In the previous two posts I took up the subjects of sniping (an inherent flaw of the Internet auction scene) and shilling (an illegal activity exploiting both anonimity and time limits). Today, as promised, I would like to cover non-paying high-bidders and outright fraud.

The problem of non-paying auction winners is multi-pronged and perhas it is best to number and list the problems it brings:
1. It wastes effort on the part of the seller to contact the buyer and to receive payment.
2. On eBay, the final value fee is paid to the auction site and the method to have it reimbursed involves step 1 above. Often the effort to go thru steps 1 and 2 are much more costly than simply losing the final value fee, as eBay knows very well.
3. If the seller is convinced that no payment will be received from the highest bidder, on eBay a second-chance option may be offered the second highest bidder, if indeed there is one. However, the second highest bidder often refuses to accept this offer due to four reasons:
3.1 (S)he has a change of heart, and what was bid during the heat of the auction now seems too high.
3.2 Perhaps there was something wrong with the item such that the highest bidder refused it.
3.3 If there were a good number of bidders, the item was not inexpensive, and/or the seller has only a limited number of feedbacks, perhaps the seller is offering non-existent extras to make a killing, and to return under a different alias, or just to temporarily satisfy a habit. I have seen a person do this for a $25 item.
3.4 The highest bidder was perhaps a shill with the purpose of exposing everyone else's bids. Now the seller does not even bother with the shill, but tries to hit the exposed maximum bids.
4. When the seller gives up on the highest bidder, he loses at least the difference between the two highest bids. If there were only one bidder, he loses more.
5. One other fraudulent practice is for a buyer to charge back Paypal credit card payments after receiving item, but this is not inherently limited to the auction scene. However, my personal experience has been that Paypal is not particularly interested in protecting its customers' rights in disputes.

Clearly items 3.3 and 3.4 fall into the realm of outright fraud. While there is no protection for the seller from items 1, 2, and 4, the buyer can protect her(him)self from item 3 by refusing second-chance offers. This, of course, hurts honest sellers as a result.

Another fraudulent practice is obviously where the anonymous seller does not send the item in question (sometimes claiming it was sent), sends another item instead, or sends a bad substitute. This is again an inherent flaw that exploits the anonimity of the Internet auction scene. Very few sellers would resort to such tactics if their business and contact information were open even if they did not have long term plans of staying in business.

Finally, it is no secret that eBay, and other auction sites, have been used as clearinghouses for stolen items. It is easy for a thief to make of use of identity theft in order to register and sell stolen items for a brief while, then to disappear before the items are discovered to have been stolen, if ever. Some even dare to use their own IDs wih the assumption that they will not get caught. This is why open seller information is essential if fraud is to be minimized over Internet selling. Fraudulent sellers not only hurt the buyers, but they also hurt honest sellers due to the suspicious environment they help create.

In my next post I will discuss fees and time management.