Sunday, January 29, 2006

How Much Fraud Can eBay's Customers Endure

Fraud on eBay is making news again, this time for upset customers being sold counterfeit goods. Here is an article by Katie Hafner of the New York Times:

"A year ago Jacqui Rogers, a retiree in southern Oregon who dabbles in vintage costume jewelry, went on eBay and bought 10 butterfly brooches made by Weiss, a well-known maker of high-quality costume jewelry in the 1950s and 1960s.

Rogers thought she had snagged a great deal. But when the jewelry arrived from a seller in Rhode Island, her well-trained eye told her all the pieces were knockoffs. Even though Rogers received a refund after she confronted the seller, eBay refused to remove hundreds of listings for identical "Weiss" pieces. It said it had no responsibility for the fakes because it was nothing more than a marketplace that links buyers and sellers.

That stance — the heart of eBay's business model — is being challenged by eBay users such as Rogers who are starting to notify other unsuspecting buyers of fakes on the site. And it is being tested by a jewelry seller with far greater resources than Rogers: Tiffany & Co., which has sued eBay for facilitating the trade of counterfeit Tiffany items on the site.

If Tiffany wins, other lawsuits would follow and eBay's business model would be threatened because it would be nearly impossible for the company to police a site that has 180 million members and 60 million items for sale at any time."

For the full story, read: eBay users fed up with fakes.

eBay hasn't only been in the news recently for being a marketplace for counterfeit goods. In a recent post, I covered the problem of stolen goods being sold and merchandise being purchased with fraudulent financial instruments.

Also covered in this post is the growing problem of buyer/seller accounts being hijacked. This normally occurs when a seller becomes a victim of phishing, or is tricked into giving up their account information to a seemingly legitimate eBay request via e-mail. The e-mail links them to an official looking eBay site, where they are asked to "validate" their account information. Should someone fall for this, the criminal has all the information necessary to hijack the account and use it (the account) to conduct fraudulent business.

Although, eBay's official policy is to support law enforcement requests without a subpoena, it takes them 10-20 days to honor these requests. If criminals have access to multiple accounts and fraudulent financial tools, the trail is likely to be pretty cold in 10-20 days.

Here is my post on that activity: Better Teamwork is an Opportunity.

eBay is also getting a reputation for Advance fee fraud (419) activity. On auction sites, fraudulent buyers offer to buy something and send a financial instrument to the seller for more than the asking price. They then dupe the seller into negotiating the instrument, which is counterfeit and wiring the excess money (less a commission for the seller) overseas. When the instrument is discovered to be fraudulent (often much later), the seller is held accountable and could even be charged with a crime.

Counterfeit Postal Money Orders, Cashiers Checks and a new type of instrument, OChex (checks ordered electronically over the internet) have all been used in these frauds, which are becoming collectively known as auction scams.

Over the Christmas season, we saw another scam, where XBox packaging was being sold as the real thing: XBox Latest Lure in Auction Scams.

I wrote this in a recent post, eBay Needs to Protect Those that Line it's Pockets:

"My message to the folks at eBay is that they better take a look at upgrading their "authentication systems" and hire some extra security staff. Blogs like mine and many others are trying to educate the very people, who are making them billions and they blame for allowing themselves to be scammed. eBay is no longer the only the only game out there and if they fail to protect those who line their pockets, they are likely to go elsewhere."

Perhaps a few legal actions will wake eBay up?

5 comments:

prying1 said...

I buy and sell on ebay and have had only one time a seller did not come through with the goods. A couple times I had to make good on dissatisfied customers. It has been a good experience on the whole.

That said, I also found out the hard way what phishing is. (Didn't lose anything but I could have.) I have educated myself to the fraudulent check/refund con and wire transfer scams. and I drop by here to make sure I keep up on whats new. -

Thanks for your good work Ted. keep it up and keep spreading the word.

Scott said...

Yet another story about how some people think other people should be cleaning up the mess for their own stupidity. It seems we no longer live in a world where we learn from our mistakes, instead it's a world where we don't need to think for ourselves because someone else with a bit more money will sort it out if things go wrong.

I bet the buyer of the counterfeit goods didn't think to check the feedback of the seller before she bid. If the seller does sell counterfeit goods there is bound to be lots of feedback warning others of this. There is nothing within eBay that needs to be changed, feedback counters this problem, once one buyer has been fooled they can warn the others.

It is very wrong to expect eBay to be policing every auction. How are they supposed to know what is a fake and what isn't? Like you said in your article, it will be nearly impossible for eBay to police a site that has 60 million auctions at any one time and they'll collapse under the weight. If Tiffany's lawsuit wins this will be a huge blow for common sense.

It's not eBay that needs to change its ways, its the clueless buyers.

stolentime said...

Scott's comments have the rant knob turned up high. Yes, the buyers can be at fault, but there is pretty much conclusive evidence that eBay has its head firmly buried in the sand on this one.

First: feedback is a very poor and often useless line of defence against a determined scammer - as the NYT piece attests.

Secondly, scammers are deliberately setting out to rip off people. It is inevitable that at some times they will succeed. That has always been the case. There are plenty of safeguards available in the real world that simply don't exist online.

It is nonsensical to suggest that eBay police/vet every single item listed on eBay and nobody (that I have come across) is suggesting it should. What eBay could do with very little outlay is improve its existing systems.

One simple move it could do right off the bat is scrap private auctions.

R.

check out my blog: www.stolentime.wordpress.com

Ed Dickson said...

Everyone on here has very valid points. First of all eBay didn't create the crime on their site, however their procedures and policies make it possible.

Last quarter, they made 279 million in profit, which was up 36 percent from the last year.

The bottom line is that they need to fight this activity and make it possible for law enforcement to viably assist them. If it takes 10-20 days for them to get information on a case, the criminals have long moved on and the process starts all over again.

Also, sadly enough, their statements saying it's everyone else's fault versus eBay is scary and indicative of the law suit happy world of today.

Currently, there are a lot of people, who are victims of this out there. eBay, itself, could very well become a victim if they don't start taking action.

Perhaps, eBay should consider stepping up their fight against this? People want to feel safe when they go on there and everyone isn't an expert on fraud.

As long as most of us blame each other, the criminals will happily laugh all the way to the bank.

In my opinion, they are the root cause of this all and we should be focusing on how to deal with them.

One of the most effective ways, besides catching them, is communication.

The very reason, I write about all of this!

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