By Bezalel Gavish and Christopher L. Tucci
When it comes to online auctions, “caveat emptor”
is an understatement.
REDUCING INTERNET
AUCTION FRAUD
Fraud on the Internet is developing into a major issue for consumers, businesses, and
governments [ 1, 6, 10]. The
Financial Times in 2003 called
online fraud “an epidemic of
huge and rapidly growing proportions” and noted the incidence of fraud was 20 times
higher online than offline [ 12].
The complaints of online fraud
registered at the IC3 Web site—
which is jointly sponsored by the
U.S. Federal Bureau of Investigation and the U.S. National White
Collar Crime Center—have
grown from around 20,000 in
2000 to around 200,000 in
2007, which represents a compound annual growth rate of
39% [ 7]. At the same time, the
dollar value of losses has skyrock-
eted at an annual rate of 50%
from less than $18 million in
2001 to over $200 million in
2007 [ 7].
One area that is particularly
interesting is auctions. Auction
fraud reported to the Federal
Trade Commission has likewise
grown tremendously from 106 in
1997 to around 24,000 in 2007
[ 9] and continues to climb dramatically. Internet auction fraud
is one of the main sources of
overall Internet fraud, with estimates of incidence from 64% to
87% of all Internet fraud [ 4, 7].
However, major Internet auction
sites estimate that fraud is
involved only once in approximately 10,000 auctions [ 9],
which appears to contradict these
observations.