U.S. Consults Internet Giants on Web Auction Fraud

U.S. Congressional lawmakers in the House Energy and Commerce Committee are calling upon some of the Internet’s biggest e-tailers to help prevent online auction fraud.

In a letter sent to Web giants Amazon.com (Nasdaq: AMZN), Yahoo! (Nasdaq: YHOO) and eBay (Nasdaq: EBAY) on Monday, committee chairman Billy Tauzin (R-Louisiana) asked the chief executive officers of each company to analyze their auction rules and determine whether their practices encourage, discourage or fail to affect fraudulent behavior.

Tauzin stated that the committee is particularly interested in discovering what each company is doing to combat shilling: self-bidding to drive up prices for the seller.

“We request your assistance in determining the causes of online auctionfraud as well as solutions to help protect consumers and boost confidence ine-commerce,” Tauzin said in the letter. “We would be interested in specificrecommendations.”

eBay Steps Up

eBay spokesperson Kevin Pursglove told the E-Commerce Times that eBay will provide the requested information to the committee over the next five to six weeks.

“We’ll essentially tell them some of the steps eBay has taken over the years to reduce fraud and we’ll be happy to cooperate in any way possible,” Pursglove said. “This is another good opportunity to talk to a member of Congress about some of the issues we’ve raised over the last couple of years.”

Without a Cause?

Tauzin’s letter cited a recent study revealing that from May to November 2000, auction fraud accounted for 64.1 percent of Internet fraudcomplaints filed with the Internet Fraud Complaint Center.

According to a report released in March by the U.S. Federal Bureau of Investigation (FBI) and the National White Collar Crime Center, the No. 1 scam on the Internet is Web auction fraud.

Tauzin said the current lack of analysis regarding the causes of online auction fraud is a major factor behind the committee’s request.

Pop Quiz

The committee is requesting that Amazon, eBay and Yahoo! answer a series of ninequestions relating to online auction fraud. The questions range from identifying the types of fraud committed in online auctions to identifying the auction rules that promote fraudulent behavior.

For example, the letter asked each company, “Do auction rules that allow for changes in identity or the maintenance of multiple identities facilitate fraudulent practices?”

The letter also asked the companies to identify any state commerce laws or regulations that interfere with the company’s ability to combat auction fraud.

We’re No. 1

The Internet Fraud Complaint Center is not the only agency to list auction fraud as the No. 1 online consumer complaint. In October, the U.S. Federal Trade Commission (FTC) said that auction fraud topped the list of complaints received through its Consumer Sentinel database.

Additionally, in January, eMarketer released a report showing that auctionfraud accounts for 87 percent of all online complaints.

However, Jupiter Media Metrix reported earlier this month that the frequency of online credit card fraud has been exaggerated. Jupiter’s report said that the attention focused on online security incidents has led consumers to believe that fraud is approximately 12 times more prevalent on the Internet than off.