Fraud On eBay – A Review Of The Stamp Category

According to a CNET report of June 5, 2002 , “eBay Chief Executive Meg Whitman told shareholders that technology has already helped eBay reduce its fraudulent sales rate, which she said is at less than one-tenth of 1 percent. Whitman said the software's ability to spot criminals will get better as the database of fraudulent sales grows.”

There are different definitions of fraud. Maybe eBay defines “fraud” as something they actually catch and stop. If such is the case, I can believe that eBay is catching only one-tenth of one percent of sales as fraudulent. The actual fraud rate, using a more standard definition of fraud, is probably significantly higher.

Fraud is rampant in the collectible categories on eBay. Some of the frauds being committed, such as the sale of fakes and forgeries as genuine, cannot be determined using only high-tech solutions. Although it is sometimes not possible to determine if a listing is accurate, it is often easy to be certain that a listing is fraudulent. Yet eBay's "SafeHarbor" is not responsive to complaints about fraudulent descriptions.

In the stamp category on eBay, which is the area I am most familiar with, I estimate the fraud rate at roughly ten percent of all lots listed in the category.  This is based on a survey described below with clear definitions of what I consider to be fraudulent auctions.

The survey

I did a survey of lots offered in the stamp category on eBay on August 3, 2002 . Of 121,000 total lots in the stamp category, I estimated that 12,000 involved one of the forms of fraud listed below. (see survey) 

Definitions of fraudulent stamp auction practices

1. Forged stamps being offered as genuine stamps. These can in many instances be ascertained by examination of scans.

2. Faked covers being offered as genuine. This entails covers with stamps substituted or missing, as well as postmarks faked. This is often evident by examining the scans.

3. Manipulated or repaired stamp and covers being offered without description of the manipulation. Major faults or repairs not mentioned in description. This is often evident by examining the scans.

4. Material being offered “as is” that is, or should be, known to be something other than as described. This includes material that has been manipulated by the seller or seller’s agent directly, as well as mis-identified stamps and rarities that should be accompanied by a certificate of authenticity before offer. For example, an obvious forgery, or mis-identified stamp or cover offered “as is” in an attempt to deceive.

5. The sale of postage stamps that are commonly referred to as “illegal” issues. These are simply labels that have the appearance of real postage stamps. They were never valid postage in any country that is a member of the Universal Postal Union. These “stamps” often have the name of fictional countries, including supposed Russian Republics , etc. printed on them. They are produced to deceive collectors and many appeal to topical collectors because they bear images of musicians, actors, or other notable celebrities.  I have no problem with people collecting this material but they should not be placed in postage stamp category except as cinderellas or clearly identified as being labels rather than postage stamps.

 Methods employed to notify victims of fraud

In the past several methods have been employed by collectors to warn bidders about fraudulent auctions when they were noticed. These methods included:

1. Placing a bid and then retracting the bid with explanation that item is a forgery or with an explanation of whatever the fraud is.

2. Sending an email to a bidder or buyer directly informing bidder that the listing is fraudulent.

3. Posting information regarding the lot in question to one of the eBay discussion boards and then sending an email to bidders and, after the sale, to the buyer, suggesting that they visit the discussion board to learn why they consider the listing to be fraudulent.

Ebay has now effectively blocked all three of the above listed methods used by concerned observers to inform potential victims of fraudulent listings. Their latest move, prohibiting the discussion on the boards of fraudulent listings, has sealed off the most frequently used method.

Fraudulent auction sellers not exposed by eBay feedback systems

The eBay feedback system is not effective in providing information regarding the types of fraud listed above. The “victims” rarely know that they have been deceived until well after the sale, if ever. As a result they do not post negative feedback. Ebay has implemented several features that are apparently an attempt to promote “reputable” dealers. The “power seller” logo is an embarrassment to many because so many of the power sellers engage in fraudulent practices. The new “square trade” feature seemingly gives sellers an advantage in getting negative feedback removed from their profiles. Neither are viable solutions.

Conclusion

Even though most of these types of fraud listed above also occur in the normal stamp collecting marketplace, they are hidden from public view and can be adequately policed when the perpetrators are exposed. The high visibility of this type of fraud on eBay, and the fact that eBay has turned a deaf ear to collector complaints, is very frustrating to those who strive for an honest, viable and open internet marketplace. In addition, and perhaps more important for long term health of eBay, sellers of correctly described goods cannot achieve full value because their goods are in direct competition with fraudulently described items.

I believe Ebay would be well served to hire category specific advisors.  A set of qualified advisors, empowered to review complaints and act in a timely fashion, could substantially reduce the percentage of fraudulent auctions on eBay in the collectible categories.

Richard Frajola (August, 2002)