Online Auction Tips
Contributed by: Federal Trade Commission
Internet auction sites give buyers a “virtual” flea market with new and used merchandise from around the world; they give sellers a global storefront from which to market their goods. But the online auction business can be risky business. OnGuard Online wants to help buyers and sellers stay safe on Internet auction websites. Among the thousands of consumer fraud complaints the Federal Trade Commission (FTC) receives every year, those dealing with online auction fraud consistently rank near the top of the list. The complaints generally deal with late shipments, no shipments, or shipments of products that aren’t the same quality as advertised; bogus online payment or escrow services; and fraudulent dealers who lure bidders from legitimate auction sites with seemingly better deals. Most complaints involve sellers, but in some cases, the buyers are the subject. Whether you’re a buyer or a seller, understanding how Internet auctions work can help you avoid most problems.
TIPS FOR BUYERS
Despite complaints of fraud, online auctions remain a fun, efficient, and relatively safe way to shop — if you act prudently. Here’s how:
Before Bidding
Become familiar with the auction site. Never assume that the rules of one auction site apply to another. If the site offers a step-by-step tutorial on the bidding process, take it. It may save you frustration and disappointment later.
Find out what protections the auction site offers buyers. Some sites provide free insurance or guarantees for items that are not delivered, not authentic, or not what the seller claims.
Know exactly what you’re bidding on. Read the seller’s description of the item or service, and if a photograph is posted, look at it. Read the fine print. Look for words like “refurbished,” “close out,” “discontinued,” or “off-brand” — especially when shopping for computer or electronic equipment — to get a better idea of the condition of the item. Sometimes this information and other important terms are in a contract that may be found by following a hyperlink in the listing to the seller’s online store.
Try to determine the relative value of an item before you bid. Be skeptical if the price sounds too low to be realistic. “Brick-and-mortar” stores and price comparison sites may be good for reality checks.
Find out all you can about the seller. Avoid doing business with sellers you can’t identify, especially those who try to lure you off the auction site with promises of a better deal. Don’t trust emails alone. Some fraudulent sellers have used forged email headers that make follow-up difficult, if not impossible. Get the seller’s telephone number as another way to get in touch. Dial the number to confirm that it is correct. Some auction sites post feedback ratings of sellers based on comments by other buyers. Check them out. Although these comments and ratings may give you some idea of how you’ll be treated, comments sometimes are submitted by the seller or “shills” paid by the seller. In other cases, a seller may build up his reputation by selling many low cost items before making fraudulent sales of higher cost items.
Consider whether the item comes with a warranty, and whether follow-up service is available if you need it. Many sellers don’t have the expertise or facilities to provide services for the goods they sell. If this is the case with your seller, be sure you’re willing to forfeit that protection before placing a bid.
Find out who pays for shipping and delivery. Generally, sellers specify the cost of shipping and give buyers the option for express delivery at an additional cost. If you’re uncertain about shipping costs, check with the seller before you bid.
Check on the seller’s return policy. Can you return the item for a full refund if you’re not satisfied with it? If you return it, are you required to pay shipping costs or a restocking fee? Sometimes the return policy is found in the listing, but other times you may have to access it by following a hyperlink in the listing to the seller’s online store.
Email or call the seller if you have any questions. Don’t place any bids until you get straight — and satisfactory — answers.
When Bidding
Establish a top price and stick to it. This can help ensure that you get a fair price and protect you from “shill bidding.” Don’t bid on an item you don’t intend to buy. If you’re the highest bidder, you’re obligated to follow through with the transaction. Some auction sites bar “non-paying” bidders, also known as “deadbeats,” from future bidding.
Save all transaction information. Print the seller’s identification, the item description, and the time, date, and price of your bid. Print and save every email you send and receive from the auction company or the seller.
Before Paying
Protect your identity. Never provide your Social Security number or driver’s license number to a seller. Don’t provide your credit card number or bank account information until you check out the seller and the online payment or escrow service, if you’re using one, and ensure their legitimacy. Examine the online payment and escrow service’s privacy policy and security measures. Never disclose financial or personal information unless you know why it’s being collected, how it will be used, and how it will be safeguarded.
Protect your funds. Know what form of payment the seller accepts. If the seller accepts only cashier’s checks or money orders, decide whether you’re willing to risk sending your payment before you receive the product. Never wire money to a person you don’t know or whose identity you can’t verify. If the seller insists on using a particular escrow or online payment service you’ve never heard of, check it out. Visit its website. Be suspicious of any site that is generally of poor quality with misspelled words or claims that it is affiliated with the government. Call the customer service line. If there isn’t one — or if you call and can’t reach someone — don’t use the service. Before you agree to use any online payment or escrow service, read the service’s terms of agreement. If it’s an online payment service, find out whether it offers buyers any recourse if sellers don’t keep their end of the bargain, whether it prevents sellers from accessing their funds if buyers are not satisfied with the product, and who is responsible for paying for credit card charge backs or transaction reversal requests. If the online payment service cannot recover theloss from the seller, it might try to recover its loss from you, using the credit card or bank account information in its file. To limit your exposure, consider reserving a separate credit card, stored-value card, or bank account to use just for your online transactions. Be suspicious of an online escrow service that cannot process its own transactions and requires you to set up accounts with online payment services. Legitimate escrow services never do this. Check with the Better Business Bureau, state attorney general, or consumer protection agency — where you live and where the online payment or escrow service is based — to see whether there are any unresolved complaints against the service. A lack of complaints doesn’t mean that a service doesn’t have any problems. Many scammers change their company names often.
Know Your Legal Obligations. Under federal law, you’re required to advertise your product or service and the terms of the sale honestly and accurately. You can’t place “shill” bids on your item to boost the price or offer false testimonials about yourself in the comment section of Internet auction sites. You’re prohibited from auctioning illegal goods; some auction sites have further prohibitions on sales of other items. While many auction sites monitor to ensure that illegal items are not being offered, the responsibility for ensuring that a sale is legal rests with the seller and buyer. Some auction sites post a list of prohibited items. You are required to ship merchandise within the time frame specified during the auction, or within 30 days, if a time frame is not specified. If you can’t meet the shipping commitment, you must give the buyer an opportunity to agree to the new shipping date or cancel the order for a full refund. To learn more about your responsibilities when shipping products, see A Business Guide to the Federal Trade Commission’s Mail or Telephone Order Merchandise Rule.
Advertising Your Product
* When describing your item and its condition, state whether it’s new, used, or reconditioned.
* Anticipate questions buyers might have and address them in the description of your item or service.
* When possible, include a photograph of the item. There’s much truth to the saying that “a picture is worth a thousand words.”
* Specify the minimum bid you’re willing to accept.
* Specify who will pay for shipping, and whether you’ll ship internationally.
* State your return policy, including who’s responsible for paying shipping costs or restocking fees if the item is returned.
* Let prospective bidders know whether you provide follow-up service; if you don’t, tell them where they can get it.
Dealing with Bidders
* Respond as quickly as possible to bidders’ questions about the item you’re auctioning or the terms of the sale.
* When the auction closes, print all information about the transaction, including the buyer’s identification; a description of the item; and the date, time, and price of the bid. Save a copy of every email you send and receive from the auction site or the successful bidder.
* Contact the successful buyer as soon after the auction closes as possible; confirm the final cost, including shipping charges, and tell the buyer where to send payment.
Arranging for Payment
* If you accept credit card payments from the buyer directly, bill the credit card account only after you’ve shipped the product.
* If a buyer insists on using a particular escrow or online payment service that you’ve never heard of, check it out by visiting its website or calling its customer service line. If there isn’t one, or if you call and can’t reach someone, don’t use the service. If the service claims to be affiliated with a government agency, that’s a sign of a scam.
* Before agreeing to use an online payment or escrow service, read the terms of agreement.
If it’s an online payment service, find out who pays for credit card charge backs or transaction reversal requests if the buyer seeks them.
* Examine the service’s privacy policy and security measures. Never disclose financial or personal information unless you know why it’s being collected, how it will be used, and how it will be safeguarded.
* Don’t use an online escrow service that does not process its own transactions, but that requires you to set up accounts with online payment services. Legitimate escrow services never do this.
* Check with the Better Business Bureau, state attorney general or consumer protection agency — where you live and where the online payment or escrow service is based — to see whether any unresolved complaints are on file against the service. But remember that a lack of complaints doesn’t guarantee that the service has no problems.
Look Out for Fraudulent Checks or Money Orders. Sometimes, your bank may not alert you that a fake check or money order has been returned until after you have shipped the merchandise. If you are suspicious about a check because it is written by a third party or for any other reason, call the person who wrote the check to verify that they have authorized it. If you receive a check or money order for an amount that exceeds the successful bid, and the buyer asks that you wire the excess funds back to him or to a third party, do not wire the money. Instead, return the check to the buyer, and do not ship the merchandise.
If you accept payment by check, ask for a check drawn on a local bank, or a bank with a local branch. That way, you can make a personal visit to make sure the check is valid. If that’s not possible, call the bank the check was drawn from and ask if it is valid. Get the bank’s phone number from directory assistance or an Internet site that you know and trust, not from the person who gave you the check.
FOR BUYERS AND SELLERS
Where to Turn for Help.If you have problems during a transaction, try to work them out directly with the seller, buyer, or site operator. If that doesn’t work, file a complaint with:
* the attorney general’s office in your state.
* your county or state consumer protection agency. Check the blue pages of the phone book under county and state government.
* the Better Business Bureau.
* the Federal Trade Commission. File a complaint online at ftc.gov.
To take an interactive quiz about online auctions visit: http://www.onguardonline.gov/quiz/auctions_quiz.html
