Internet auction fraud accounts for 87 percent of all incidents of onlinecrime, according to a new study released Tuesday by eMarketer.
As part of its “ePrivacy & Security Report,” eMarketer also found that morethan 34 percent of Internet users have been targeted by a Web-based privacyor security breach. Moreover, the study estimates that the averagefraudulent transaction costs roughly US$600, which outpaces most researchestimates of average online retail spending.
eMarketer said that half of all users falling victim to onlinefraud are in either the Generation X or the baby boomer bracket,two of the most tech-savvy Net populations.
“For most Internet users, the protection of personal information is a realand valid concern,” said eMarketer analyst Rob Janes. “Offerings of freeservices and promises of wealth lure participants into binding contracts orunbelievably great deals enticing consumers to buy products that neverarrive or don’t meet the quality promised.”
Credit Cards Safe?
eMarketer also found that the rate of credit card fraud as a percentage ofall credit card transactions is extremely low. Citing data from Visa andMastercard, the report said 22 million fraudulent creditcard transactions occurred either online or offline in 1999, out of an estimated total of 25 billion transactions.
Despite these figures, eMarketer said that the majority of Internet userswho do not make purchases online are afraid of hidden costs, leery of fraudand question companies’ ethics. The report said that consumer fears resultedin roughly $2.8 billion in lost sales in 1999 and could top $18 billion in2002.
Although they spur only a fraction of the complaints for auction fraud, theother categories of online crimes cited by eMarketer were generalmerchandise sales, Internet access services, computer equipment service, andwork-at-home scams.
Net Auctions Up
Recent studies have forecasted that consumer-to-consumer onlineauction sales will spike to over $15 billion from the $3 billion racked upin 1999. eMarketer said that these figures naturally open the door for aconcurrent increase in online criminal activities.
“Given that 16 million unique users may visit eBay in a given month, it’s nosurprise that auctions consistently rank as the most fraud-prone onlineactivity,” said Janes.
In recent weeks, eBay — which was the 13th most visited Web site accordingto the latest Media Metrix statistics — has taken steps to crack down ondeal scams. At the end of December, the online auction giant said it wouldbegin enforcing a prohibition on offline deals between members, saying that user complaints sparked its decision to take action since buyers who conductbusiness outside of eBay are not protected by the company’s insuranceprogram or feedback system.
Under the new policy, sellers who use their eBay connections to conductbusiness offline will first be warned and then suspended from the site.Prohibited conduct includes offering to sell a listed item outside of eBayto avoid paying a listing fee, as well as offering to sell users merchandisesimilar to what they are bidding on at eBay.
Several recent studies dovetail with the eMarketer report. A study issued inNovember by the National Consumers League (NCL) found that Internet auctionsgenerate the largest number of online fraud complaints.
Similarly, the U.S. Federal Trade Commission cited auction fraud as the No. 1 online scam, with the number of reported cases mushrooming from 100 to1997 to a whopping 10,000 in 1999.
On a positive note, the NCL said that incidents of fraud in online auctionsmay be decreasing. According to NCL, 79 percent of complaints filed in 2000 were related to auction fraud, as compared to 87 percent in 1999.