RealTime IT News

eBay Confirms Federal Investigation

eBay's troubles continued to worsen Friday as the auction site confirmed it is the target of a federal investigation that centers around possible illegal transactions.

The news came the same day Microsoft said it was considering legal action over the sale of more than 6,000 copies of its Office software at more than 140 separate auctions this week.

Late Friday, eBay released a short statement that said it had been ordered to produce records connected to possible illegal transactions.

"The company has been informed that the inquiry includes an examination of the company's practices with respect to such transactions. The company is fully cooperating with the inquiry.

"In order to protect the investigations, the court has ordered that no further public disclosures be made with respect to the matter at this time."

Published reports said the federal inquiry was unrelated to Microsoft's complaint.

Microsoft is demanding that eBay take responsibility for pirated software products sold on the auction site. Currently there are hundreds of Microsoft applications for sale at eBay with no means for potential buyers to determine whether the product is legitimate, or a pirated copy.

eBay maintains that they are only a venue in that the auction site acts as a marketplace for buyers and sellers to meet. The eBay user agreement maintains that "we just provide the automated bidding system. We do not authenticate users, and we do not verify items, we do not guarantee that you will receive payment or the item. However, we are extremely concerned about our community and your safety within our community. To that end, we work with third parties to offer you services to authenticate users obtain insurance and escrow your transactions."

In a statement, the auction firm said it is cooperating with Microsoft to address the issue of potential infringing items being listed for auction.

"eBay has zero tolerance for illegal infringing software listed on its site. eBay's industry leading 'Legal Buddy' program began in November 1997 as a means for content owners to quickly notify eBay about any illegal or infringing items listed on the site. eBay has established relationships with more than 100 companies in a coordinated effort to eliminate such items from the site. This program has resulted in the successful termination of unauthorized listings."

eBay added it "has provided information on hundreds of suspected software infringers to Legal Buddy participants and appropriate law enforcement agencies so they may take whatever action they deem necessary."

eBay reaffirmed its commitment to work with content owners on pirating issues to create a safe and positive online person-to-person trading experience at its Web site.

This is not the first time the auction site has come under fire for the products offered for sale on eBay.

Last week, eBay announced that the auction site would not accept listings for firearms and ammunition after March 5. eBay said it was unable to come up with a way to ensure buyers and sellers comply with federal laws regulating gun sales.

More recently, EarthLink voluntarily closed its auction for Internet access so it "could re-tool our offers to make them fit more appropriately into eBay's auction format."

According to EarthLink spokesman Arley Baker, the ISP never intended to use eBay as an advertising vehicle or to use eBay to specifically target eBay's customers.

Baker said because many ISP customers are being put on the auction block "we thought an auction-themed campaign would be appropriate -- hence, the natural eBay tie-in." He added "whatever auction you see from EarthLink on eBay will now be more in line with the fun, competitive interactive bidding spirit of the eBay community."

eBay provides a list of illegal items that will not be posted on the auction site in its user agreement. This list however, is not an extensive and is only used to provide examples to its members.

eBay recommends members check with an attorney if they have consulted the list and are still unsure whether it's legal to buy or sale a certain item.

Ramifications for posting an illegal item for sale on eBay are anemic, at best. If a member violates the user agreement, they may receive a warning, suspension or eventual termination of their account with eBay.

Of course, eBay maintains they do not authenticate users, so a member that violated the charter of the user agreement can return to post to the trading community with another identity in a matter of minutes from being expelled.

eBay leaves it up to the auction community to report fraudulent sales and illegal acts among the users. The self-policing practice is anathema for a public auction system based on and age old Latin premise; caveat emptor, or let the buyer beware.