Internet auctions: a closer look

It's a 24/7 flea market for bargain shoppers out there. Online auctions are a growing area of business but they are also a growing risk. Protective considerations are important whether you're a buyer or a seller.

Auction complaints made up about 34% percent of all internet reports to the Federal Trade Commission (FTC) in 2006. This number is probably slightly skewed as auction giant eBay removed the link from its website to www.fraud.org in the fall of 2006 (this means that there were 3 or some months of fraud that would have been less often reported).

What is the role of the auction site?

Remember that many, if not all, online auction sites will not take direct responsibility for problems between buyers and sellers . The sellers store and send the merchandise, not the auction site. So before using an auction site for the first time (particularly if you are a seller or a high volume buyer), read their User Agreement and Privacy Policy. It can only help and will only take a few minutes.

Generally, please use the same rules for online auctions as you would for online shopping, but be more conservative.

The rules for online shopping, in short:

In addition to this, follow these guidelines when you're a buyer on an auction site:

• When bidding, create a "max price" in your head, and stick with it. There is a gaming technique out there where the seller, under a different profile, or an associate of the seller artificially inflates the bidding price. This is called shill bidding.
   
• Be sure to read the seller's feedback. Learn all you can about them. And if they seem shady, don't bother.
   
• Try not to be the first person to buy something super expensive from a seller. Keep in mind that a seller may auction many inexpensive items to get good feedback and then start using shadier tactics when it comes to expensive items.
   
• Try to get an understanding of the value of the item before you put up your bid. Do a search for how much that same item would cost on a different site or with different sellers.
   
• Avoid sellers who are out of the country (there simply harder to trace, and there are more variables—changes of hands—when your package gets shipped).
   
• Be very suspicious of a lot of misspelled words, poor language, in tandem with claims of legitimacy (being a representative of Walmart, the Nigerian Government, etc...). Just don't bother if it's shady.
   
• Be sure to understand who will be paying for delivery of merchandise.
   
• Be sure to find out acceptable methods of payment (PayPal, credit card, money order, etc...).
   
• Save all correspondences (emails, phone records, etc...) you have with sellers.
   
• Sellers never need your driver's license number or your social security number.
   
• If it is a well established seller, they may have an online payment function on their business. Use this feature with extreme caution. I personally always prefer a third party payment service (e.g. PayPal).
   
• If you have problems with a transaction that cannot be resolved or you believe you're involved with a fraud case, you can contact:
   
  a) The Federal Trade Commission (FTC) to file a complaint @ www.ftc.gov
  b) Your local or state consumer protection agency.
  c) The attorney general's office in your state.
  d) The Better Business Bureau
  e) Online Crime Database

What if you're a seller? Here are some tips...

1) Advertise as accurately as possible:

• Use the terms new, reconditioned, and used. Be certain to differentiate between the condition of a used-like new, used-good, and used-okay condition. If it's used-poor, you need to state that or you probably don't want to be selling it.
   
• Be certain to detail payment options, mail options, and which party is responsible for shipping and handling.
   
• An item with a photograph will always sell better (unless it shows what horrible quality the item is).
   
• Provide a link or explain your return policy (and who's going to pay for it).
   
• A buyer with a physical address, phone number, and their website will be more successful. Try to provide some of those things.
   
• Try to anticipate what questions your potential buyers will have and include them in the description.
   
• Establish a minimum bid or a "Buy Now" acceptable price if it exists.

2) Deal with bidders as quickly and kindly as possible:

• Basically, the more time you can spend answering emails or bidder questions, the better you'll fair in the long run. Try to respond quickly, kindly, and accurately.
   
• Contact the winning bidder as soon as the auction closes and establish a good professional rapport. This contact should include final price, payment options, shipping and handling information, and an honest idea of how long after payment the item will be shipped. Some of this information may be repeated from the content in the description or other correspondences, but redundancy doesn't hurt if it's important information.

3) And finally, watch out for scams:

• Save or document your correspondence with winning bidders.
   
• Minimize dealings with other countries because they are harder to trace and laws are harder to enforce.
   
• Never accept a payment for more than the final cost of the item. This is a scam where they buyer has you pay them for the difference (the overpayment amount), the original check bounces, and you are left with false payment, an item that has been shipped, and you gave them some of your money. If you receive a check for a larger amount, just don't accept it.
   
• Try to avoid personal checks if you can. If you can't, make sure it's from a bank that has a Yellow Book listed number so you can call to confirm the account.
   
• If a check is signed by a third party, call the original party to make sure they authorized the check.

4) Be aware of the law:

• You cannot sell illegal goods . This includes items that are illegal in the buyer's state or items that are illegal to mail.
   
• As a seller, you must advertise your product and the sale terms with accuracy, integrity, and honesty.
   
• Set up a reasonable shipping timeline with the buyer. Many auction sites will have guidelines for this. If a specific date is not set, the law states that a vendor must ship the item within 30 days of payment.

Related articles

• The dangers of online shopping
• Clearing your Internet cache
• Internet and software privacy index page
• Privacy Alerts™ homepage

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