EBAY Big buys mean bigger risks for online auction shoppers

Padded feedback ratings and the high costs of lawsuits reinforce the old adage: Let the buyer beware.
KNIGHT RIDDER NEWSPAPERS
KANSAS CITY, Mo. -- Marge and Paul Meyer were elated when they won the sporty 1999 Volkswagen Cabrio convertible in their first eBay Motors Internet auction in late June.
After all, the $7,000 price seemed a bargain for this cream puff, advertised in "perfect driving condition" with a host of power options, including convertible top and heated seats. "The overall condition of this convertible is GREAT, so BID WITH CONFIDENCE!" the auction listing boasted.
But the car that arrived at the Meyers' Kirkwood, Mo., home was something different. For one thing, it did not have a power convertible top or heated seats. What it did have was a cracked windshield, a sick engine, bumper damage and a mildew odor "that hit you like a ton of bricks," Marge Meyer said.
The couple has paid more than $1,900 on body and engine repair, not including what it will cost to get rid of the smell.
Consumer experts say the Meyers' experience is much like that of others who have been burned in their naive efforts to get great car deals through Internet auctions. While the vast majority of auction sales are legitimate, the anonymity of the Internet often makes it hard to distinguish a great deal from a lemon that has been damaged or wrecked.
EBay Motors will not reveal how many auto complaints it gets. Spokesman Hani Durzy said confirmed cases of fraud occur in less than 1/100th of 1 percent of eBay auctions, which recorded 8 million bids a day this summer on everything from cars to antique lamps.
"Are people bidding and doing it safely each and every day? Yes, they are," Durzy said.
Low estimates
But as Internet auto auctions grow in popularity, so do the chances to get suckered.
EBay Motors is now the largest national auction marketplace for used cars. More than 450,000 cars were sold on eBay Motors in 2003, reflecting trades upward of $9.8 billion -- making it the largest segment of the vast online auction's business. The second-biggest eBay auction category is consumer electronics, with $2.5 billion in trades in 2003.
Consumer advocates contend eBay's fraud estimates may be low, because one government study suggests one-third of all online frauds never get reported. In addition, eBay's statistics, which eBay does not detail, refer to confirmed fraud cases rather than complaints.
The National Fraud Information Center's Internet Fraud Watch, which is operated by the National Consumers League, one of the nation's oldest consumer groups, has received complaints from people who buy cars that either do not exist or are delivered without titles or have problems that were not disclosed, said center director Susan Grant.
But Grant said Fraud Watch's ability to monitor eBay complaints was hampered last year when eBay removed a link to its site. Fraud Watch received 3,110 online auction complaints (not broken out by category) in the first six months of this year -- just one-sixth the number it received before, she said.
Limited liability
The Federal Trade Commission received more than 79,000 Internet auction fraud complaints of all types in 2003, the highest category of Internet complaints.
One reason it is hard to measure problems is because the government limited the liability of online auctions in the 1990s when it deregulated telecommunications and encouraged Internet commerce.
As a result, eBay and other Internet auctions are treated as huge flea markets that provide a place for individuals or entrepreneurs to sell their wares.
Durzy said eBay Motors offers other protections, including a buyer protection plan, a feedback process in which both buyers and sellers can express both kudos and complaints about a sale and an affiliation with a mediation system.
"We can't tell people at what point they can trust someone. All we can do is give people the tools they need to get to that point themselves," Durzy said.
Even so, investigators say it is hard for consumers to be alert to misrepresentations before they happen.
Marge Meyer, the Kirkwood consumer who bought the car with the cracked windshield and bad smells, said eBay protections did not keep her online experience from becoming a nightmare.
"They make it seem a safe bet," she said. "Nothing could be further from the truth."
Padded ratings
Meyer, who has purchased smaller items on eBay, said none of the Cabrio's problems were cited in the Internet auction listing. She later found out a prior owner had filed an insurance claim for $1,187 in 2003.
It took 30 days for the seller to ship the car and title to Missouri, she said, and then more time trying to settle her complaints with the seller. When that failed, she tried to use eBay Motors' buyer protection plan in which eBay provides up to 50 percent of the purchase price of a car if fraud is proved.
But eBay originally denied her complaint on grounds it was filed beyond the 35-day limit, even though eBay encourages customers to first try to work out problems with the seller.
Steamed by her online auction experience, Meyer and other individual consumers are trying to bring attention to bad dealings on the Web. Among their complaints is that Internet auctions look the other way when online sellers confuse or mislead consumers.
For example, they point out how affiliated or friendly online car dealers will show up on each other's auction sites and leave glowing comments to inflate each other's feedback ratings.
Investigators say this practice of "padding" feedback can lull buyers into a false sense of security because the ratings are touted by online auctions as the best way to judge a seller's reputation.
SquareTrade
But feedback ratings are vulnerable to changes in other ways. For example, eBay and other auctions encourage buyers and sellers to work out problems through mediation. EBay contracts with SquareTrade, a prominent online mediator that claims to be highly successful in resolving disputes.
SquareTrade allows sellers who commit to mediation to display a special logo.
"While participation in the service is voluntary, SquareTrade's Seal Members have pre-committed to participate to distinguish themselves as more professional sellers," President and Chief Executive Officer Steve Abernethy said in a statement.
However, the seller is not bound by mediation and can walk away at any time.
EBay said it does not require consumers to use SquareTrade and only offers access to mediation to raise the comfort level of consumers who use eBay.