Auction is market mechanism by which buyers make bids and sellers place offers. The most popular type of auctions is an electronic auction which means auctions conducted online.
31% of online Americans (35 million people) who participated in online auctions in 2000, 41% encountered problems. Checks were cashed without goods being sent (or vice versa) and the average loss per victim was $326. The obvious safeguards were not known or not used. Only 17% paid with credit cards and a mere 6% employed an escrow service.
The largest Internet auctioneer is eBay which has introduced several measures in an effort to reduce fraud. Following are action to prevent e-auction fraud:1. User identity verification such in IC number, driver’s license number or date of birth. For example, verified eBay user, the voluntary program, encourages users to supply eBay with information for online verification.
2. Authentication service is to determine whether an item is genuine and described appropriately. It difficult to perform because their training and experience, experts can detect counterfeits based on subtle detail.
3. Grading services which is a way to determine the physical condition of an item, such as 'poor quality' or 'mint condition'.
4. Feedback forum allows buyers and sellers to build up their online trading reputations. It provides user with ability to comment on their experiences with other.
5. Insurance policy. For example, eBay offers insurance underwritten, users are covered up to $200, will with a $25 deductible. The program is provided at no cost to eBay user.
6. Escrow services. Both buyers and sellers in a deal are protected with an independent third party. Buyer mails the payment to escrow services which verifies the payment and alerts the seller when everything checks out.
7. Non-payment punishment. To protect sellers, a friendly warning for first-time nonpayment. A sterner warning is for second-time offense, with a 30 day suspension for a third offense and an indefinite suspension for a fourth offense.
8. Appraisal services which use a variety of methods to appraise items. It includes expert assessment of authenticity and condition, and reviewing what comparable items have sold for in the marketplace in recent months.
9. Item verification which is a way of confirm he identity and evaluate the condition of an item. Third parties will evaluate and identify an item through a variety of means. It provides a way of tracking an item if it charges ownership in future.
10. Physical inspection. It can eliminate many problems especially for collectors’ item.
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