Q. What types of fraud exist with internet auctions?
A. Most people who complain to the FTC about Internet auction fraud report problems with sellers who:
–fail to send the merchandise
–send something of lesser value than advertised
–fail to deliver in a timely manner
–fail to disclose all relevant information about a product or terms of the sale.
But some buyers experience other problems, including:
–“bid siphoning,” when con artists lure bidders off legitimate auction sites by offering to sell the “same”; item at a lower price. Their intent is to trick consumers into sending money without proffering the item. By going off-site, buyers lose any protections the original site may provide, such as insurance, feedback forms or guarantees.
–“shill bidding,” when fraudulent sellers or their “shills” bid on sellers’ items to drive up the price.
–“bid shielding,” when fraudulent buyers submit very high bids to discourage other bidders from competing for the same item and then retract those bids so that people they know can get the item at a lower price.
Another type of fraud occurs when sellers or buyers pose as escrow services to improperly obtain money or goods. The so-called seller puts goods up for sale on an Internet auction and insists that prospective buyers use a particular escrow service. Once buyers provide the escrow service with their payment information, the escrow service doesn’t hold the payment: The payment goes directly to the so-called seller. The buyer never receives the promised goods, can’t locate the seller, and, because the escrow service was part of the scheme, can’t get any money back.
In some cases, a fraudster poses as a buyer and, after placing the winning bid on an item, insists that the seller use a particular escrow service. The escrow service tricks the seller into sending the merchandise and doesn’t send the payment or return the goods to the seller.