Auction is defined as market mechanism by which buyers make bids and sellers place offers. It is characterized by the competitive and dynamic nature by which the final price is reached. Auctions can rapidly disposal of items that needs liquidation or a quick sale, they offer trading opportunities for both buyers and sellers that are not available in conventional channels and they ensure cautious execution of contracts.
Electronic auction (E-Auction) is auctions conducted online. For example: www.lelong.com.my. www.ebay.com.my
There are several types of e-auction fraud as follow:
- Bid shielding
- Fake photos and misleading descriptions
- Improper grading techniques
- Bid siphoning
- Selling reproductions as originals
- Failure to pay
- Failure to ship merchandise
- Loss and damage claims
- Fake escrow services
- Other frauds
Protecting against E-Auction Fraud
- User identify verification
- Verify IC number, driver’s license number, and data of birth.
- Authentication services
- To determine whether an item is genuine and described appropriately.
- Grading services
- To determine the physical condition of an item.
- Feedback forum
- Allows buyers and sellers to build up their online trading reputations. Buyers and sellers provide comments on their experiences with the other parties.
- Insurance policy
- Some sites provide insurance on auction frauds but extra cost is incurred.
- Escrow services
- Both sellers and buyers in a deal are protected with a independent third party. This third party will also hold onto the money form buyer until confirmation is received from buyer to pay seller (after confirmation of goods received).
- Nonpayment punishment
- Friendly warning for first-time offense, sterner warning for second-time offense, a 30 day suspension for a third offense, an indefinite suspension for a fourth offense.
- Appraisal services
- Expert assessment of authenticity and condition and reviewing what comparable items have sold for in the marketplace.
- Physical inspection
- Can eliminate many problems especially for collectors’ items.
- Item verification
- Neutral third parties will evaluate and identify an item through a variety of means.
- Other security services
- Dispute resolution between a buyer and seller.