How to bid safely in online auctions
With no mall, no traffic, no crowds and low prices,
online auctions are a simple solution to shopping. But, just as
you need to guard your wallet in the mall, bidding and buying online
requires vigilance as well.
Online auction fraud was the No. 1 reported consumer
fraud complaint in 2003, says the Federal Trade Commission. The
FTC's database logged more than half a million complaints last year
and 55 percent of those were Internet-related complaints.
The FTC says it's cracking down.
"We're working with partners
virtually coast to coast to stop scammers in the virtual world,"
says Howard Beales, director of the FTC's Bureau of Consumer Protection.
Operation Bidder Beware, coordinated by the FTC with
the National Association of Attorneys General, is targeting Internet
auction scams that bilked thousands of consumers out of their money
"Law enforcement will do what it can, and responsible
auction sites are trying to police their own market," says
Washington State Attorney General Christine Gregoire. "But
the single most powerful tool to protect consumers is education."
So as online auction fraud continues to grow, savvy
shoppers must learn to protect themselves.
Know the product
The best way to avoid getting taken is to do your homework. Research
the item -- compare costs at other auctions and at brick-and-mortar
stores. Auction sites aren't necessarily offering the best price
or information. A little shopping around may prove the item auctioned
as "rare" is available at the Kmart down the block --
and for a lower price.
Consider the risks
Check out the auction site. Some sites, like Amazon's auction site,
offer full fraud coverage for items not delivered or fraudulently
represented -- but only up to $2,500 and only when using their Amazon
Payments feature. Other payment methods, excluding cash and third-party
wire, are insured up to $250.
Ebay offers similar fraud protection but at a cost
and with a much lower maximum. For items never received or misrepresented,
eBay provides protection up to $200, minus a processing fee of $25.
Buyers using eBay's electronic check option don't have to pay the
processing fee. All methods of payment, excluding third-party wire
transfers and cash, are covered.
Paying by credit card is the best insurance, regardless
of site. Most credit card issuers provide 100 percent online protection.
Debit cards may or may not offer similar protection.
Know the seller
One of the worst mistakes an online shopper can make is not researching
the seller. Most sites provide a seller's rating and feedback history
for each sale. Read it.
A seller with several negatives in his feedback should
be avoided, as should a seller with no feedback. The Internet
Fraud Watch warns that while a lack of complaints doesn't guarantee
a smooth transaction, a history of complaints is a good indication
not to bid.
Unfortunately, shifty sellers have figured out a way
around negative feedback by creating fake testimonials. The seller
either sends them himself, using an alternate e-mail account, or
conspires with other bidders to give higher ratings. Some shill
testimonials are easy to spot -- numerous positive responses all
posting from the same e-mail address.
It's still 'Buyer beware'
Before trusting any seller, ask lots of questions about the product
-- regardless of the item's description or photos. Be wary of any
discrepancies, any items sold "as is," high shipping charges
or significantly delayed shipping dates.
Ask for the seller's phone number and physical address.
Verify by calling. An e-mail address is a flimsy means of contact
that may be untraceable. If a seller is located outside the United
States, differing laws may complicate resolving disputes.
Be especially cautious of sellers offering a large
number of popular collectibles and other expensive items. The IFC
warns that because the items can't be examined or appraised until
after the sale, claims about the condition or value of an item may
be faked. Photographs aren't necessarily accurate. They may not
show the item's flaws or could be taken from a catalog or another
How to pay
Because credit cards offer protection, they are always the best
way to pay. But many sellers are individuals (rather than businesses)
and don't have access to credit card verification equipment.
Do not deal with sellers who demand payment in cash
or third-party wire transfers. These means of payment are not traceable
and offer no protection. Most legitimate sites have secure payment
options that do not require sellers to purchase any equipment. Ebay
offers Paypal and Amazon offers Amazon Payments.
Even if an auction site offers insurance, bidders
are not guaranteed a refund if the deal goes sour -- only the chance
to appeal for a refund. If cashier's checks and money orders are
the only means of payment, you'll need to decide if you're willing
to risk losing your investment if you're unhappy with the item and
the seller won't reimburse you.
Any seller who asks for a bidder's Social Security
number, driver's license number or bank account information should
be reported to the site's fraud program and to the Internet
Fraud Complaint Center. This information is not necessary for
a sale and exposes the bidder to identity theft and fraudulent account
Making the bid
Once you've done all your homework and are ready to place a bid,
decide how high you're willing to bid for the item and stick to
it. This prevents heat-of-the-moment decisions especially in highly
competitive bidding. You will also protect yourself from falling
prey to shill bidding.
If you win the bid, print out the photos, descriptions
and e-mails exchanged with the seller. Insure the item and pay promptly.
Keep all records until the item is received and verified. If there
are problems, first try to work it out with the seller. If a dispute
can't be resolved, contact the credit card company and the auction
site. If that doesn't work, a report should be made to the Federal
-- Updated: July 12, 2004