The US Federal Trade Commission last year got more than 10,000 auction-fraud complaints about business transacted on the estimated 1,000 auction sites. With a growing number of Americans looking to trade their goods in the virtual tag sales, federal regulators fear the number and size of the frauds could grow sharply.
The FTC's consumer-protection bureau is leading the charge by aggregating fraud complaints from state officials, consumer groups and auction-site managers in a massive database for exclusive use by law-enforcement officials.
"We don't intend to let a handful of rogues erode consumer confidence in Internet commerce," said Jodie Bernstein, chief of the consumer-protection bureau. "We want Internet auction users and the online-auction industry to know that the e-con artists who capitalize on them are going, going, gone."
Pact with eBay
FTC officials also announced an agreement with eBay, by far the nation's largest online-auction host. The California company has pledged to forward fraud complaints it receives from its 10 million customers to the federal agency.
"We're going to streamline our fraud-reporting process," said eBay spokesman Kevin Pursglove. "The only way you can build an online e-commerce site is to build the trust of the users."
Pursglove said only about 0.5 percent of total transactions result in fraud complaints, but company officials are concerned that the continued growth of online fraud could scare consumers. He said the new relationship with the FTC should help shore up trust in e-commerce. "Now the information will be e-mailed directly to the FTC's database," he said.
Over the past three years, the FTC has pooled more than 300,000 complaints into its Sentinel database. Federal and local law-enforcement officials can comb through the complaints and track repeat offenders or focus on categories and patterns of fraud. FTC officials hope the new eBay relationship will spur other site operators to help law-enforcement officials.
Internal fraud control
"We want auction sites to develop a really meaningful fraud-prevention program that collects and analyzes their complaint data," said Eileen Harrington, a senior FTC attorney who heads the agency's marketing practices oversight group.
In addition to notifying federal officials, Harrington said, online-auction sites should develop strict internal fraud-control programs and encourage their customers to use online escrow services.
Of all the complaints from online-auction consumers, FTC officials said, the vast majority involves overt fraud. Most commonly, Harrington said, the schemes involve collecting money for goods that are never delivered or have been misrepresented through the auction process.
Consumer groups applauded the effort to focus on fraud initiated at online-auction sites. Susan Grant of the National Consumer League, a Washington nonprofit consumer-advocacy group, said the FTC's database has been an effective tool for fighting consumer fraud. Of all the online-auction complaints the group has passed along to the FTC, Grant said, 87 percent involve fraud.
The move to provide what the agency called "armchair armor" for Americans is part of the FTC's broader effort to lead the policing charge into cyberspace. FTC officials have been among the most active law-enforcement Web surfers recently, and the agency is at the center of the Internet-policy debate.
