How Does the Industry Deal with Online Fraud

How is the online auction industry dealing with this problem?

It was difficult to reach a major online auction site’s office. Dialling their number led the caller through an electronic maze of recorded instructions, ending in a voice-mail too full to receive more messages. After several emails and one snail-mail, an answer came from the Public Relations department. But the reply fell far short of answering specific queries on art fraud, and just repeated the general advice to buyers found on their site. A second communication repeating specific questions on dubious art sales remains unanswered.  

The key word in most online auction sites responses to potential fraud appears to be “marketplace”: referring to themselves as a marketplace — rather than a retailer — shifts total responsibility on the buyer. The auction site, in their view, is the shopping mall and the sellers are the tenants. But this analogy falls apart when you understand that most auction sites take a percentage on the selling price of every transaction, creating a de facto partnership with sellers and raising obvious issues of conflict of interest. Are genuine efforts made to drive out swindlers who are also high volume sellers? Perhaps the answer is in the growing number of complaints against online auction sites.

On my3cents.com, a consumer advocate Website, we found a long list of complaints against a major online auction site and fraudulent sellers, including this e-mail, “If you're the winning bidder and you do not pay you are suspended. If the seller takes your money and does not send the item, no action is taken against him, he's got (name of auction site deleted) blessing to defraud you and keep doing it to others because he's a paying customer. It's been a month since I put the complaint and this seller is still allowed to defraud buyers…”

Another buyer writes, “She does not respond to her emails and she is no longer an (name of auction site deleted) seller. She is however selling her prints on other websites and will not send me my print.”

            And finally, this from yet another customer: “I have just been ripped off of $785.00 US by a scam artist on (name of auction site deleted) and no amount of emails to (name of auction site deleted) can get that sleazy outfit to respond to my plight.”

No matter what efforts most major online auction sites claim to be making to limit fraud, buying art from an online auction site – like buying from a bricks and mortar auction house, for that matter — is ultimately a question of caveat emptor, buyer beware. In fairness, it might well be impossible to keep track of the millions of transactions that take place throughout worldwide sites – a major site claims eight million buyers and sellers worldwide. And most sites do include comprehensive security centres, offering very good advice for buyers and sellers alike, including a mechanism for reporting unsatisfactory transactions or outright fraud. But the question remains, How do major online auction sites respond to these reports and complaints?

Part of the answer to that question might lie in discussion boards — a forum for exchange of problems and solutions among buyers and sellers. A quick survey of them shows that a significant number of complaints centre on non-delivery and inability to contact the Website by snail mail or phone. One of these complaints, headed “(name of site deleted) Loses Another Buyer”, is from someone who asks, “How long can they last with only sellers and no buyers?”

The disgruntled user goes on to say that he or she (it’s impossible to determine gender from the user name) fell victim to fraud five times out of 150 purchases, with an average loss of $500 per bad transaction. Complaints and requests are fruitless, as the buyer says that he or she never received a penny. The e-mail goes on to state that, “…the claims process itself can drive you nuts.”

This posting provoked a string of comments – five pages in all –, many of them relating similar experiences:

“…lots of people out to make a quick buck.”

“…it is very depressing to hear good buyers feeling this way.”

“I am now in the process of filing claims on three items.”

NEXT WEEK: Protecting yourself: Beware of bad answers to good questions.