CAVEAT “ONLINE” EMPTOR
by David Currie
What a week I’ve had! If you could hear the people I’ve talked to this week about online auctions, you would never bid in an online auction again. Here are the top 5 reasons I repeatedly heard that people pay inflated prices for items sold by online auction:
There are far more people bidding at online auctions than at traditional auctions.
Among the throngs of online bidders, many are unaware of the true value of items.
Among the throngs of online bidders, many have emotional reasons for seeking items, and this causes items to be over-valued.
Among the throngs of online bidders, many incorrectly assume that auction prices are better than any other prices, and this causes them to drive bids upwards.
- The quality of items, presented to bidders in small image format only, is routinely exaggerated; call it human nature among sellers.
But the problems go beyond inflated prices. Despite claims from the online auction giants that fraud occurs among only a small fraction of a single percentage of sales, the National Consumer’s League reports that 41% of persons who have participated in online auctions have had problems related to those online auctions. While it would be nice to believe that online auctions are safe havens for honest sellers and buyers, this is far from the truth. So how is it that online auction services stay in business?
Online auction services generally steer clear of taking responsibility for customer rip-offs, although some, like Amazon.com, will reimburse customers who suffer certain financial losses. Most auction services clearly state that they are not responsible for fraudulent activity practiced by persons selling goods or services over their auction sites. And even where online auction services set up programs to stop online fraud, such programs are mostly window dressing; why continue to post notices absolving themselves of responsibility for fraud unless they know that fraudulent activity continues to be rampant? And they do know. In April of 2000, the Software & Information Industry Association reported that 91% of software sold at Internet auction was pirated! So, again we ask, how do online auction companies stay in business?
The auction giants owe their continuing success to idiots like me, and many people like me who have written to me, expressing discontent at having purchased an item through an online auction service. Having successfully outbid the pack, the unwary bidder receives a product that is often far from what was advertised. Often, new products are actually refurbished products. Supposedly new products are often unaccompanied by warranties, manuals, cords, or rebate cards. Used products are often misrepresented, altered, or simply never received.
But if you think the only ones who get ripped off through online auctions are the buyers, think again. How would you like to sell an item online for $10,000 and then find out that the bidder you sold the item to was just a “prankster.” You can’t collect your money, but you can be sure that the online auction company will still want their full commission.
Don’t believe me… then why not do a little roving reporting on your own.
Let’s start with a few online auction nightmares:
The Federal Trade Commission reports that Internet Fraud tops the 10 most frequently reported internet fraud case list. Check out this ongoing problem in the FTC reports of February 2000 and April 2001.
In June of 2001, Congress asked a number of online giants, including Amazon, Ebay and Yahoo to provide them with data on all aspects of online auction fraud and what they are doing to prevent it. If you, like Congress, are looking for information on how not to become a victim, why not check out the following links:
Finally, if you need to report a case of online fraud… why not start with the following groups. Thanks to the work of some of the people listed below, Internet fraud rates probably started to fall after April of 2001. However, early indicators suggest that fraudulent charities set up on the Internet after September 11th, 2001, may cause an upswing in reports of online fraud.
Dr. W. David Currie
