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RealTime IT News

Consumer Group Warns About Possible Fraud at Auctions

In a statement sure to displease the operators of legitimate auction sites, the Internet Fraud Watch unit of the National Consumers League said its statistics show that online auctions have become the No.1 Internet scam.

The NCL is a consumer advocacy group based in Washington. The group said reports of Internet fraud tripled in 1997, compared with 1996.

Since Web auctions are so new, they did not even merit a separate fraud category in 1996, Susan Grant, a National Consumers League vice president, told The New York Times. But last year, auctions were cited in nearly 30% of the 1,152 complaints of Internet-related fraud the group received. And Grant said the numbers probably grossly understated the problem because most consumers did not bother to report such incidents.

The Times described online auctions as "wild and woolly digital bazaars" that represent one of the fastest-growing segments of electronic commerce; industry estimates say online auctions had $500 million in sales in 1997, a number the industry expects to grow to $1 billion this year.

Fortunately for the consumer, the vast majority of online auction transactions are completed safely, the newspaper said. But consumers should proceed with caution because there are various ways to stage a swindle in the world of Web auctions, the Times said.

Grant was quoted as saying that some consumers who filed complaints say they detected evidence of shills after the fact by tracing a disproportionate number of last-minute bids back to a single Internet server.

Most consumer complaints about Web auctions stem from so-called person-to- person auction sites, where people who register their names and postal and E- mail addresses can list their items and make use of the site's bid-management software for a fee, which usually ranges from 25 cents to $50, the Times said.

Managers of such auctions say they cannot possibly police every deal because of volume.