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(1/28/03 11:18:51 pm)

10 Tips to Avoid Auction Scams

More and more people are turning to online auctions in hopes of finding top-notch goods at fire-sale prices or making a few bucks off the baubles and gadgets collecting dust in their garages. At online auction sites, you can sell and bid upon just about anything under the sun -- antiques and collectibles, computer equipment, sporting goods, and, of course, Beanie Babies -- all from the comfort of your PC. There are upwards of 250 online auction sites so far, the most well-known sites being eBay, Yahoo!Auctions and Amazon's auctions.

As they grow ever more popular, auction sites are becoming a magnet for the unscrupulous. In fact, according to Internet Fraud Watch, operated by the National Consumers League, online auctions complaints were the number one fraud complaint in the U.S. in 2000.

Shills, Shields and Scams
How do scheming surfers take advantage of legitimate auction users? Some sellers will employ a second email address or a friend (called a "shill" in auction lingo) to artificially pump up the prices for a particular item, forcing a buyer's bid upwards or sometimes prompting a bidding war. Another scam has the buyer using another email address or a friend (called a "shield") to drive up prices and discourage bids on an item she wants. At the last minute, the shield withdraws the high bid, allowing the buyer to win the item at a lower price. While most auction sites forbid retracting a bid once it's made, shields either take advantage of the few exceptions to this rule or simply use a phony email address to make and withdraw the bogus bid. Of course, it's hard for an online auction user to spot a shill or a shield through the faceless online world (but there are ways to avoid them; see Tip 5 below).

The more obvious and frustrating scam occurs when a winning bidder or a seller sends the money or the goods but never receives what was promised in exchange. Unfortunately, if you've sent money or merchandise and the other side doesn't come through, long distance and lack of contact information can make it very hard to collect. While most auction sites will not take any steps to force a sale, some sites now guarantee some transactions under $250 -- meaning you'll be reimbursed if you haven't received your money or your merchandise. Either way, prevention is still the best medicine. (See Tips 6 and 7, below.)

While auction sites are scrambling to combat fraud, the nature of online commerce makes it virtually impossible to eliminate it totally. I've pulled together ten tips to help you avoid some of the common pitfalls.

Ten Tips to Avoid Auctions Scams

1.. Educate yourself. Start slowly, whether you're a buyer or a seller. Carefully read the auction site's rules and FAQ pages before listing an item or making a bid. (You may also want to check out, which offers an FAQ on auction basics, a glossary of auction jargon and other tips and tactics.) Spend some time on a particular site to get the lay of the land. The auction sites have different rules, which can be quite technical, so if you switch sites, make sure you understand the differences. When you're ready, start by bidding on relatively inexpensive items, or, if you're selling, first sell a low-cost item or two. This reduces your risk while you learn how online auctions really play out.

2.. Check out sellers and buyers. Take the time to find out more about the buyer or seller you're dealing with. Stay away from transactions with minors if you can spot them (called "kid-bids" in online auction jargon). Check out feedback on the other party -- auction sites allow users to post positive or negative comments about their experiences with other users. Be extra cautious when dealing with users with negative feedback or no feedback. And remember, you can't always believe positive feedback, since a user can use an alternate email address or a friend to pad their feedback with undeserved praise.

3.. Be wary of untraceable users. While most sites require sellers to supply billing information (including an email address and a physical address) and sometimes pay a listing fee up front, most sites do not require buyers to put up any funds or credit card information in advance. That makes it harder to find someone should a deal go sour. (Amazon, which requires and verifies credit card information from buyers and sellers, is one exception.) Worse, some auction sites do not prevent users from using anonymous email addresses. For example, Web-based email services, such as those provided by,, Yahoo! and Excite, may require a physical address for registration, but they don't verify the location, much less a user's identity.

4.. Check retail prices before bidding. Don't assume you'll get a great deal -- or even a good one -- just because an item is being auctioned online. Internet auctions have become such big business that some folks (and even stores) are making an online living by buying low and selling high. Check the price of the same or a similar item elsewhere. (Consider using Excite's product finder at to search online stores, classified ads and/or auction sites for comparable prices.) Don't forget the costs of shipping and insurance, which may make buying locally a better deal.
After you've figured out a fair price for the auction item, set the highest price you'll pay and stick to it. If you don't, you may get swept up in the heat of the bidding moment and end up paying higher than retail (perhaps as the victim of a clever shill).

5.. Watch for shills and shields. Spotting a shill on the Internet can be difficult, but it's not impossible. Do a search of a seller's past sales. Often the same shill will have bid on everything the seller has offered, to artificially jack up the price of the seller's offerings. The shill's email address may have the same domain name as the seller's (or an anonymous domain name) and the shill may have little or no feedback, or feedback that comes from the same seller or another shill with the same domain name.

To spot a shield, look for the same person in other auctions in which the winning bidder has participated. Has this person ever actually won one of the auctions, or has he withdrawn his bid at the last minute? Some sites allow sellers to cancel suspected shield bids. However, no one can spot every scamster, so the trick here is: don't get caught up in a bidding war.

6.. Contact the other party by phone. Always telephone the other party before completing the deal -- to confirm the details of what you've bought or sold, to verify the other party's phone number, and to discuss further details such as payment and shipping method. Buyers usually pay the shipping and insurance costs.

7.. Choose a safe payment and shipping method. Buyers should pay in a way that can be traced, such as with a credit card or check. (Never send cash, and never send payment to a P.O. box.) Sellers shouldn't ever send the product unless they've received the money -- money orders and cashier's checks are a sure thing, but if you accept personal checks, wait until the check clears before sending the merchandise to the buyer. Always use a traceable shipping method (such as FedEx, UPS or some types of U.S. Mail), and insist on shipping insurance. Since the buyer has to sign for the package, she can't say she never got it.One good solution for both parties is to use UPS's COD (collect on delivery) system, which costs about $5 per delivery (in addition to the regular shipping cost). The driver won't release the package until the buyer hands over a money order or cashier's check.
Even better, escrow services (which charge from 3% to 6% of the sale price) let the buyer inspect the goods for a short period of time. Here's how they work: The escrow company collects and verifies the payment from the buyer, then notifies the seller, who ships the item. If the buyer finds the merchandise satisfactory, the escrow company releases the funds to the seller. If not, the buyer sends the merchandise back to the seller. There are several online escrow companies. The most popular are i-Escrow at and TradeSafe at They're excellent choices for transactions over $250.

8.. Record every step of the purchase or sale. Print out all details of every transaction, including the original product description and the bidding history. Take pictures of items you send and receive. Also print all email correspondence and the contact information for each buyer or seller you deal with.

9.. Report any problems. Contacting the auction site's customer service or admin department. For complaints about shilling and bid shielding on eBay, post your suspicions at the eBay Detective Agency website (not affiliated with eBay) at If you're lucky, some good soul there may help you investigate your claim. In addition, you can register a complaint with the National Fraud Information Center (

10.. Use common sense. If something is too good to be true, it probably is. Watch out for fakes -- online auctions have been known to list counterfeit Beanie Babies, watches and handbags. For rare or collectible items, have the seller send you a signed, written statement describing the product and its value before you pay for it.
And now that we've done my best to scare you off, realize that the vast majority of online auction transactions are completed safely (including the ones we've tried), so if you follow these tips, you shouldn't get burned.

Copyright 2002 Nolo, Inc.
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