to harvest contacts. The fraudster then privately contacts interested buyers and offers a better deal than advertised on the product. By taking the transaction off site and avoiding eBay fees, the scamster claims, both buyer and seller get a better deal.
Greed -- or a really great deal -- then gets the best of an unknowing consumer. Duped buyers are convinced to send money via a wire transfer. Then, predictably in hindsight, they never hear from the fraudster again.
"If you answer a private email and wire money without the auction site knowing about it, you are not a bidder," the reader said in a note to us. "You're doing the online equivalent of meeting some guy in a back alley and paying cash for something he's got in the back of a truck." Directing outrage to an auction site in this case may be off-base since such buyers never conducted a transaction on the auctioneer's site in the first place.
While auction sites can't guarantee foolproof results, they do offer buyer and seller protections, including a very public way to flag a bad seed in public. eBay's buyer protection guidelines are outlined on its site, but the rules are strict and the coverage limited. Only purchases up to $200 are covered -- $500 if you use PayPal. There's a $25 processing fee for your pain, not to mention several hoops to jump through and timelines to heed. The FTC provides tips for buyers and sellers, as well.
Still, the best advice continues to be "Buyer beware." Technology and new trade channels just make that mantra even more important to heed.