When Steve Weprin, a publishing production manager, was in the market for a new computer, he didn't head to his local computer store.
Instead, he logged onto Auction-Sales.com, an online auction site on the Internet that trades everything from computers to skin-care products. It turned out to be the right move: Weprin's bid was good enough to nab a complete system -- computer, printer, monitor and scanner.
Then he got a call from Auction-Sales. Even though his $151 bid for a Hewlett-Packard printer bested all others, it failed to meet what the company called the "reserve price," a predetermined amount that Auction-Sales.com would not go below.
Bottom line: If Weprin still wanted the printer, he'd have to pay an additional $45. He canceled his entire order.
"My beef is, why did you say I won the printer?" Weprin said. "My bid was posted as the winning bidder."
Buyer beware -- especially in cyberspace
Auction Sales didn't break any laws, since it listed the reserve price policy in the fine print. (The company also did not return phone calls seeking comment.)
Still, Weprin's experience illustrates an important rule for consumers looking to buy through online auctions -- make sure you know the rules before you buy.
For example, reserve prices are actually fairly common in online auctions, and if you're not willing to pay above a certain price, you should make sure you're aware of any reserves.
"These transactions are no different than any others in that respect. If the consumer doesn't understand what they're doing, it may be that they aren't reading all the information," said Eileen Harrington, director for marketing practices at the Federal Trade Commission. "The great thing about the Internet is it provides a great deal of information, and you can keep going back and looking at it."
While consumers are looking at the information, the FTC is looking at the auctions. The number of sites auctioning off products has exploded in recent months. Search services list pages of online auction houses specializing in everything from art to computers to Beanie Babies.
In fact, eBay Inc., one of the largest of the general auctioneers, was the fourth most popular shopping site in July, according to Media Metrix, a Web metering company.
Most of the problems don't involve the companies doing the selling, but the individual sellers, Harrington said.
Rule No. 1: Never pay cash
In March, the agency filed charges against a Florida man for selling computer systems to people through online auctions and then making off with their money.
The accused, Craig Hare, asked the victims to send him cash or cash equivalents, such as money orders or certified checks, before he sent them the systems.
And that violates the No. 1 rule the FTC warns consumers to follow -- always use credit cards for this type of transaction.
"We would recommend in any kind of distance transaction where the buyer and seller don't meet face to face that consumers purchase by credit card, because consumer's rights to dispute credit card transaction are well established," Harrington said.
"If you pay by cash, once the money is gone, it's gone and the only way you're going to get it back is by law enforcement [If you pay by credit card] and you never receive the goods or the goods were misrepresented, you don't have to pay at all."
Do's and don'ts
That may be feasible when a consumer is buying something from a company auctioning off surplus goods. But how do you handle it when the deal is between individuals?
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'We would recommend in any kind of distance transaction ... that consumers purchase by credit card, because consumer's rights to dispute credit card transaction are well established.' -- FTC's Eileen Harrington  |
"For higher-priced goods it's certainly an alternative, and it provides a level of comfort for people who aren't as comfortable sending cash and goods to somebody they haven't met," said Brad Handler, corporate counsel at eBay.
Something like an escrow service needs to be worked out between the buyer and the seller ahead of time, and that type of communication is encouraged by the FTC and by the auction houses.
"Make sure you know the item you're bidding on. Make sure the description is clear, and if it isn't, make sure you contact the seller, and get your questions answered before you bid," Handler said.
'Reputation to protect'
eBay, as with many auction houses, also offers a feedback service where users can make comments -- good or bad -- about people who trade there. Harrington recommends people check out feedback before they bid on products and use the service if they have any problems.
"Businesses have reputations to protect. If they constantly disappoint their customers, they lose that reputation," she said.
