Some auction sites simply function as a matchmaker, providing a central place where individual sellers may list products and buyers may bid on those goods. These sites do not have custody of the listed goods or control over the transaction.
On other online auctions, the web site operator itself is the seller.
Internet auctions are a big business. At any given time, the world's largest person-to-person online auction has over three million items up for sale, and over 2.1 million registered users. Dozens of companies have launched online auctions over the past few years.
Unfortunately, as the number of Internet auction houses has grown, so too has the number of fraud reports. The vast majority of these complaints involve person-to-person auctions. The most common problems include:
- failure to deliver
The majority of complaints involve bidders not receiving the merchandise they purchased. Typically, these buyers have sent a check or money order to a seller who pockets the money and never sends the product. Often these sellers simply "disappear." Unfortunately, buyers who paid these sellers with certified checks or money orders have had little recourse in getting their money back.
Other bidders complain of sellers who misrepresent the value of offered goods or services. Antiques and collectibles are particularly vulnerable to this con, given that their accurate value is linked to their precise condition. Since buyers cannot appraise the item until after the sale, it is difficult to verify sellers' claims.
Another scam involves the use of phantom buyers who help increase the price of an item by placing phony bids. Some sellers have created false identities in order to place bids in their own auctions.
If you have been a victim of any of the above schemes, report the fraud to law enforcement officials in both your home state and the seller's state.
Online Auction Tips:
- Know what type of auction it is. You will have different legal protections depending on whether you are using a person-to-person auction or a business-to-person auction. Most consumer protection laws do not apply to private party sales. Remember, person-to-person auction websites do not verify the existence or quality of listed merchandise. They also maintain that they are not responsible for fraud committed by sellers using their sites. Some sites, however, do have insurance programs and seller verification systems.
- Verify the seller's identity. Get the seller's name, street address, and telephone number. If you can't verify the seller's information, avoid the sale.
- Check out the seller's reputation. Many auction sites provide feedback or ratings of their sellers. Check out this information, but be aware that the system can be manipulated. A seller with no complaints or with positive comments does not guarantee the seller's legitimacy. Before you seal a deal, check the seller's complaint history with the Attorney General and Better Business Bureau in your state and in the seller's home state.
- Ask about delivery services, return policies and product warranties. Find out when the product will be delivered as well as any shipping costs. If you are buying from a business, find out if the product has a warranty.
- Make safe and secure payments. Never send cash, and be careful if the seller insists that the money be sent via a courier or an overnight delivery service, as the seller could be trying to get around postal fraud laws.
- Try to pay with a credit card. If the seller misrepresents the product or fails to send it to you, you can dispute the charge through your credit card company. NOTE: You will not have the same legal dispute rights if you pay with a debit card, unless your card issuer voluntarily offers this protection.
- Consider using an escrow service if the seller cannot or will not accept credit cards. For a fee, these companies will hold your payment and release it to the seller only after you have confirmed that you received the product.
- For purchases $1,000 and under, you also may want to consider using the Post Office's Collect on Delivery (COD) service. Upon delivery of the product, the Post Office will collect your payment.
- Shop Around. Don't get caught up in the frenzy of an auction and pay more for a product than its worth. Try to verify the value of collectibles and antiques. If the site archives completed auctions, find out how much similar items have sold for in the past. You also may want to look up the product on one of the many price tracking websites. The noncommercial site Consumerworld lists these services at: