The No.1 online scam involves auction scams. This is not surprising given that the buyer doesn't inspect the merchandise before he or she purchases it and pays for the merchandise before he or she receives it. Throw in the fact that the buyer doesn't ever see the seller and that the seller could be on a different continent, and you have the makings of the right conditions for a scam. To protect yourself against an auction scam, you need to know the different ways that you can get scammed. Below we survey the different types of online auction scams and how to protect yourself so that you won't become a statistic.
This is a frequent scam that will sure raise your blood temperature as well as the final bid price. Shilling is the practice of the sellers and their partners bidding the price of an item higher so that the ultimate buyer ends up paying for the item at a higher price than he or she would otherwise have but for the actions of the partners. The scenario occurs as follows. The time to bid is drawing to an end and you have the highest bid. Suddenly, you notice that a large number of bids come in pushing up the price. You continue to bid on the item and in the end win. But where did all these bids come in when there was so little activity during the bidding process until the final moments. Answer: Shills.
The seller either through the use of multiple user IDs or through his or her partners has driven the ultimate price higher so that you end up paying more than you otherwise would have. In some cases, the shills drive the price higher only to retract their bids at the last moment. Shilling is extremely frowned upon. If the seller is caught, then the seller will be automatically suspended indefinitely.
To detect a shill, check the bid history of the auction to ascertain who did the last minute bidding. Was it one person with several bids or a number of people? Check out the bid histories of the other auctions of the same seller. Was there a similar pattern? Determining whether you are a victim of a shill is difficult because many bidders like to come in at the end as a matter of strategy. If you feel that you were the victim of a shill, then report the seller immediately to the auction. Since it is difficult to prove, the seller might not be punished. However, you can complete a seller's auction rating appropriately to warn others and you can stay away from auctions of the particular seller and anyone who you feel conspired with the seller.
Bid shielding aims at defrauding sellers and not buyers. Here is how is works. You are watching an auction of one of your items and you notice that a couple of buyers are dueling it out for the highest bid. The bid has reached incredible heights when at the last moment the competing buyers suddenly retract their bids and pull out of the competition. What is left is a very low bid placed by another individual, a bid that was so low that most people would have jumped at the chance to purchase the item for that price. What happened? Bid shielding.
The buyers that were fighting it out for top bid were in fact raising their bids to scare off other buyers. Then they would pull their bids at the last moment to allow their low bidding scheming partner to win the item at a ridiculously low price. The result is that the seller has been scammed into selling his or her item at a low, non-market price.
This practice is just as shameless as shilling but working in reverse and against the seller. The mechanics are the same as shilling. It involves one person with several user IDs or several people working together. Like shilling you, as a seller, should determine who the bidders were and determine whether they have a history of engaging in bid shielding or even shilling.
If you feel that an individual or group of individuals have been bid shielding, then report them immediately. Online auction operators will not tolerate that type of practice and the individuals will be banned from the auction site. In the end if you can prove that you have been scammed, you will be able to cancel the bids of the scamsters and to re-auction your item. You can also ensure that in the future the auction operators take measures to prevent these individuals from bidding on your items. Be vigilant! Always keep a close eye on how the bidding for your items proceeds to detect this bidding shielding scheme.
Fake Photos and Misleading Descriptions
One of the problems with online auctions is the buyer's inability to inspect an item. The buyer can only view the item's picture and rely upon the seller's description of an item. It is bad enough that miscommunication arises with face to face conversation, but the likelihood of miscommunication with images and seller descriptions is even greater. Sometimes the seller innocently uses a bad photo and does not accurately describe a product. Other times, a seller will attempt to enhance the description of the item that he or she is selling or where the item is less than perfect, to describe the item more vaguely or to post a poorer quality picture. In the worst case a seller might be intentional trying to deceive you. With all these risks, it makes it extremely important to know exactly what you are buying.
So what to do? Before bidding on an item, some due diligence is in order. First, look at the picture carefully and print a copy for future records in case you get something that doesn't look like the picture at all. Second, read the description very carefully and try to objectively interpret what is being describe as opposed to what you think the seller is trying to describe. Here are some questions you should be asking yourself:
Once the due diligence is complete and you bid and win an auction, what do you do if you receive an item that doesn't match the description or picture? First, contact the seller and let him know that the item is not as described. By now you should have an appropriate image and even notes of your conversation and the online description. If the seller is honest he will accommodate you. If not, then you will have the evidence needed to recover your money if it is worth pursuing. At the very least you can visit the buyer's feedback and give the seller an appropriate rating. If you think that you have been scammed and this was not an example of simple miscommunication, then contact the auction operator. Finally, do not deal with that particular selling in the future.
High Shipping Costs and "Handling" Fees
Before bidding on any item determine what are the handling and shipping costs. Many winning buyers are shocked when they purchase a $10 item and find out that handling and shipping cost $5.00. Buyers are even more shocked when the actual item is mailed with a regular postage stamp of 55 cents. Each seller will charge his or her own shipping and handling rates. Some of the rates are justified and some are not. If the shipping rate is according to weight, some sellers inflate the weight. Some even charge for packing supplies which are free at many post offices. In the end, the result is the same. Costs that might be unjustified and totally unexpected.
What is the best way to avoid being surprised or shafted? Read the seller's auction listing closely. Determined the exact costs of shipping, handling and any other miscellaneous fees and expenses. If they seem high and not justified, then don't bid on the item. You could even call the seller and discuss the matter beforehand to clarify the cost and determine whether the costs are justified. If the seller agrees that maybe the charges are excessive because the seller is inexperienced in making the appropriate assessment, ensure that he changes the auction listing before the bidding process.
If you buy an item and upon seeing the bill for shipping, you determine that the amount is quite excessive, contact the seller and ask him politely to explain. If the postage is lower than what was charged, then ask the seller for a refund. Reasonable sellers should give you a refund. Those who are not reasonable, well... you might want to stay away and visit the buyer feedback page.
Failure to Deliver Merchandise After Payment
One of the highest cited cases of fraud relating to online auctions is the seller's failure to deliver the purchased item after the buyer has paid. The current practice at online auctions is to have the buyer pay for the merchandise before receiving the goods. Some sellers request payment only by money order or cheque. The typical scenario works like this: You have won a bid and you pay by cheque according to the seller's request. After sending your cheque, you wait a week or so for the merchandise to be shipped to you. After about a week or two, you begin to wonder where your merchandise is. You notice that your cheque has been cashed. You send the seller an email asking for information about the shipment. The seller comforts you by saying that he sent it a week or so ago and that the merchandise should be there within a day or two. After a couple of days you get that funny feeling in the pit of your stomach that something is wrong. You send another email. But this time, the seller fails to respond. To many victims, this will sound quite familiar.
The seller has committed fraud and in the United States this is mail fraud. The Mail Fraud Statute defines mail fraud as "a criminal scheme where the postal system is used to obtain money or anything of value from a victim by offering a product, service, or investment opportunity that does not live up to its claims." To obtain a mail fraud conviction, a prosecutor must prove (1) that the seller intended to misrepresent facts surrounding the auction offer and (2) the U.S. Mail was relied on to carry out the scheme.
Accordingly, the seller's fraudulent use of the mail is mail fraud and is punishable at law.
If you are a buyer who is faced with not receiving your goods after your payment has been made then do the following:
As with most auctions the buyer is at a disadvantage because the buyer does not get an opportunity to physically view the item up for sale prior to bidding. The buyer is restricted to looking at an online photo and relying on the seller's description. This has lead to some sellers selling reproductions of original items. One often heard example is the sale of original Louis Vuitton purses when in fact the purses were reproductions. Many buyers can't spot the difference between a fake and an original. The buyer's ignorance leads more sellers to know they can get away with their scheme. Some reproductions are unwittingly sold by sellers who honestly believe that they are selling originals.
Before buying any original online, do some due diligence. Conduct all necessary research about an original so that you know when an item is obviously a fake and when it is not. Study the item to be auctioned. Look at the images and the description. If you have doubts, contact the seller for more details. Ask the seller where he purchased the item and determine whether the seller is a professional who knows what an original is and what he did to authenticate the item himself .
If you purchase an item and it turns out to be a fake, contact the seller and ask for a refund. If he refuses, then contact the auction site operator and make a claim. Visit your buyer feedback and file the appropriate rating. If you feel that the seller intentional defrauded you, then contact your Postal Inspector and follow the other steps we recommended above when the seller fails to deliver merchandise since we are again dealing with mail fraud.
We all have different view points of the condition of an item. What one person might say about an item might be completely different to another person. To a seller an item might be in mint condition. To the buyer, the item might be flawed. Every assessment is open to personal subjectively, opinion and interpretation.
It is for this reason that buyers and sellers often differ in the way they each grade an item. To avoid receiving an item and being surprised by its condition, you should conduct a little due diligence before you bid on an item. Carefully study the online photo and ask the seller questions as to the grading of the item. Keep records and notes of conversations with the seller and print the photos and seller's description of the item. Ensure that you ask enough questions to determine exactly what you are getting. If you receive an item that is not the grade that you expected, then contact the seller to try to resolve the matter
If you are a seller and want to avoid a dispute, contact an expert to grade and authenticate the item. You can get an appraisal done. With your professional grading in hand, you can describe the item as graded and avoid the problems of individual interpretation. In addition, do not, as a seller, oversell your item by trying to enhance the worth by embellishing its description. In the end, an unhappy buyer will end up hurting your future ability to sell additional items since your credibility will be damaged.
If you have not already done so visit your online auction's buyer feedback page. This will contain the overall rating of a seller by past buyers. However, this system of keeping track of past buyers' feedback is subject to manipulation. By way of example, if you review the seller's average score and note that it is perfect, that is, the feedback has been entirely positive then you might be lulled into a false sense of security. In most cases the feedback rating works well especially if you find a seller who has received negative feedback. However, where the seller has received entirely positive feedback, you should still remember the tips that we have given here. The reason for this caution is called "feedback padding". Feedback padding refers to a seller who has arranged himself or through his friends to post positive feedback. Of course this is almost impossible to detect and only after you are burned can you do something about it. If you are burned, post the appropriate feedback to alert others. Let the auction site operators know as well where it is a case of fraud.
Also be aware of new sellers. They have no track record and therefore no feedback.
While many of the frauds at online auctions are perpetrated by sellers, there are a few committed by buyers. The classic example is the case of the buyer who receives the item and claims that the item is damaged or that the item never arrived. In the circumstance where the buyer claims that the item is damaged, the buyer tries to argue that he should get a refund or a reduction in the price. In some cases the buyer claims that he or she even repaired the damaged item and wants the seller to pay for the repairs.
In these cases the seller is not without recourse. As a seller, insure the item so that any damage is covered. Also send the item in a manner which allows you to trace the item and to ensure that the buyer has to acknowledge receipt of the item. Inform your buyer that the item is insured and that if he receives the item in a damaged state, he should contact the post office to start a claim. If the item is lost, then there should be no record of the buyer receiving the item. Usually the postal carrier of an item through whom it was shipped requires the recipient to sign for the package. If the buyer claims he didn't receive the item and he signed for it, then the buyer has committed mail fraud.
If the buyer won't pay for the cost of insurance, then agree that the buyer bears the responsibility of damage onroute.
Assume you are a seller. You have auctioned an item and now proceed to send it to the buyer. You take great pains to package the item carefully; you have ensured that the product is insured; and you have kept all records to track the shipping of the item to protect against a buyer claiming that he or she did not receive the item. The buyer receives the item and claims that he is not satisfied. As a good seller, you agree to take back the product and send the refund. You then receive the item and lo and behold it is not the same item. It is either an older version of what you sent or even a reproduction of an original item that you sent. The buyer has switched the item and returned a different less valuable item.
Are you stuck now without a case? Not at all if you have properly documented and photographed your item. Always keep the photos and online auction listing for proof of what you sold. Taking pictures of any identifiable marks that you can later point to as evidence of a switch will be quite helpful. Are there serial numbers that you can write down? Do you have the original receipt? Anything that can be used as identification will help.
Auctions are great place to find great deals. Many professional vendors look to auctions for inexpensive items to resell at a profit. An auction is the last great trading arena for buyers and sellers to come together and buy and sell goods. But this mecca also affords certain individuals the occasion to ply their stealthy trade. For some individuals, the online auction is a wonderful place to sell stolen goods or pirated software. Before the advent of the internet many goods were (and probably still are today) fenced at pawn shops. Now the fencing can be done on the internet with even better profit margins.
Pirated software has also made its way to the auction block. In a recent study of online auction sales of software, 60% were found to be pirated. The online auction venue allows scammers to fence software to unsuspecting buyers who think that they are buying licensed software at a low price. While the cost of pirated software is less expensive than buying licensed software, the disadvantages outweigh the short-term benefits of lower price.
Why is pirated software a problem to buyers?
Pirated software is sometimes easier to detect. Beware of:
