eBay auction

eBay Inc. (NASDAQ: EBAY) is an American Internet company that manages eBay.com, an online auction and shopping website where people and businesses buy and sell goods and services worldwide. In addition to its original U.S. website, eBay has established localized websites in several other countries. eBay Inc also owns PayPal, Skype, and other businesses.


 

• 1Controversy and criticisms
• 2Intellectual property in auctions
• 3eBay customer support
• 4Other eBay controversies
• 5References

[top]Controversy and criticisms

eBay has its share of controversy, ranging from its privacy policy (eBay typically turns over user information to law enforcement without a subpoena to well-publicized seller fraud. eBay claims that their data shows that less than .01% of all transactions result in a confirmed case of fraud. However, eBay states that their stated fraud statistic both undercounts and overcounts fraud.


Fraud

One mechanism eBay uses to combat fraud is its feedback system. After every transaction both the buyer and seller have the option of rating each other. They can give a "positive", "negative", or "neutral" rating and leave a comment no longer than 80 characters. So if a buyer has problems, he or she can rate the seller "negative" and leave a comment such as "never received product".

Weaknesses of the feedback system include:

• Small and large transactions carry the same weight in the feedback summary. It is therefore easy for a dishonest user to initially build up a deceptive positive rating by buying or selling a number of very low value items, such as e-books, recipes, etc., then subsequently switching to fraud.
• A user may be reluctant to leave honest feedback out of fear of negative retaliatory feedback (including "negative" in retaliation for "neutral").
• Users and generators of feedback may have different ideas about what it means. Ebay offers virtually no guidelines.
• Feedback and responses to feedback are allotted only 80 characters each. This can prevent users from being able to fully list valid complaints.
• Accounts with good feedback can be hijacked by phishing giving a con artist the appearance of an excellent trading history. This problem is particularly prevalent in certain areas, such as digital cameras.
• Although Ebay protects sellers from getting a negative feedback from a deadbeat buyer (once the non-paying bidder case is decided in the seller's favor), they do not offer the same protection for a buyer who gets a deadbeat seller.

eBay acknowledges weaknesses in its feedback system on its own policy pages, noting several of the above points.

When a user feels that a seller or buyer has been dishonest, a dispute can be filed with eBay. An eBay account (whether seller, buyer or both) may be suspended if there are too many complaints against the account holder.

Many complaints have been made about eBay's system of dealing with fraud, leading to its being featured on the British consumer rights television program Watchdog. It is also regularly featured in The Daily Mirror's Consumer Awareness page. The complaints are generally that eBay sometimes fails to respond when a claim is made, and since eBay makes its money on commissions from listings and sales may not be in eBay's interest to take action against large sellers.

Frauds that can be committed by sellers include:

• Receiving payment and not shipping merchandise
• Shipping items other than those described
• Giving a deliberately misleading description
• Knowingly and deliberately shipping faulty merchandise
• Counterfeit or bootleg merchandise
• Knowingly selling stolen goods
• Inflating total bid amounts by bidding on their own auction with "shill" account(s), either the seller under an alternate account or another person in collusion with the seller. Shill bidding is prohibited by eBay and, in at least one high-profile case involving Kenneth Walton (and his accomplices Ken Fetterman and Scott Beach) has been prosecuted by the federal government as criminal fraud.

Frauds committed by buyers include:

• PayPal fraud: Filing false shipping damage claim with the shipping company and with PayPal.
• Credit card fraud, in the form of both stolen credit cards and fraudulent chargebacks.
• Receiving merchandise and claiming otherwise
• Returning items other than received
• The buyer sends a forged payment-service E-mail which states that the buyer has made a payment to the seller's account. An unsuspecting seller may ship the item before realizing the E-mail was forged.

Other controversial practices of users

• Sellers of inexpensive items may benefit from inflating the shipping cost while lowering the starting price for their auctions, because some buyers overlook the shipping cost when calculating the amount they are willing to spend. Since eBay charges their fees based on final sales price without including shipping, this allows sellers to reduce the amount they pay eBay in fees (and also allows buyers to reduce or avoid import fees and sales taxes). This is called "fee avoidance", and is prohibited by eBay policy, as are excessive shipping and handling charges. A danger to the buyer in such cases is that in the event of defective merchandise, the seller may claim to have met his refund obligations by returning only the minimal purchase price and not the shipping costs.
  
• Sellers sometimes charge fees for use of PayPal as well. Although this is officially banned by eBay and PayPal (except in the UK) and is against some local laws as well as violating merchant agreements with Visa, Mastercard and Discover (again, except in the UK), eBay does not police for this and will only look at it if the auction is reported. Therefore inexperienced users often wind up paying these illegal and unenforceable fees.
  
• Auction sniping is the process of watching a timed online auction, and placing a winning bid at the last possible moment (often literally seconds before the end of the auction), giving the other bidders no time to outbid the sniper. Some bidders do this manually, and others use online services and software designed for the purpose. While disliked by many eBay users, sniping is not against eBay rules as users are expected to put in their maximum bid from the start and the system will automatically bid up on their behalf.
  
• Burying shipping charges or undesirable terms in a large amount of text.

[top]Intellectual property in auctions

Holders of intellectual property rights, have claimed that eBay profits from the infringement of intellectual property rights. eBay has responded by creating the Verified Rights Owner (VeRO) program, which provides to rightsholders expedited auction takedowns and private information on eBay users, but has likewise been criticized.

In June 2004 the jeweler Tiffany & Co. sued eBay claiming that eBay profits from the sale of counterfeit Tiffany products. As of July 2006, a trial date has not been set.

In September 2005, eBay's privacy practices relating to its VeRO program came under scrutiny when WNDU-TV reported that the Embroidery Software Protection Coalition was accusing United States buyers, identified by eBay, of copyright infringement, and demanding monetary settlements. eBay's privacy policy warns that eBay may disclose personal information on the request of any VeRO rightsholder investigating illegal activity; in comparison, competing service Yahoo! Auctions may disclose personal information in response to a subpoena or court order. Although, according to a University of Notre Dame law professor, there is no legal basis, in the United States, for copyright infringement claims against buyers, eBay's VeRO program may have allowed the ESPC to obtain private information without judicial oversight.

Some manufacturers have abused eBay's VeRo program, through which copyright and trademark owners can quickly protect their rights, by seeking to prevent all sales of their products on eBay.

In November 2006, a U.K. High Court ruled that a VeRO rightsholder's takedown request to eBay constituted a legal threat under design patent law. Since groundless legal threats under design patent law are unlawful, the ruling holds that groundless VeRO takedown requests based on design patents are also unlawful. Further, the text of the ruling appears critical of the VeRO program in general: "It is entirely wrong for owners of intellectual property rights to attempt to assert them without litigation, or without the threat of litigation, in reply."

[top]eBay customer support

A source of frustration for some eBay users is that due to the company's size, it offers no customer support by phone, instead referring all ordinary members to its online help features. Apart from a library of self-help resources, these features consist mainly of e-mail contact forms and "Live Help," which lets users chat with customer service representatives via instant messaging. In fact, most visitors to the eBay site will not find any company phone number listed at all. In addition, only registered users can contact eBay customer support via email through the site; those who merely wish to contact eBay have to sign up for an account first.

eBay does, in fact, have a phone support department, but that service is limited to members of the rank "Silver PowerSeller" and above, the company's term for members who sell at least $3,000 worth of goods per month on the site. The phone number for that service is not published, although there have been reports on eBay's own forums and weblogs that customers who manage to obtain the number through legal documents are rudely replied and told to use the online service instead.

[top]Other eBay controversies

Other notable controversies involving eBay include:

In May 2000, eBay seller Kenneth Walton auctioned an oil painting on eBay for $135,805, due to speculation that it might be the work of California modernist Richard Diebenkorn. Walton pretended to know nothing about art and claimed to be surprised by the price the painting fetched, and the auction attracted international media attention. In several investigative reports by The New York Times, it was revealed that Walton was in fact an experienced eBay art dealer with several unhappy customers, and that he had colluded with two other eBay sellers to bid up each other's auctions. The Times described this as a "shill bidding ring". Walton and his cohorts were banned from eBay and eventually convicted of fraud by the federal government in the first ever prosecution for shill bidding on eBay.

On 28 May 2003, a U.S. District Court jury found eBay guilty of willful patent infringement and ordered the company to pay USD $35 million in damages. The plaintiff was MercExchange, which had accused eBay in 2000 of infringing on three patents (one of which is used in eBay's "Buy It Now" feature for fixed-price sales, 30 percent of eBay's business and growing). The decision was appealed to the U.S. Court of Appeals for the Federal Circuit (CAFC). The CAFC affirmed the judgment of willful infringement, and reversed the lower court and granted a permanent injunction. eBay appealed the permanent injunction to the U.S. Supreme Court, which on May 15, 2006 found an injunction is not required nor automatic in this or any patent case where guilt has been established. The case was sent back to the Virginia district court for consideration of the injunction and a trial on another MercExchange patent the inventor claims covers the remaining 70 percent of eBay's business model. This case has been particularly controversial since the patents involved are considered to be business method patents.

On 28 July 2003, eBay and its subsidiary PayPal agreed to pay a $10 million fine to settle allegations that they aided illegal offshore and online gambling. According to the settlement, PayPal between mid-2000 and November 2002 transmitted money in violation of various U.S. federal and state online gambling laws. eBay's announcement of its acquisition of PayPal in early July said that PayPal would begin the process of exiting this market, and was already doing so when the ruling occurred. These offenses occurred prior to eBay's purchase of PayPal.

On 17 December 2004, Avnish Bajaj, CEO of eBay's Indian subsidiary was arrested after a video clip showing oral sex between two Indian students was sold online. The company denied knowing the content of what they were selling (because it is a venue, not a retailer) and removed the offensive material as soon as they became aware of it. The Indian government attempted to make the case that Bajaj had violated India's IT Act, which forbids "publishing, transmitting or causing to publish" obscene material, even though the actual material was never published on Baazee's servers. eBay supported Baazee's defense.

On 14 June 2005, eBay removed auction listings for originally free tickets to the Live 8 charity auction amid hundreds of complaints about such auctions. Normally, selling of charity tickets is legal under United Kingdom law.

In 2005, the Australian National Rugby League tried unsuccessfully to persuade eBay to prevent scalpers from selling Grand Final tickets online.

On 18 December 2006 eBay won a court case against Creative Festival Entertainment in Australia, allowing sellers to on-sell (or scalp) tickets for the Big Day Out concert. The case was won due to the big day out organizers not being able to fully enforce an anti-scalping policy printed on the back of the tickets. The presiding judge described the decision as "unfortunate".

Some have criticized the emphasis eBay places on its subsidiary PayPal as a method of accepting payments. eBay discourages sellers from using independent money-wiring companies such as Western Union and MoneyGram (Moneybookers is now allowed instead), stating that it prohibits or discourages certain forms of payment in order to reduce fraud. On the U.S. eBay, while sellers may accept such payments, they are prohibited from advertising them as a payment option. A similar policy applies to mailing cash as a payment option. Certain non-U.S. branches of eBay allow sellers to advertise wire transfers or mailed cash as payment options, provided such methods are not the only payment options the seller accepts.

In late 2006 eBay effected a policy a change which showed less information about sellers once auctions reached a certain value. This policy has been criticised for making shill bidding much harder to detect, to the potential disadvantage of buyers and significant advantage to unethical sellers who may artificially inflate the price of an auction. An investigation by The Sunday Times in January 2007 uncovered substantial evidence of shill bidding on eBay.

[top]References

eBay feedback changes

Source: eBay Newsletter (Wed 1/30/08)

1. Buyers will only be able to receive positive Feedback.
2. Positive repeat customer Feedback will count and Feedback more than 12 months old won't.
3. Negative and neutral Feedback left by the buyer will be removed for transactions in which a buyer doesn't respond to the Unpaid Item (UPI) or if the member is suspended.

Other links

Countries with localized eBay websites include Australia, Austria, Belgium, Canada, China, France, Germany, Hong Kong, India, Ireland, Italy, Netherlands, New Zealand, Poland, Philippines, Singapore, South Korea, Spain, Sweden, Switzerland, Taiwan, and the United Kingdom

Chat with Rob Chesnut, Vice President of eBay's Trust & Safety Department

eBay Feedback: Fatally Flawed?

San Francisco Bay Guardian - Bias on eBay

eBay.com Feeback Policies - Overview

Circumventing Fees eBay. Retrieved on 2006-06-11
Excessive Shipping & Handling eBay. Retrieved on 2006-06-11

Tiffany sues eBay, says fake items sold on Web site, USA Today, March 22, 2004

eBay Privacy Policy Retrieved on 2007-01-10

Design right threat fails to stop eBay sales, 2006-11-14

eBay's Superb Customer Service (2006-09-19) Retrieved on 2007-06-30

Hafner, Katie (2004-12-30). Customer Service: The Hunt for a Human The New York Times. Retrieved on 2007-06-30

Hafner, Katie (2005-01-04). Hunting a rare breed: Human online support The New York Times. Retrieved on 2007-06-30

EBAY INC. ET AL. v. MERCEXCHANGE, L. L. C. (PDF) US Supreme Court. Retrieved on 2006-06-17

Federal Court decision on Big Day Out tickets eBay. Retrieved on 2007-02-05

Accepted Payments Policy eBay. Retrieved on 2006-10-20

Ebay UK payment methods allowed eBay. Retrieved on 2006-10-23

Sunday Times Reports Widespread Shill Bidding on eBay


eBay policies pages

Tobacco
Alcohol Policy
Drugs and Drug Paraphernalia
Offensive Material Policy
Bootleg Recordings
Firearms, Weapons and Knives
Used Clothing
Teacher's Edition Textbooks
Human Remains and Body Parts Policy
Animals and Wildlife Products
Digitally Delivered Goods
eBay Help: Prohibited and Restricted Items and Services



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