New eBay Fraud Case Highlights Growing Problem

The case of a California man who allegedly raked in more than US$30,000 selling specialty sports cards on eBay that were never delivered is highlighting the issue of online fraud and the role of e-commerce companies.

While identity theft, phishing scams and spam have been the focus of security experts, the old fashioned fraud of not delivering product or delivering faulty product continues to grow.

Debbie Matties, a staff attorney with the Federal Trade Commission, told TechNewsWorld that the most recent information indicates online fraud is increasing. Matties reported that for 2003, the FTC received nearly 80,000 complaints about Internet auctions. While 15.4 percent of all complaints on fraud centered on Internet auctions, the online theft opportunity represented nearly half of all the Internet-related complaints in 2003, Matties said.

Crime with Cards

The issue was highlighted in this week’s grand jury indictment of 39-year-old Michael Gouveia, who is charged with mail fraud and wire fraud over his sale of collector sports cards that were never delivered.

The case, reportedly investigated by officials with a special computer hacking unit of the U.S. Attorney’s office and by postal inspectors, could land Gouveia behind bars for more than 20 years.

The non-delivery of items — also prominent in a Utah case involving laptop computers and a perpetrator who reportedly took in more than $1 million in 2003 — remains a persistent problem for online auctions, which have grown in both size and stature thanks to companies such as eBay and Amazon.

Payment Protection

The FTC’s Matties, who urged victims of any online fraud to visit the FTC Web site to report it, said consumers can protect themselves to some degree by conducting online transactions only with credit cards, which offer their own refunds and protections in cases of fraud.

“We find [fraud] most often happens when customers are using methods of payment that are harder to recover,” Matties said, referring to money transfers or check payments.

While she downplayed the reliability of online auctioneer profiles or feedback ratings, which could be impacted by associates of a fraudster, Matties also cautioned on the use of escrow or bonding intermediaries, which could be just as fraudulent as anyone else.

Culpability and Clickware

Rob Hammesfahr, author of the book @Risk: Internet and E-Commerce Insurance and Reinsurance Issues, said that while e-commerce companies may have been given some latitude with new technology a decade ago, there is a higher expectation today.

“The Internet has been used in volume for almost ten years,” Hammesfahr told TechNewsWorld. “These are not new instances or security threats. We’re all very dependent on computer systems and dependent on the intermediaries who are courting us to use them.”

Hammesfahr, a member attorney with the firm Cozen O’Connor, did indicate that the legal system has still not yet caught up with the digital world. He said online auctioneers such as eBay have managed to protect themselves from liability by crafting legally enforceable terms of use, also known as “clickware.”

“Clickware has generally been enforced by the courts,” Hammesfahr said, adding there is some controversy over whether such policies contradict consumer protection statutes. “This is a new area.”

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