• Do a telephone number search (a reverse search and check the name of the party owning that number); legitimate companies should have their own number. The buyer can also call that number to make sure that a live entity is behind that number. You can also cross match it to an email address.

• Occasionally, a seller asks to send cash or equivalent. What one can do is send an email saying that “by coincidence I am passing through your city. Can I drop by, pay in cash, and pick up the item?” If the seller does not respond, or says I only ship, do not do business with that person. Smart crooks could bluff, however, so there is no guarantee.

• Through the exchange of email, one acquires much more information about the entity with which one is dealing. Phone number, name, address, tracing the routing of response messages and so forth. Then one can use the Internet to check on the entity, as discussed earlier. If the seller does not respond to your questions/email this should raise suspicion.

• Always pay with a credit card. Some sellers will not sell the item to you, but that is the price you pay for security. Some swindlers allow PayPal, but they only accept the one that comes from your bank account, not the kind of charge that comes through your credit card.

• When you receive a package, open it in front of the delivery person or company representative. You can tell your delivery company not to drop off without a signature.

• Go to an “eBay Xchange Point,” or something equivalent. In Switzerland, eBay has proposed meeting points at major train stations where buyers and sellers can meet face-to-face to inspect the goods and pay for them. This is not entirely practical for goods bought far away, but for more local transactions, nothing beats face-to-face.

• Chua [ 2, 3] also proposes being more proactive in reporting and preventing fraud through such techniques as collective action on reporting (for example, to Traderlist), contacting other potential victims directly, or even “vigilantism” in which buyers deliberately sabotage auctions they feel are fraudulent.

 

Advantages and disadvantages. The advantages of buyer precautions are obvious, they reduce fraud and make it more difficult for crooks. They do not cost as much, if anything, to implement. The disadvantages are that not everyone would take advantage of them.

CONCLUSION

Auction houses today appear to be at a crossroads, with many people now losing confidence in the system [ 8]:

“...do you have a reasonable expectation that the Mac G5 you are bidding on is going to be shipped to you? How about the Sony plasma 60-inch monitor? Or, the Sony PSP for $50 to $100 over retail? No, you don’t. Now, you might say, ‘Hey, moron! Why are you bidding on stuff like that on eBay? Don’t you know that 95% of those auctions are fraudulent, especially the ones that only accept payment via Western Union?’ Of course, I know. But what about all of the people who don’t?”

Now is the time to act before the negative cycle mentioned at the beginning of this article develops in full swing. We hope that some of the recommendations listed here restore the public’s confidence in the system. While it may be impossible to eliminate Internet auction fraud, at the very least we may be able to reduce it drastically and make it very expensive for those who persist. c

REFERENCES

1. Bajari, P. and Hortaçsu, A. Economic insights from Internet auctions. J. Economic Literature 42, 2 (2004), 457–486.

2. Chua, C. and Wareham, J. Fighting Internet auction fraud: An assessment and proposal. IEEE Computer 37, 10 (Oct. 2004), 31– 37.

3. Chua, C. Wareham, J. and Robey, D. The role of online trading communities in managing Internet auction fraud. MIS Quarterly 31, 4 (2007), 759–781.

4. eMarketer. The ePrivacy and security report. Jan. 2001. White paper published by MarketResearch.com.

5. Gavish, B. and Tucci, C.L. Fraudulent auctions on the Internet. E. Comm. Research 6, 2 (2006), 127–140.

6. Hafner, K. With Internet fraud up sharply, eBay attracts vigilantes. New York Times, (Mar. 20, 2004).

7. Internet Crime Complaint Center. 2007 Internet crime report. National White Collar Crime Center and the Federal Bureau of Investigation (March, 2008).

8. Palmer, S. Can eBay be saved? OnlineSPIN. MediaPost Publications (June 16, 2005).

9. Reuters. Read this before buying on eBay. Wired News (Jan. 9, 2003); www.wired.com/news/ebiz/1,57153-0.html.

10. Snyder, J.M. Online auction fraud: Are the auction houses doing all they should or could to stop online fraud? Federal Communications Law Journal 52, 2 (2000), 453–472.

11. Trade Commssion of the U.S. (FTC) releases list of top consumer fraud complaints in 2007 (Feb. 13, 2008); www.ftc.gov/opa/2008/02/ fraud.shtm.

12. Waters, R. How fraudsters set traps and take the credit. Financial Times IT Review (May 21, 2003), 1.

 

BEZALEL GAVISH ( [e-mail]) holds the Eugene J. and Ruth F. Constantin Distinguished Chair in Business at the Cox School of Business at the Southern Methodist University, Dallas, TX. CHRISTOPHER L. TUCCI ( [e-mail]) is a professor of Management of Technology at the Ecole Polytechnique Fédérale de Lausanne (EPFL), Switzerland, where he holds the chair in Corporate Strategy & Innovation.