Had it been real, the bid would have set a record for the sale of a domain name.
But it wasn't. The sellers -- Canadian computer consultant Peter de Jager and Houston marketing firm Tenagra Group -- are back to where they started. The domain name is still for sale -- privately, however.
And now Mr. De Jager is questioning the way eBay runs its system, at least when it comes to high-priced, high-profile auctions. "Not all bids warrant it, but for some of the larger items, they should require a secure deposit, just like a regular auction where they take a credit-card imprint," he says. "If you make a bid, you're going to be paying for that bid. If it's a hoax, and they've got someone else's credit card, it's fraud. You've upped the consequences."
He isn't alone in that view. Canadian accountant Andre Choquette put a domain name up for sale on eBay Monday. "Within two hours, we had an US$8 million bid," he says. But hearing about Mr. De Jager's experience, he quickly e-mailed the bidder that a law firm would follow up to close the deal. "Within five minutes, a retraction occurred," he says. "We are now authenticating every bid that comes in."
Responsibility placed on sellers
That is what eBay recommends, says Kevin Pursglove, a spokesman for the San Jose, Calif., company. "Occasionally, individual auctions that draw a high level of attention draw a prank bid and become a very severe inconvenience to our users," he says. In such cases, the company advises the sellers "to independently establish a bidder-verification process so they can check the legitimacy of bids within a specific time frame." Sales of pricey art and antiques auctioned on the site are vetted that way and don't proceed without a credit card.
Jonathan Barsade, an Internet expert and senior counsel with Aiken Gump Strauss Hauer & Feld, says, "EBay can't assume responsibility for everything that's posted or they'd grind to a halt." About three million items are listed for auction daily. He adds: "The problem with transactions on the Net is people treat them like Monopoly, but the Net is not a board game."
But some observers say hoaxes point to eBay's shortcomings. "EBay's whole focus has been on the consumer marketplace, and that's where they're best suited," says Andre Neumann-Loreck, chief operating officer at Auctionwatch.com (www.Auctionwatch.com), a Web site that provides services to online auctioneers. "In a business-to-business site, you'd expect them to prequalify buyers. Businesses can't afford to waste time with companies that aren't serious."
Mr. Pursglove says that as eBay grows, "many of our policies are evolving. Our efforts to help our sellers sell is an ongoing process." But, "our user agreement makes clear it is the seller's responsibility to manage his or her auction." Ebay currently has several safeguards to protect buyers and sellers: A feedback process allows them to rate their buying and selling experience, which could steer sellers away from potentially dishonest bidders or sellers. An escrow service can be used to hold payment until a purchase is approved; it also will reimburse buyers as much as US$200 (minus a US$25 deductible) for items never received.
Tenegra's chief executive, Cliff Kurtzman, says he became suspicious New Year's Eve, when bidding on the domain name suddenly quadrupled to US$10 million. Says Mr. Pursglove of eBay: "When Tenegra contacted us and asked us to look into it, we attempted to contact the highest bidder and got no response. We came to the conclusion that it was a hoax."
The pranksters, who flagrantly violated eBay's honor system, will be barred from the site, he says, noting that in such cases, sellers can seek recourse in the courts. Mr. De Jager says he is too busy for that.
