On-line Auction is one of the few bright spots in dotcom ventures. It is a big business today with millions of participants across continents, buying and selling millions of products everyday. Tens of thousands of people around the globe currently make a full-time living selling items through Internet auction houses.

Major reason for such incredible growth and popularity in an otherwise gloomy dotcom scene is the simplicity and phenomenal reach of Internet auction. People find it simple and convenient to get great deals from around the world.

The excitement also makes them prime victims for scam artists, ready to play on the desire many auction bidders have for that "unbelievable deal."

This is not to doubt the integrity of vast majority of honest buyers and sellers who deliver on promises. According to eBay, only one auction in 40,000 on their site ends with a reported case of confirmed fraud.

However, it is also true that above statistics doesn't take into account unreported cases and in any case it's little comfort if you find yourself the unfortunate one in 40,000.

In fact, on-line auction scam accounts for roughly 48% of all online fraud reports to the Federal Trade Commission (FTC) of USA. Almost 500 reports per week, committed by both sellers as well as buyers.

So how do you protect yourself, short of simply staying away from the online auctions ? Before discussing the various auction related scams, let us understand how Internet auction works.

What is On-Line Auction

The process of an online auction is much the same as a live auction. Its a public sale in which a seller specifies minimum amount for an item. The buyers bids for the item for a duration specified (ranging from 1 hour to 7 days). At the end of the auction, the item is sold to the highest bidder. Similarly, a buyer may participate in an auction by bidding for an item. The person who offers the highest bid wins the right to purchase the item at that price. Successful bidders are notified through email on the status of their bids.

Actual transaction takes place between successful buyer and seller DIRECTLY without any significant involvement of the auction house.

No physical inspection of goods, anonymous nature of Internet communication, lack of rigorous legal safeguards for buyers etc. make the process somewhat vulnerable to swindlers and frauds.

Common Auction Scams

Internet Scambusters (www.scambusters.org) have identified following most common frauds seen in on-line auctions

• Misrepresentation
• Failure to ship merchandise:
• Failure to pay:
• Shilling:
• Bid Shielding:
• Piracy and counterfeiting:
• Internet Fencing:
• Triangulation:
• The "Buy and Switch":
• Fee stacking:
• Loss or Damage Claims:
• Shell Auctions:
  
  

Related Links:

• Internet Frauds and Scams - Part XII How to Detect A Bogus Lottery Offer
  
  
• Internet Frauds and Scams - Part XI More on Bogus Internet Lottery
  
  
• Internet Frauds and Scams - Part X Internet Lottery Scam
  
  

   

Source: FAIDA - Newsletter on Business Opportunties from India and Abroad Vol: 4, Issue 02 April 10' 2003