ONLINE AUCTION FRAUD AND EBAY
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Online Auction Fraud and EBay Bauerly
ONLINE AUCTION FRAUD AND EBAY
RONALD J. BAUERLY, Western Illinois University
EBay claims that users face only a 1 in 10,000 risk of fraud. Evidence from the FBI shows the rate is
more like 1 in 100, or one hundred times greater than the company alleges. Despite the usefulness of
eBay’s feedback mechanism buyers still face substantial risk of being defrauded. This paper details
the level and dimension of online fraud, examines the history of fraud on eBay, followed by a
discussion of feedback and its attendant limitations. EBay’s new feedback policies and other fraud
reduction efforts are then evaluated. Finally, fraud reduction recommendations are provided for all
three auction participant groups: buyers, sellers, and eBay itself. Managing and minimizing online
auction fraud is a challenge all three groups must meet. Trust is the antithesis of fraud and
achieving trust requires an understanding and appreciation of the actions each participant group
must make.
INTRODUCTION Until recently eBay appeared to be unconcerned
about fraud. EBay has won legal cases which
Fraud is a persistent problem for online auction confirm the fact that they are acting only as a
participants, particularly for buyers. EBay venue for auctions (Mangalindan and
dominates the online auction world with 100 O‟Connell 2008). This means the seller must be
million items on sale (Consumer Reports 2007, held legally responsible for fraud. According to
12). While eBay claims fraud occurs in only 1 the Wall Street Journal, recent reductions in
in 10,000 of its auctions, a 2007 Consumer auction growth have impacted eBay
Reports Study found almost half of eBay (Mangalindan 2007). Despite revenue growth
buyers encountered deceptions. According to of 26 percent in the most recent quarter, eBay
the FBI, the actual fraud rate for online auctions experienced a six percent decrease in listings
is more like one percent or 100 times the (p. B2). While eBay boasts over 240 million
number eBay reports. One reason eBay‟s registered users worldwide, only a third of them
reported fraud rate is so low is because it counts (83 million) are active users. As growth has
auctions where fraud is claimed. Also, many slowed, eBay‟s response has been to modify a
auctions are of low value, averaging under $25 number of dimensions in site architecture,
per item, thus, many defrauded buyers consider bidder options, and to add a variety of
it not worth the trouble to pursue a claim. Of restrictions on its sellers (Mangalindan 2007).
course there are many non-auction transactions Furthermore, eBay claims to have “2,000 staff
and the fraud problem is very significant. members policing its site around the clock”
Gavish and Tucci (2006) cite a VeriSign study (Consumer Reports 2007). Reducing fraud has
(2003) that reports 6.25 percent of e-commerce been a longstanding eBay concern but now
transactions in the U.S. were attempts at fraud. appears to have a new urgency.
The Internet Crime Complaint Center (IC3)
reports it has received its one millionth Fraud will always threaten online auction
complaint about online crime (IC3 2007). participants. While auction venue providers can
While this paper focuses on online auction increase safety, buyers and sellers must also
fraud, a very high threat of general online crime work to manage their risk of experiencing
exists for both buyers and sellers. fraud. Since eBay and buyer/seller participants
The Marketing Management Journal act as a type of social entity it is useful to detail
Volume 19, Issue 1, Pages 134-144 the actions each group can undertake to reduce
Copyright © 2009, The Marketing Management Association
All rights of reproduction in any form reserved fraud. The paper concludes with
133 Marketing Management Journal, Spring 2009Online Auction Fraud and EBay Bauerly
recommendations for each participant group on fraudulent sellers operate with seeming
how to reduce their likelihood of experiencing impunity. Comments are an important means of
fraud. examining underlying trust issues. Research
has shown that some buyers are misled by
The Level of Online Fraud exaggerated claims of quality (Jin and Kato
2006). As a consequence, textual feedback
According to the Federal Trade Commission comments are useful in spotting this deception.
(FTC), complaints about online fraud are
always near the top of the list of complaints Maintaining a consistent aggressive stance
received each year (FTC 2006), with nearly 45 against bad sellers should serve eBay‟s
percent of all complaints coming from Internet interests. According to Mangalindan, “eBay
auction fraud (Internet Fraud Crime Report restricts the selling privileges of lower-rated
2006). The average loss reported was $602.50 sellers or cuts them off entirely” (2007, B1).
per auction complaint. The most common eBay has also added more detailed seller ratings
complaints concern late shipments, no about such things as timeliness of delivery and
shipments, or shipments of products that are not how closely the products matched their
the same quality as advertised. Recent descriptions. Mangalindan reports that EBay
empirical evidence suggests that the FBI itself says “that 1 percent of sellers are
estimate that one percent of online Trades are responsible for 35 percent of the negative
fraudulent is actually optimistic. Based upon a buying experiences on the site.” If this is true,
study of 1,200 respondents, Gavish and Tucci then one might expect a more rigorous rooting
(2006) provide evidence that fraud levels are out of these bad sellers.
probably twice the FBI estimate. Many online
buyers continue to avoid online purchases due An insidious form of fraud is shill bidding. This
to mistrust even with non-auction sellers. takes place when a seller bids on his or her own
Online fraud is perpetrated far too often and is item. This practice is well known but difficult
clearly a particular threat with online auctions. to detect. Since the victim has no knowledge of
who is bidding they perceive the shill bids as
History of Fraud and EBay real and escalate their bids accordingly.
Nikitkov and Bay (2008) found the level of
EBay has long represented its online auction shill bidding alone probably exceeds 15
venue as very safe and nearly free of fraud. percent. Also, since shill bidding is often not
However, the eBay user agreement specifies detected, it is only infrequently reported to
that they “have no control over the quality, eBay. Arguably, this form of deception might
safety or legality of items advertised, the truth be more common than all the other forms of
or accuracy of the listings, the ability of sellers fraud such as non-delivery, misdescription, and
to sell items or the ability of buyers to pay for counterfeiting.
items. We cannot ensure that a buyer or seller
will actually complete a transaction.” (eBay Competing auction venues such as Amazon
User Agreement 2008). EBay details a list of have long required sellers to provide a credit
prohibited practices covering a myriad of issues card in order to list, while it took eBay several
and circumstance. Nevertheless, those who more years to begin (FinancialWire 2007). This
have brought suits against eBay have lost on the requirement is considered basic to limiting
basis of eBay‟s disclaimer. In all fairness, eBay seller fraud. Originally, eBay provided users
probably couldn‟t operate without this with a hypertext link to report fraud to the
protection. But, without efforts to combat fraud, Federal Trade Commission (FTC) but since has
eBay‟s vaunted auction world would become removed that link (Guth, et al. 2007). As a
unraveled. Feedback is the basic underpinning consequence, online auction fraud reported to
of trust and continues to be a valuable ally of the FTC dropped significantly. By removing
both buyer and seller. Despite this, many the link, eBay reduced reported fraud, but this
Marketing Management Journal, Spring 2009 134Online Auction Fraud and EBay Bauerly
doesn‟t mean actual fraud dropped. It was sellers for resolution (which eBay
another indication that eBay was less than fully recommends), only 38 percent were successful.
committed to combating fraud. According to the study, the best way to deal
with dishonesty is to report it to PayPal (owned
Legally, the company has successfully by eBay). While only 23 percent of unhappy
defended many court challenges. Despite losing respondents took their complaint to PayPal, 66
a recent French counterfeit case, eBay just won percent of those who did so were successful
a U.S. counterfeit case against Tiffany & Co. (Mangalindan 2007).
(Metz 2008). The court ruled that eBay “can‟t
be held liable for trademark infringement based EBay has developed a couple of options to help
solely on their generalized knowledge that protect buyers as long as they use PayPal for
trademark infringement might be occurring on their purchases. The first option is the dispute
their Web sites” (Metz 2008, p.1). Rob Resolution Center of PayPal. You may pursue
Chesnut, senior VP and legal counsel at eBay this option if you did not receive the item or if
said, “This ruling appropriately established that the item was “significantly different than what
protecting trademarks is the primary burden of was described in the listing or „Significantly not
rights owners – not marketplaces like eBay” as Described‟ (SNAD)” (eBay 2008a).” EBay
(Mangalindan and O‟Connell 2008, B1). defines SNAD with illustrative examples such
Consequently, we can expect eBay to maintain as the item is completely different from its
a relatively low profile on fraud cases. Limited description. A second example: you receive a
resources are more likely to be deployed to picture of an item rather than the item itself. A
maintain revenue growth. Any corrective third example is the item is in poor condition
measures taken will follow along previous eBay when it was described as “mint in box.” Other
positions. To do much more would be examples include receiving fake or knockoffs
expensive and could open eBay up to or items were missing. PayPal will then help
unacceptable levels of liability. the buyer and seller to resolve the issue.
Alternatively, PayPal provides insurance
The next section discusses the history of eBay‟s against fraud of from $200 to $2000 provided
responses to fraud. The following two sections the buyer purchased the item through a
address eBay‟s current feedback framework qualified seller (eBay 2008a).
and the new feedback rules and seller
requirements that became effective in 2008. Another helpful option for buyers who were not
The last sections provide detailed fraud satisfied has been to use eBay‟s Trust & Safety
reduction recommendations for auction Discussion Board (eBay 2008b). Many buyers
participants. say using this discussion board provides a place
to vent, as well as helpful advice you will never
EBay’s Historical Fraud Response get from eBay or PayPal concerning dispute
resolutions. The many thousands of indexed
Tod Marks (Mangalindan 2007) reports that buyer postings provide a useful set of answers
eBay has 2,000 employees policing its site, but and attest to the board‟s attraction.
with 6.4 million new listings per day, can‟t
instantly shut down every questionable auction. FEEDBACK:
A fair reporting of buyers‟ experiences shows THE FOUNDATION OF TRUST
most are satisfied. According to a recent
Consumer Report’s study 70 percent of eBay Trust is necessary in an online auction
buyers were highly satisfied overall marketplace and eBay built its business on
(Mangalindan 2007). Yet 40 percent of survey trust. Trust can be defined as “the subjective
respondents believed eBay‟s help and customer assessment of one party that another will
support was either fair or poor. Furthermore, perform a particular transaction according to his
when victims of fraud went directly to the or her confident expectations, in an
135 Marketing Management Journal, Spring 2009Online Auction Fraud and EBay Bauerly
environment characterized by uncertainty,” (Ba The list below summarizes some of the reasons
and Pavlou 2002, p.243). Trust is a critical why feedback has been less than a complete
dimension because buyers typically don‟t know solution when it comes to trust.
the seller‟s reputation and trustworthiness.
EBay strongly encourages both buyers and Reasons Why Feedback Doesn’t Work as
sellers to rely on feedback as a proxy for trust. Intended *
Experimental evidence supports the proposition 1. Buyers often don‟t know they have been
that superior feedback can increase auction defrauded.
prices achieved (i.e., Dewally and Ederington 2. Buyers are reluctant to give negative
2006; Jin and Kato 2006; Lucking-Reiley 1999; feedback fearing retaliatory negative
Lucking-Reiley, et al.; 2007, Resnick, et al.; feedback.
2006). When buyers‟ perceptions of risk are 3. Sellers are not removed even for large
reduced a price premium is gained. There is numbers of negative feedback.
support for the assertion that negative feedback 4. Negative feedback provides an insufficient
has a greater impact on prices realized than basis for informed judgment.
positive feedback. When there is buyer doubt as 5. Sellers can masquerade as an honest one.
to the quality of an item then feedback has an 6. Sellers create “shill” feedbacks to build
even stronger influence on price premiums. fraudulent positive profiles (Kirsner 2003).
Therefore, both buyers and sellers have a strong 7. A seller can leave eBay and quickly return
motive for providing positive and avoiding under a different identity.
negative feedback. *List from Bauerly and Singh (2004).
When it comes to actual action items, the seller Despite these limitations, much information can
is the only one who truly knows whether an be gleaned from the text comments. According
item is genuine and accurately described. As a to a study of text comments, the nature and
result, there is often a significant difference in quality of text comments can have a significant
the knowledge level between buyers and impact on price differentials in eBay auctions
sellers. This phenomenon is referred to as (Pavlou and Dimoka 2006). Amazon.com, from
information asymmetry. In a normal auction its inception, provided a feedback system in
setting the item can be physically inspected to which only the buyers provide feedback.
reduce the information asymmetry. In an online Experimental evidence has shown that this
auction this option is not available. system provides more trustworthy information
Consequently, for the buyer, feedback is one of for buyers (Chwelos and Dhar 2007).
the few proxies for establishing trust. Historically, EBay‟s feedback system
Interestingly, research shows that most sellers motivated buyers and sellers to engage in a
do not use buyer reputation ratings (Dholakia conspiracy of positivity while Amazon buyers
2005). Feedback acts as a form of word of can be completely honest without fear of
mouth but provided by anonymous parties. retaliation. Chwelos and Dhar (2007) found
Unfortunately, eBay‟s feedback mechanism has that when eBay buyers have a negative
a history of problems. Survey evidence shows experience they still either provide mild
that a substantial proportion of eBay users have positive feedback or no feedback at all. Based
received retaliatory feedback (19 percent) and upon direct seller comparisons on the two sites,
been victims of feedback extortion (16 percent) the authors found positive seller ratings on
within the last six months (Steiner 2003). eBay had little impact on prices or sales levels
Furthermore, evidence shows only about 60 while positive seller feedback on Amazon had
percent of sellers provide feedback to buyers significant impact on perceived reputation and
(Chwelos and Dhar 2007). prices obtained (Chwelos and Dhar 2007).
Because of the limitations of the current
Marketing Management Journal, Spring 2009 136Online Auction Fraud and EBay Bauerly
bilateral feedback system, eBay has unveiled a The first element is a common-sense change.
new feedback policy. The next section details Trading partners clearly shouldn‟t be counted
the new feedback policy and evaluates its only once (ever). This had the unintended effect
impact on buyers and sellers. of trivializing repeat customers. The fear in the
original feedback system was that a small
EBAY’S NEW FEEDBACK POLICY number of customers could artificially inflate
feedback scores. Element two is the most
In early 2008, eBay announced new fee important change to the feedback system as it
increases, increased seller standards, and a new eliminates sellers from giving negative or
feedback policy (eBay 2008c). According to neutral feedback. Buyers will no longer fear
new eBay CEO John Donahoe, the increased retaliatory negative feedback from sellers.
seller standards combined with the new EBay indicates eliminating buyer fear of
feedback policies are designed to increase retaliatory feedback was the reason for this big
buyer safety and satisfaction (Holahan 2008). change. The other changes have less impact
There are five key elements to the new than element two but are meaningful. Buyers
Feedback system being introduced in the first must wait three days before leaving negative or
half of 2008 (quoted from eBay 2008c): neutral feedback for sellers with an established
1. Beginning in February, buyers and sellers feedback. This should help protect against
will be able to earn up to one Feedback per buyers engaging in bad “knee-jerk” feedback.
week from the same trading partner. Today, The shortening of the allowable feedback
members may only affect each other‟s period is not unreasonable.
Feedback scores one time, regardless of the
number of transactions between the parties. In summary, the feedback changes offer mostly
This change will both encourage repeat improvements for buyers‟ safety. The
transactions and reward good service. Amazon.com study shows (Chwelos and Dhar
2. Sellers will no longer be able to leave 2007) the superiority of a unilateral feedback
negative or neutral Feedback for buyers. system. EBay has created a hybrid system
This change occurred in May, 2008. protecting buyers but still allowing sellers to
3. Removal of negative and neutral Feedback provide positive feedback. This not only makes
left by members who are suspended or who eBay‟s feedback distinctive from Amazon‟s but
fail to respond to the Unpaid Item Process arguably superior. While the feedback changes
(UPI). do eliminate one of the most troubling
4. Positive Feedback percentage will be based limitations identified by Bauerly and Singh
on the past 12 months of Feed back, rather (2004), retaliatory feedback, most of the others
than lifetime, since it is most indicative of remain. While eBay asserts the feedback
the seller's recent performance. changes benefit both buyers and sellers, sellers
5. Restrictions on when Feedback can be left: have been negative in their reactions (Stewart
a. Buyers must wait three days before 2008). Sellers perceive losing the option of
leaving negative or neutral Feedback giving negative feedback as an invitation for
for sellers with an established track buyer misbehavior. Buyers could blackmail
record. sellers into unreasonable concessions in order
b. Instead of 90 days, members will be to avoid negative feedback. EBay has made
able to leave Feedback for 60 days. provisions for addressing unacceptable buyer
c. Buyers will now be able to revise behavior, but sellers are wary of the newly
feedback left for sellers. Previously, all empowered buyers. The changes took effect in
feedback was permanent though May, 2008.
participants could later add comments.
(eBay 2008 d). EBay has made a number of changes which
impact sellers. Under the new terms for Power
Sellers, sellers who maintain high average item
137 Marketing Management Journal, Spring 2009Online Auction Fraud and EBay Bauerly
and revenue levels, Detailed Seller Ratings FRAUD REDUCTION
(DSRs), will have to be maintained at a high RECOMMENDATIONS
level (4.5 out of 5). The DSRs are rated on a
five star scale with 5 being highest across four All three auction participants have a role to play
categories (communication; shipping time; and in reducing online auction fraud. Buyers want
shipping and handling charges). DSRs were to avoid being defrauded; honest sellers want to
supposed to improve buyer knowledge and prevent negative outcomes for buyers some of
encourage sellers to focus on improvements in which may unintentionally constitute fraud.
these four areas. EBay will also reduce fees EBay itself must also work harder to minimize
paid on items sold (by 5 percent or by 15 fraud. The following sections provide
percent) for power sellers who maintain high recommendations for reducing online auction
(4.6 out of 5) or very high (4.8 out of 5) levels fraud for the various participants. Since getting
of DSRs respectively. Sellers have voiced their buyers to trust is a key managerial goal for
disapproval of new seller requirements for sellers, then understanding how buyers can
Power Sellers (Zouhali-Worrall 2008). achieve trust is a relevant and instructive
consideration.
Frustration over the monopolistic tendencies of
eBay is apparent from both buyers and sellers. Recommendations for Buyers
This frustration is evident as reflected in the
thousands of postings on eBay‟s discussion Buyers need to arm themselves with knowledge
board and other user developed sites. Sellers that will not only help them get a good deal but
have a number of longstanding complaints reduce the chances they will be defrauded.
against the imperious nature of eBay‟s
relationships with its sellers. The call for a 1. Examine not only seller feedback ratings
strike against eBay February 18-25, 2008 was a (insist on a level of 99 percent positive),
reflection of the mounting dissatisfaction sellers but also the detailed comments. Often, the
have with eBay. Some sellers have begun to comments both from buyers and seller
switch to alternative auction sites such as responses can provide relevant content.
OnlineAuction.com and eCrater (Chu 2008). Avoid sellers whose comments berate
While alternative auction venues may be buyers who complain.
attractive, even Amazon.com has been unable 2. Be wary of sellers who have recent
to attract the enormous level of buyers and negative feedback. According to Gregg
sellers that eBay commands. and Scot (2006), this information usefully
predicts future negative outcomes from
As an auction venue EBay straddles a line these sellers.
between sellers and buyers that can be most 3. Don‟t pay with cash, money order, or
contentious. The safety of online auctions is personal check. Sellers who want to
paramount in the eyes of buyers. John defraud know there is little recourse for
Donahoe has vowed to make eBay a safer and the buyer when they pay by cash. So
more satisfying experience for buyers (Holahan beware of sellers who do not allow
2008). Since the announcement of the changes payment via PayPal or credit card. While
in feedback and seller requirements eBay has these sellers may just want to avoid paying
been deluged by sellers with mostly negative credit card fees, buyers who pay by cash
reactions. Buyers are mostly positive about the methods are the most frequently defrauded
feedback changes. The feedback changes (Snyder 2000).
should eliminate the fear of retaliatory 4. Carefully read and understand seller‟s
feedback, and enhanced seller requirements descriptions of the item and costs/terms of
should lead to improved buyer satisfaction. shipping.
5. Remember that most winners are cursed:
You have just paid more than any other
Marketing Management Journal, Spring 2009 138Online Auction Fraud and EBay Bauerly
interested party was willing to pay, thus, 10. Consider consulting an online trading
you probably paid more than the item was community for more information. There
worth. Expert behavioral economist are eBay communities as well as
Richard Thaler (1994) found that even independent online communities.
sophisticated oil companies overpaid for
leases won at auction. Thaler concludes Recommendations for Sellers
that almost all winners overpay. This
means that often, the best advice is not to While buyers are the focus of much advice on
bid at all on a given item. So think it over how to avoid fraud, sellers can increase their
before bidding on anything. positive ratings and minimize the chances a
6. Be wary of sellers who make outrageous buyer will feel defrauded.
quality claims since these sellers obtain
higher prices for what often turns out to be 1. Provide a large actual photograph of the
average to lower quality. Research item with an accurate description. Point out
suggests these sellers are more likely to flaws that could be considered deal
not send the item or send a counterfeit. breakers after the fact. Buyers don‟t like
(Jin and Kato 2006). surprises unless they‟re positive ones.
7. In general, avoid three-day auction Misrepresentation of merchandise was the
listings. This is a favorite tactic of second most common reason for complaint
fraudulent sellers of high cost commodity with non-delivery the most common (Gregg
items like computers and cameras. By and Scott 2006).
making all transactions quickly the seller 2. Don‟t hide your shipping charges and don‟t
can leave the system before buyers find charge unconscionable prices for shipping
out they‟ve been defrauded due to non- and handling.
shipment. 3. Keep the lines of communication open and
8. Don‟t act in haste. If you are inclined to be solicit unofficial feedback. When buyers
risk tolerant and impulsive you may be an are upset they need to contact you first
ideal eBay buyer, but you are also subject before leaving negative feedback.
to greater fraud and poor outcomes. Remember, sellers no longer fear
Research by Stern et al. (2008) suggests retaliatory feedback due to eBay‟s new
that individuals who are impatient and risk feedback rules. This means it is incumbent
tolerant tend to make speedy decisions. on the seller to be exceptionally responsive
Such individuals may need protection. to buyers‟ needs. Also, be sure to provide
They further argue that the “Buy It Now” buyers with positive feedback to close the
option is dangerous. It reduces the time for loop.
risk assessment and can lead to making 4. For commodity type merchandise such as
risky and high cost mistakes. music, electronics including computers,
9. Especially for collectibles, you may wish software, and new toys, consider selling
to stick with items that are certified by a only items either new in box or guaranteed.
third party as to their authenticity and For collectible merchandise consider
grade. Things like trading cards, comic selling professionally graded items.
books, and coins are typical of this 5. Do not sell counterfeit merchandise. As
category. In a study of online non-certified reported in the Wall Street Journal, eBay
baseball cards sellers often seriously recently lost a case in a French court and
overgraded their cards (Jin and Kato was fined $63.2 million (Passariello and
2006). The authors found this type of Mangalindan 2008). The case was based
fraud was far less common in retail upon eBay sellers defrauding buyers with
collectibles stores. counterfeit Louis Vuitton and Christian
Dior items. Some sellers like to pretend
139 Marketing Management Journal, Spring 2009Online Auction Fraud and EBay Bauerly
buyers know the items they are acquiring 3. List seller information including a physical
are “knock-off merchandise” given the address to which buyers send their
unusually low prices the items attract. This payment. This allows buyers to decide if
is nonsense and selling counterfeits is the seller is legitimate. (See Gavish and
illegal. Tucci 2006).
6. If the buyer believes the item was 4. Make buyer education a priority.
misdescribed, refund the buyer‟s money. If Eliminating fraud is not possible, but
the buyer is abusive, i.e., threatens to education is an excellent way to limit the
blackmail you with unjustified negative number of easily defrauded buyers.
feedback, blacklist the buyer from bidding 5. Work to get increased community
on your items in the future. involvement and at the same time, commit
7. Own up to your own mistakes, yours or more internal resources to fraud prevention.
your employees. Fix the problem quickly See Chua, et al. (2007) for an excellent
and without negativity. Lin et al. (2007) qualitative analysis of online trading
determined that over 40 percent of buyer communities and the role they play in
complaints were resolved at the moment minimizing online auction fraud.
they were raised. 6. Continue to motivate sellers to provide
8. Send the merchandise quickly and offer better service. Using fee discounts for
insurance, particularly with fragile items. sellers who achieve top service ratings is an
This common sense advice is often ignored. excellent move and appears to be paying
9. Insist that buyers purchase via PayPal only. off (Mangalindan 2008). By providing
It costs you upfront but protects you and buyers the opportunity to rate individual
your customers‟ interests. service elements such as speed of service
10. Work especially hard to improve Detailed and accuracy of descriptions eBay has
Seller Ratings. This tends to improve the moved the service ball forward. This
buyers‟ sense of safety and can reduce your doesn‟t remove fraudulent sellers in and of
selling costs. itself, but is a valuable improvement in the
feedback system.
Recommendations for EBay 7. Get honest sellers to help identify and
remove the fraudulent sellers. Honest
By eBay‟s own admission, just one percent of sellers are harmed as is the whole eBay
the sellers account for thirty-five percent of community when fraud is allowed to
negative feedback (Mangalindan 2007). This proliferate. Sellers in a given merchandise
sorry statistic represents a failure to remove the classification are often the most
worst of the bad sellers. Historically, eBay has knowledgeable about bad sellers and need
done too little about bad sellers including those to be brought into the fold. EBay needs
defrauding buyers. Here are a few honest sellers as allies, but they must solicit
recommendations for eBay that should help their help and then listen and act.
reduce fraud and consumer dissatisfaction.
EBay sellers have been angered by the changes
1. Commit to a policy of quickly suspending in fee policy and feedback resulting in a boycott
sellers who persistently provide poor by sellers (Stewart 2008). The boycott proved
service. If the seller is committing fraud, moderately effective, but the changes have
permanently remove the seller. stayed in place. EBay can‟t ignore the sellers or
2. Continue efforts to keep bad sellers and be perceived as unduly favoring buyers. As an
sellers of counterfeit merchandise out. auction venue, this is an inherent conflict eBay
Recent restrictions on sellers of certain faces. Historically, major auction houses relied
items like luxury handbags make a lot of on their expertise and corporate reputations to
sense. (See Mangalindan 2007). protect buyers from fraud. Instead, eBay relies
upon their feedback system and detailed seller
Marketing Management Journal, Spring 2009 140Online Auction Fraud and EBay Bauerly
ratings to establish seller/buyer reputations. minimize actual fraud but, even more
Since sellers can‟t leave negative feedback to importantly, building a strong perception of
buyers, sellers view this as a reduction in their fairness in all company communications and
ability to fight buyer fraud or simply refusal to actions. As an auction venue, eBay can reduce
pay for purchases. Because sellers create buyers fraud best by maintaining vigilance and an
and visa versa, eBay‟s dilemma is never ongoing dialogue and collaboration with both
ending. buyers and sellers.
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