With online auctions, it's buyer beware
By Dimitra DeFotis
CHICAGO TRIBUNE
For Howard Bregman, 35, online auctions are perfect capitalism.
When the pediatrician wants to add a porcelain sculpture or an obscure old magazine to his collections, he forsakes antique stores for an international marketplace where he tries to outbid fellow buyers with a taste for exotic products.
These sessions are devoid of the auctioneer's call or the well-heeled buyer's silent bidding signal.
Instead, the new marketplace offers something akin to high-tech day at the grand bazaar. Equipped with an e-mail address, a buyer at a home computer can name a maximum price and log off. In what typically is a weeklong process, online auction sites use software to automatically bump up the price as more people bid, until the top bidder beats the clock.
Computers are among the most popular items sold, followed by collectibles and antiques. But you can bid on plenty of other things, from airline tickets to cars.
The somewhat anonymous process is quite different from choosing an item from the online catalog of a well-known retailer, though: Most online auction sites take no responsibility for the sale or delivery of merchandise.
Although individual collectors find them a fun place to look for a bargain, online auctions are becoming serious marketplaces for businesses looking for a good deal on items ranging from thermostat covers for air conditioners to hexagon-headed screws.
But now that some sites boast annual sales in the millions of dollars, Internet fraud watchers are exerting pressure on online auctioneers to provide a more secure -- and predictable -- transaction.
Online, the average Joe gets an affordable shot at an international clientele for grandma's chipped tea set but no guarantees that the check is in the mail. For the buyer, there is no promise that the tea set bid upon will be the item sent -- if anything is sent at all.
Web auction fraud topped the list of complaints collected last year by the National Consumers League Internet Fraud Watch in Washington. The business is growing and there is no stopping shoppers such as Bregman.
"I would buy anything. I think it's the perfect capitalism and probably one of the top five best uses of the Internet," Bregman said. "It reaches an unlimited amount of people and everyone gets the same opportunity to bid."
Online auction sites vary greatly in size and business practices, but most are just the walls of the virtual garage where buyers and sellers converge.
The sites charge sellers a fee to advertise merchandise and a percentage of the final sale price.
Among the most trafficked sites is California-based ebay.com, where outside sellers have auctioned more than 15 million items at a frantic daily pace since its inception in 1995.
New among the top tier of sites is ubid.com, which focuses on the sale of refurbished computers and related equipment and sells mostly its own inventory. Unlike most online auction sites, the subsidiary of Creative Computers Inc. of Torrance, Calif., offers a toll-free line for customer service, extended warranties on computers, has a return policy, and protects consumers' credit card numbers with special encryption software.
Both companies hope to ride investors' interest in technology stocks by going public later this year.
At eBay, anyone can poke around more than 550,000 items for sale in more than 870 categories. But to bid on something, you have to register. Then you learn that this isn't like shopping at a department store: You must acknowledge that the site holds no legal responsibility for your online shopping adventures.
"We have no control over the quality, safety or legality of the items advertised, the truth or accuracy of the listings, the ability of sellers to sell items or the ability of buyers to buy items," the eBay user agreement says.
In fact, roughly 30 percent of eBay items languish on the site either because no one bids or because the seller's minimum bid is not met.
Once you find something you simply must have (and decide the seller appears to be on the up-and-up), eBay asks for the maximum price you will pay, but keeps that secret. Then the fun begins.
eBay times its auctions to last from a few hours to a week.
Someone else could have a maximum bid higher than yours, but neither of you knows that. What shows up on the eBay screen is a rock-bottom starting point -- you might see $1 as the going bid for all parties initially -- and the company's automated software bumps up the bids, by predetermined increments.
You can watch the bidding process in real time, or you can log off and eBay will e-mail you when you have been outbid. Then you can raise your minimum price.
Your bid cannot be retracted, however, unless the seller changes the description of the item. You are the buyer when no one outbids you. The price you pay may be less than your maximum because the selling price is based on the highest bid -- the one created by the automation process -- at the time of the close.
Other auction forms, such as the Dutch auction, where multiple items are sold to multiple top bidders, work slightly differently.
To get the item, you have to call or e-mail the seller and clarify terms of payment, shipping, insurance and related matters.
"The Internet allows us to find the person in the world who will pay $12 for a decorative Jim Beam bottle that smells like bourbon and looks like a duck," said Mark Maron, who auctions high-end sports collectibles and animation art cels through his company, Animation Art Ltd. He went from selling to galleries to selling online roughly 14 hours a day, mostly through eBay.
No one can say how many people have paid for merchandise that never arrived or for goods that were misrepresented. But it happens often enough that online escrow financiers are making money protecting against such scenarios.
And many people who have spent less than $100 on an item think trying to recoup the loss is not worth the time and expense involved.
"It is a huge problem. Anyone can go to a Web site and sell something and there are no checks in place to make sure you can get the product or that it is what is promised," said Cleo Manuel, spokeswoman for Internet Fraud Watch.
"We want the [ auction companies ] to protect consumers, but it is hard because con artists don't wear signs in cyberspace," Manuel said. "Companies don't want con artists on their sites, but it's a challenge to stay one step ahead."
Tracking online fraud is a perplexing task for law enforcement types who would have to monitor thousands of interstate, private transactions. Large Web auction operators such as eBay and uBid monitor auctions randomly and welcome feedback from unsatisfied consumers, but weeding out scam artists is a daunting task.
The key is knowing whom you are buying from.
But that is easier said than done at sites where sellers need only provide an e-mail address as identification.
The National Consumers League has a list of recommendations: Try to pay by credit card, because then you can challenge charges with the card issuer; use an escrow agent or pay cash-on-delivery; verify the seller's identity or don't bid; ask if there is a return policy or customer service; and avoid impulse bids.
In an attempt to weed out dishonesty, eBay invites buyers to rate sellers and talk about them on internal site bulletin boards. Comments about a seller appear as a link next to the seller's e-mail address.
But Manuel and others caution that fraudulent sellers can change e-mail addresses easily and frequently to avoid detection. Her advice: Ask for a way to write or call to learn more and write to the seller to see whether you are working with an individual or a company.
"We think the Internet has become like a huge garage sale," she said. "Now the marketplace has grown anywhere your computer can go. But you can't kick the tires online."
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