From The Attorney General's Office and the University of Washington Center for Law, Commerce & Technology — Report Urges Care When Paying for Online Auction Purchases

Business Wire, April 20, 2001

Business Editors/Technology Writers

SEATTLE--(BUSINESS WIRE)--April 20, 2001

Successful online auction bidders who prefer to pay with cash may expose themselves to greater risks than if they had used credit cards to pay for their purchases, according to a new report from the Attorney General's Office and the University of Washington Center for Law, Commerce & Technology.

While credit cards are the safest way to pay for auction purchases, only a small number of online bidders -- perhaps as low as 17 percent -- use credit cards, the report said. Fear of credit card fraud or the sharing of personal financial information with third parties may be the reasons for low credit-card usage.

"Internet auctions are the most exciting development in shopping since the 'One Day Sale' or the 'Blue Light Special.'" Attorney General Christine Gregoire said today at the center's second annual conference. But despite their growing popularity, online auctions remain one of the primary venues for fraud over the Internet, she said.

Recent Federal Trade Commission figures show online auction fraud complaints declined in 2000, but Gregoire said the trend over the last several years remains disturbing.

"Over 35 million Americans have used online auctions to buy or sell merchandise," Gregoire said. "Unfortunately, four in ten say they have had problems."

The joint Attorney General and UW report is titled "Bidder Beware: Toward A Fraud-Free Marketplace -- Best Practices For the Online Auction Industry." It provides a snapshot of the online auction industry as it exists today, outlines basic measures currently used to combat fraud, and offers information on how consumers can better protect themselves.

The report is one of several joint projects undertaken by the Center and the Attorney General's Office since the Center was formed last year.

Among the report's tips for online auction bidders are:

-- Use a credit card when making online purchases. The card issuer becomes an
intermediary and if there is a problem with the transaction, the consumer can
contest an unauthorized or erroneous charge. Consumers can further protect
themselves by carefully reviewing monthly credit card statements for fraudulent
charges.

-- Check online auction forums for reports by previous participants on which
buyers and sellers have completed transactions without problems.

-- Take advantage of online auction insurance programs. These policies, some of
which are free, cover a portion of the value of non-delivered or defective
merchandise. Consumers must be careful to make claims in a timely manner and
should take note of the amount of coverage.

-- Use online escrow services. These services hold a buyer's money in trust
until ordered merchandise is received and approved of by the buyer.

The report notes that most auction sites offer consumers some or all of these protections. Consumers should consider which ones are available before deciding whether to buy or sell. Sites that don't provide protections to customers should consider doing so, the report concludes.

"Unfortunately, too many consumers aren't aware of the ways they can protect themselves," Gregoire said. "In the anonymous world of the Internet, it's imperative that consumers do their homework."

In preparing the report, researchers conducted an extensive survey of industry representatives. "One of the more heartening things we discovered was that the online auction industry is as interested in keeping the marketplace problem-free as we are," Gregoire said.

The entire report can be found on the Attorney General's website at http://www.wa.gov/ago/ or on the Center's website at www.law.washington.edu/lct