eBay's Fraud Detection System Asleep at the Wheel?
By Ina & David Steiner
On February 19, a member of AuctionWatch posted a warning on the Site's discussion board concerning a suspicious eBay seller, who we'll refer to as "Mr. X." The post generated much discussion about the intentions of Mr. X. Was he a fraudulent seller, or an inexperienced Newbie who was getting in over his head?
AuctionWatch posters pointed to several "red flags" that might have indicated that the eBay seller had less than honorable intentions:
1) Mr. X was a new seller (he registered on January 8), yet he had listed thousands of items, including high-priced items.
2) Mr. X put up nearly 2,500 auctions in the first month-and-a-half as a seller, totaling nearly $250,000. (Not something a bidder usually stops to look at, but certainly something one would expect to be flagged by eBay on a brand new account.)
3) Mr. X's inital positive feedback came from low-end items ($5 DVDs), but he soon started selling high-end electronics. Fraudulent sellers may build up positive feedback quickly on low-priced items, then switch to high-priced items.
4) Mr. X was selling at prices far below retail; a Poster in AuctionWatch was suspicious as to how this was possible.
5) For high-end electronics items, Mr. X stated in his terms that items would be shipped on 2/28/03 and received by 3/10/03. Some speculated that this would give the seller time to collect a large number of payment before the negative feedbacks started rolling in.
6) Mr. X initially violated a PayPal policy, lending credence to the Poster's suspicions that this was someone new to eBay, not an experienced seller using a new User ID. (Mr. X originally charged an extra 5% for accepting PayPal.)
On February 24th, the last of Mr. X's auctions ended and no more auctions were listed by him. By March 3rd, negative feedback began piling up for the eBay seller - Mr. X received 30 Negative Feedback from unhappy eBay buyers in the 3 days before he was finally suspended by eBay.
Much of the feedback included comments such as, "SCAM!!! GOING THROUGH LAW ENFORCEMENT CHANNELS" and "NO ITEMS RECIECED,DOESNT RESPOND TO EMAILS(BUT THEY DO CASH YOUR CHECK)" Once an account has been suspended by eBay, it's impossible for trading partners to leave new feedback.
On March 5, eBay suspended Mr. X's account - 10 days after all of his auctions had completed.
What took eBay so long?
The AuctionWatch thread provides documentation indicating that eBay's anti-fraud program may have serious holes. eBay took no action on Mr. X's account until almost 2 weeks after a casual, albeit experienced, eBay member spotted and reported suspicious activity. Further, on February 21, the original Poster commented that he had talked to an employee of eBay on their Live Chat feature to "make them aware of the situation."
eBay would not comment on the specifics of the case, citing the privacy of its users. eBay also refrains from giving details of its fraud detection software.
While eBay spokesperson Kevin Pursglove said he could not share information about Mr. X's account or the reason for his NARU status, he did say that certain conclusions could be drawn from looking at the seller's feedback. Pursglove also indicated that he would let AuctionBytes know if there were inquiries from law enforcement about the account. (We spoke with Pursglove shortly before press time, and will follow up with any additional information he provides.)
Rob Chestnut, eBay's Vice President of eBay's Trust & Safety Department, participated in a Live Chat on eBay last August. When asked how eBay was using its new FADE system to combat fraud, Chestnut said he wouldn't answer: "On the assumption that the bad guys can sit in chat sessions along with good users, I don't want to disclose how our systems work publicly. I can tell you though that we're very excited about the results we're getting."
The full story behind Mr. X. is not yet known, but this case points to the fact that users should not rely solely on eBay for protection against fraudulent sellers. As eBay's Chestnut said in August, "it is important for bidders to trade smart, and protect themselves. They can do this by carefully checking the feedback of the seller, paying using safe payment methods like credit cards, using escrow in higher dollar transactions, and asking the seller questions if they have concerns before paying."
About the author:
Ina and David Steiner are publishers of EcommerceBytes.com and have been writing about ecommerce since 1999.
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