Rules of the Marketplace
Contributed by: Federal Trade Commission
Role of the Auction Site. Most Internet auction sites specialize in person-to-person activity where individual sellers or small businesses sell their items directly to consumers. In these auctions, the seller — not the site — has the merchandise, and often, the site will not take responsibility for any problems that may arise between buyers and sellers. Before using an Internet auction site for the first time, buyers and sellers should read the Terms of Use, and review any information the site offers.
Registration. Most Internet auction sites require buyers and sellers to register and obtain a “user account name” (or “screen name”) and password before they can make bids or place items for bid. Keep your password to yourself. If you share it, another person could access your account and buy or sell items without your knowledge. That could damage your online reputation — and eventually, your bank account.
Fees. Some sites require sellers to agree to pay a fee every time they conduct an auction, whether the item is sold or not. Other sites charge a fee only when an item is sold.
The Auction. Many sellers set a time limit on bidding and, in some cases, a “reserve price” — the lowest price they will accept for an item. When the bidding closes at the scheduled time, the item is sold to the highest bidder. If no one bids at or above the reserve price, the auction closes without the item being sold. sellers, some auction sites now prohibit the use of wire transfers as a method of payment.
Online Escrow Services and Bonding Services. For big-ticket items like computers, cars, or jewelry, buyers should consider using an escrow service or purchasing from a bonded or insured seller to protect their funds. The primary purpose of online escrow services is to protect buyers and sellers from fraud. Escrow services accept and hold payment from a buyer — often a wire transfer, check, money order or credit card — until he receives and approves the merchandise. Then, the escrow service forwards the payment to the seller. The buyer pays the fee for an online escrow service — generally a percentage of the cost of the item. Before using an escrow service, both the buyer and the seller should verify that it is a legitimate, reputable company. Some sellers may state that they are bonded or otherwise insured against fraud. If a buyer intends to rely on a seller’s bonded status or the seller’s insurance to protect against fraud, he should investigate the legitimacy of the bonding or insurance company and then make sure that the seller really is a member of — or certified by — that company. If a problem arises with a bonded seller, the buyer usually has to engage in a dispute resolution process with the seller before being able to submit a claim to the bonding or insurance company.
