Online Auctions

April 08, 2014

If you're looking for a hot collectible or simply a good deal, online auctions may appeal to you. But before you place a cyber-bid, consider how online auction houses work. Like a traditional 'live' auction, the highest bidder 'wins'. That's where the similarity ends because an online auction house doesn't have the merchandise, the highest bidder deals directly with the seller to complete the sale.

If you're the highest bidder, the seller typically will contact you by e-mail to arrange for payment and delivery. Most sellers accept credit cards, or use a third-party escrow agent to collect your payment, the product you're buying, and process delivery of each.

Be cautious if the seller asks you to pay by certified cheque or money order. Some on-line sellers have put items up for auction, taken the highest bidder's money, and never delivered the merchandise. What's more, consumers who paid by certified cheque or money order had little recourse when it came to getting their money back.

Follow These Tips BEFORE You Bid In An Online Auction:

- Try to pay by credit card. If you don't get the merchandise, you can challenge the charges with your credit card insurer. 
- Ask about using an escrow agent, or paying by COD. Most escrow services charge a fee, so you may want to consider this option only for larger purchases.
- Verify the seller's identity. If you can't, avoid doing business with the seller. Some sellers may use a forged e-mail header, making it impossible to contact them if you need to. 
- Ask how you'll get follow up service, if you need it. Many sellers don't have the expertise or facilities to provide service for the goods they sell. Is this important to you? 
- Avoid impulse bids and purchases. Online auctions may be enticing, but are you really getting the best price? 
- Ask about return policies. Returning merchandise to an online seller may be difficult.

Here Are Descriptions Of The Most Common Fraud Seen At Auctions:

- Misrepresentation: One of the oldest tricks in business. Just what it sounds like. Or more accurately, the merchandise ISN'T what it sounds like. Value, authenticity or condition may be overstated, sometimes wildly.
- Failure to ship merchandise: The merchant takes your money and runs, leaving you nothing but a lighter wallet for your troubles.
- Failure to pay: Through the use of fake money orders, bounced checks, stolen credit cards, or a number of other techniques, the buyer gets the goods and leaves the merchant with nothing in return.
- Shilling: Artificially inflating the price on an item by use of fake bids from phony user IDs or accomplices.
- Bid Shielding: Using high bids from phony accounts to run up the price and scare off potential buyers, the actual bidder then retracts the higher bids, getting the item at a much lower price than he would have otherwise.
- Piracy and counterfeiting: The sale of pirated music and software or counterfeit art, phony jewelry or gems, and forged collectibles.
- Internet Fencing: Selling stolen goods through the auction.
- Triangulation: The seller offers to send you the item (usually new, brand name goods) on approval. They then use stolen credit cards to order the item shipped to you. You pay for the goods (in cash) after receiving them, and get a visit shortly thereafter from the police. Credit card fraud and theft.
- The 'Buy and Switch': The buyer gets the merchandise and returns a similar item that has been damaged, or a fake, with the claim, 'It isn't what I expected.' The seller refunds their money, and is left with broken and unresellable product.
- Fee stacking: Fees, usually "related" to shipping costs, are added to the cost after the sale has been made.
- Loss or Damage Claims: Not always fraudulent. After all, things do get broken in transit. Often these claims are a result of the buy and switch, or careless handling by the buyer.
- Shell Auctions: No merchandise exists. The sole purpose of the auction is to get money or credit card numbers from unwary buyers.