Since 1995, many Internet auction sites, such as eBay, have helped millions of people to buy or sell goods online in a simple and effective way. Unfortunately, fraudulent merchants have exploited this Internet auction to their benefit. Although the vast majority of online auctions proceed without any problems, due to the great number of users of the service, many people become victims of this type of fraud.
Internet auction fraud is currently the number one fraud committed using the Internet. The Internet Crime Complaint Center (IC3) reports that auction fraud accounted for about 61% of the complaints it received in the year of 2003, showing just how prevalent this form of crime is.
Most Internet auction sites are person-to-person sites, which means that the owners of the auction website do not need to get directly involved with the individual transactions. The site merely hosts the auction.
Firstly, a seller puts up details of the goods that he wants to sell on the auction website and also sets his rules and regulations for the auction.
The potential buyers then make offers for the items. The person with the highest offer or “bid” wins the auction. The seller then makes arrangements with the buyer for payment and delivery of the items.
Types of internet auction fraud
According to The Internet Crime Complaint Center, the various types of Internet auction fraud include non-delivery, misrepresentation, triangulation, fee stacking, black-market goods, multiple bidding and shill bidding.
Non-delivery
This is the simplest case. Non-delivery occurs when a seller places an item up for bid even though he simply has no such item in reality. Therefore, even after the buyer pays up, he never gets the item.
Misrepresentation
Misrepresentation happens when a seller deceives potential buyers by providing false information about the item he is trying to auction. This can happen when a buyer provides fake pictures of the items he is selling and make the item look to be in a better condition than it really is. As such, buyers do not get he quality they paid for.
Triangulation
Triangulation involves the perpetrator, a consumer, and an online merchant. The perpetrator buys items from an online merchant using stolen credit card number and identities and then sells them to unsuspecting buyers. When the police investigate the matter, they confiscate the stolen items and keep them for evidence. As a result, the buyer becomes a victim as the item he has paid for has now been confiscated by the police. This is a fairly elaborate and popular method of operation as it is not that easy to track down the perpatrator.
Fee stacking
Fee stacking occurs when a seller keeps adding hidden charges to the item he had sold to the buyer. This may come in the form of additional money for shipping, postage and handling. As a result, the buyer will eventually end up paying much more money than what he had been promised by the seller.
Black-market goods
Black-market goods include illegally copied software packages, audio CDs, movie CDs and games. As a result, the seller delivers these items in improper packaging and does not offer any form of warrantee or instruction manual that may have come along with the original goods. Any damage that the software does to the computer cannot be accounted for by anyone except the user.
Multiple bidding
Multiple bidding involves an unscrupulous buyer placing multiple bids on the same item under different aliases. These bids occur in a wide range, some are exorbitantly high and some are surprisingly low. The high biddings will scare away the other potential buyers. Then, just before the bidding ends, the buyer withdraws his high bids, hence buying the item for a much lower price. Therefore multiple biddings deprive the seller of the amount of money he deserves for his goods.
Shill bidding
Similarly, shill bidding also involves multiple fake biddings, but this time, by the seller whose motive is to drive up the value of their items. As a result, the seller may be able to sell his items for a higher price than that he may have actually received legitimately.
This is another one of those crimes which have a perfect mirror image in the real world and it goes to show that while the world and technology may have changed dramatically, human nature has remained largely the same.
Reference
Internet fraud complaint centre report
http://www.ifccfbi.gov/strategy/AuctionFraudReport.pdf
Internet Auctions: A Guide for Buyers and Sellers
http://www.ftc.gov/bcp/conline/pubs/online/auctions.htm
Internet auctions
http://www.jlkstamps.com/long/scams.htm