Online Auction Fraud and eBay

Abstract

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.