Online auction scams gain steam during holiday season

NEW YORK, NY… November 23, 2005...

Looking for that elusive, yearly fad that every child in the country is begging for? Trying to get your hands on the latest electronic gadget? Hoping to pick up a designer gift at a bargain basement price? Then you're exactly the type of consumer that fraudulent auctioneers are banking on this holiday season.

Shopping online has become wildly popular over the past few years, especially during the holidays when malls and shopping centers become choked with customers buying gifts for their friends and family. Online auctions, in particular, have risen from humble trading posts where people peddled their old junk to sprawling virtual marketplaces driven by the pressures of Wall Street. eBay, the most obvious example, has grown by leaps and bounds since its inception in 1995, from simple home-based auction website to multi-billion dollar international conglomerate. But despite the fact that eBay has achieved great success while simultaneously becoming an icon of pop culture, its underlying business model (that buyers and sellers conduct transactions based on good faith) invariably leaves its users susceptible to numerous types of fraud, and this issue is only exacerbated by the additional volume of sales during the holidays.

One of the most rampant problems with online auctions during the holiday season is the practice of price gouging. While charging hundreds of dollars for a 30-dollar toy can be viewed as good, old-fashioned capitalism, it should be noted that many auctioneers buy out hot-selling items with the sole intention of scalping them at a ridiculous markup, a fact that typically has desperate consumers in an ethical uproar as the holidays inch closer. While this year's Furby or Tickle-Me-Elmo has yet to emerge, Microsoft's latest platform gaming console, the Xbox 360, is likely to command severely inflated prices as inventories get low in traditional retail locations. In fact, auctions for an Xbox package that would normally sell for about $600 were garnering bids in excess of $1,000 the day before the system had even launched.

Another, more sinister problem lurking on auction sites is the presence of counterfeit goods. This is certainly not a phenomenon unique to the holidays, but when this time of year rolls around, the market for phony merchandise gets a tremendous boost. The most popular items? Designer accessories and apparel, such as purses, watches, wallets, sunglasses and jeans, make up the bulk of the counterfeits, largely because they are easy to produce, easy to misrepresent, and yield huge profits. Such products would make perfect gifts if they were genuine, but by the time buyers find out the goods are fakes, the money has changed hands and any hope of recourse is lost.

As if that weren't enough, there is always the issue of dealing with disreputable sellers that simply don't come through with merchandise, artificially-inflated auction prices produced by shill bidding, the sale of stolen items, and even the potential for credit card fraud. With so much trouble circling around internet auctions, why do customers continue to flock to eBay, Yahoo and others?

Kessler International, the world's leading corporate investigation firm, took to the street to find out. We conducted a random survey of holiday shoppers in various major cities throughout the United States, focusing our study on those who have used online auctions in the past. We found that not only were most internet auction goers aware of the potential hazards, but that the majority of them claimed they had been ripped off at least once by unscrupulous merchants. Interestingly, most of the people who claimed to be victims also said they would continue bidding on auctions, but would take greater precautions in the future. The full results of our survey were quite telling:

As it turns out, most of those people who continued to participate in internet auctions even after having bad experiences simply felt that people needed to be more careful when placing bids. The tried-and-true attitude of "buyer beware" seems to be the leading bit of advice from auction users, and with good cause. Simply paying close attention and using common sense can often ward off auction frauds and further holiday stress. So if you expect to browse the auction block for that hard-to-find present, heed these simple tips to avoid becoming another victim...

• Always read descriptions thoroughly
  Often, items are listed that have a suspiciously low number of bids, or a too-good-to-be-true asking price. And often, the reason for these anomalies is that the product is damaged, refurbished, missing parts, stained or otherwise, while the item photo shows a brand spanking new version. Sometimes this information is prominently displayed, but sometimes it is tucked away in an inconspicuous area of the page, simply existing to deflect legal responsibility, not to alert the consumer. Keep your eyes peeled, and your chances of being disappointed will be greatly reduced.

• Pay attention to seller feedback
  Feedback ratings and user comments are one of the most helpful tools for the auction shopper, and should never be taken for granted. Only buy from reputable sellers with high feedback ratings and positive comments from a wide variety of users. New sellers, particularly those that come from nowhere to offer big-ticket items around the holidays, should be approached with great caution.

• Make payments with a credit card
  Auction sites have made it so easy for sellers to legally accept credit card payments that there is no reason to pay by any other method. Credit card payments can be tracked and rescinded, and credit card companies are usually quite aggressive when it comes to fraud. If a seller only accepts payment via personal check, money order or cash, just look elsewhere, because if the seller fails to hold their end of the bargain, you have little hope of getting your money back.

• Watch those shipping costs
  A common tactic of less-than-forthright sellers is to offer a relatively low starting price, and then nail the winning bidder with outlandish shipping and handling fees to inflate the final price. This is another bit of information that may be in an obscure location, so make sure you know exactly how much shipping will cost before placing a bid. Remember, if you win the auction but refuse to pay due to the cost of shipping, you will be branded with bad feedback, not the seller.

• If it's too good to be true, it probably is
  The most indispensable rule of them all... designer handbags don't cost $30. People don't unload brand new, hot-selling electronic gadgets at a loss. Legitimate, high-end computer software isn't sold for mere pennies. Whether you're walking down a city street or perusing an online auction, any time you come across a deal that is so good that it defies explanation, a red flag should go up. It may be counterfeit, it may be stolen, it may be worthless, and in the case of an online auction, it may not even exist. Why put yourself at risk?

While internet auction fraud has been explored at length by companies such as eBay and Yahoo, and despite the numerous precautions that have been put into place, such schemes continue to affect a great deal of consumers simply due to the massive volume of transactions that take place on a daily basis. And when you throw the holiday shopping season into the mix, the potential for fraudulent auctions and frustrated customers increases astronomically. But by following these simple hints, you can continue to search for rare items and incredible deals, all while keeping your wallet safe from crooked auctioneers.

Happy bidding!