Auction is market mechanism by which buyers make bids and sellers place offers, characterized by the competitive and dynamic nature by which the final price is reached. Electronic auctions (e-auctions) means auctions conducted online. There are some major limitations in e-auctions: lack of security, possibility of fraud and limited participation, long cycle time, monitoring time and order fulfillment costs.
According to Internet Fraud Watch, of all e-commerce activities conducted over the Internet, fraud is most serious in e-auctions. E-auction fraud accounted for 70 percent of the e-commerce fraud that occurred in 2001 (down from 87 percent in 1999). The average auction loss is $518 per complaint, and roughly $6.1 million was lost due to fraudulent activity in 2001.
Types of e-auction fraud:
- bid shielding
- shilling
- fake photos and misleading descriptions
- improper grading techniques
- selling reproductions
- failure to pay the auction house
- inflated shipping and handling cost
- failure to ship merchandise
- loss and damage claims
- switch and return
- other frauds, eg: sale of stolen goods, the use of fake ids, selling to multiple buyers
The largest Internet auctioneer, eBay, has introduced several measures in an effort to reduce fraud. Some are free, some are not. The company has succeeded in its goal: less than one-tenth of 1 percent of the transactions at eBay was fraudulent in 2001 (Konrad 2002).
According to Internet Fraud Watch, of all e-commerce activities conducted over the Internet, fraud is most serious in e-auctions. E-auction fraud accounted for 70 percent of the e-commerce fraud that occurred in 2001 (down from 87 percent in 1999). The average auction loss is $518 per complaint, and roughly $6.1 million was lost due to fraudulent activity in 2001.
Types of e-auction fraud:
- bid shielding
- shilling
- fake photos and misleading descriptions
- improper grading techniques
- selling reproductions
- failure to pay the auction house
- inflated shipping and handling cost
- failure to ship merchandise
- loss and damage claims
- switch and return
- other frauds, eg: sale of stolen goods, the use of fake ids, selling to multiple buyers
The largest Internet auctioneer, eBay, has introduced several measures in an effort to reduce fraud. Some are free, some are not. The company has succeeded in its goal: less than one-tenth of 1 percent of the transactions at eBay was fraudulent in 2001 (Konrad 2002). The following are some of eBay’s antifraud measures:
- user id verification
- authentication service
- grading services
- feedback forum
- insurance policy
- escrow service
- nonpayment punishment
- appraisal services
- physical inspection
- verification
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