The risks of online auctions.
Fraud.
Copyright © 2000-2003 NK Guy
Auction sites... an interesting phenomenon, all right. On the one hand, the idea is ingenious. People have all this stuff lying around sheds, basements and garages; stuff that other people out there might actually want. And online auctions bring those two groups of people together. And they do so in a gambling framework that gets some people very excited, and with the promise of fabulous deals, which gets other people very excited. And unlike all the failed dotcom ideas, online auction sites skim a percentage off each transaction, guaranteeing income for the site.
But from the point of view of the buyer the idea has two flaws: lots of people are fraudulent to varying degrees, and still more people are very, very stupid.
Here are some comments and opinions on the subject of buying camera equipment from auction sites. Note that I’m not talking about small purchases here. Auction sites are fine for buying inexpensive accessories and this and that, and I often use them for this sort of thing myself. But camera gear is another subject altogether. The stuff is generally worth more and so the chances of fraud are much higher. It’s one thing to buy a $5 US plastic case for my Palm handheld organizer; quite another to consider buying a $500 US camera or $1500 US lens.
The whole thing is a big gamble for the buyer. The system is set up in a way that favours the seller, making it incredibly easy for a seller to defraud the buyer. The buyer can’t see the merchandise, has to trust that the seller has described the merchandise accurately and honestly, and has to send money to the seller on blind hope. You also have to hope that the seller hasn’t forged positive feedback comments, hasn’t hijacked somebody else’s account and isn’t placing shill bids to drive up the price, all of which are obviously very easy to do.
Remember that criminals really like camera and computer equipment because of the relatively high value of the gear involved. Swindling people out of the cost of a CD or a paperback probably isn’t worth the hassle. But an expensive camera or lens? That’s a different story altogether! Rip off a dozen people over professional lenses and you’ve got enough cash to buy a decent car. A woman in Connecticut named Teresa Smith bilked over $800,000 US out of eBay sellers from fraudulent computer sales before she got caught. Money figures like that make using auctions to buy camera equipment much riskier.
The feedback system used by eBay, the largest online auction site, is also problematic. Take this example based on my experience. I have just a few items of feedback so far - all positive. A seller might have something like 3 dozen, mainly positive. If I get ripped off by him and give him a negative rating he might well give me a negative rating back out of spite. Sure, I could respond to his negative feedback with my little 80-character response, but the point is in this situation he can damage my rep quite easily.
It’s also really easy to forge positive comments. The New York Times published an article on the topic of eBay fraud (March 7, 2002) describing a common trick - building up positive feedback by setting up tons of fake transactions. Look at the seller’s feedback carefully. If all the feedback is from users who have been members the same period of time, beware!
Another common trick is to steal a legitimate user’s account by password hacking and account hijacking; a reminder of the importance of choosing hard to guess passwords, changing them frequently, and never giving your password to anybody else.
In fact, social engineering to obtain eBay passwords is a really common criminal passtime. Apparently many people unwittingly do send their passwords in response to spam of the, “this is an official email from eBay! We need to update our records - so send us your password!” variety. Then they discover that someone has hijacked their account and is using it to defraud people. If you find, say, someone who’s selling a $5000 US camera and whose previous auctions have all consisted of selling $5 paperback novels or macramé plant hangers, chances are good you’ve found such a fraud.
Even more obvious is a fraud who advertises the $5000 US camera for $1500 US. I mean, come on! Nobody is a camera charity, generously giving away brand new cameras for a third of their list value! How stupid can you get? Compound that with the note, oh - you have to send the money via Western Union to Uzbekistan. And please note I’m not making this up - these are all real examples.
This isn’t even counting more creative fraud. Take klm-express.com for example. Sounds like a legitimate shipping company, doesn’t it? Would you send money to a seller after getting shipping confirmation from such a Web site? Well, it was actually a non-existent shipping company hosted on a Web server in the Ukraine and part of an online auction scam. The occasionally broken English, occasionally broken links, the fact that Dutch airline KLM is unlikely to have a main site hosted in the Ukraine (and a domain name owned by someone with a non-existent address that looks Canadian) and the fact that there isn’t an KLM Express courier firm anyway were the giveaways.
My minor experience being defrauded.
Stupidity and pricing.I relate this story as I suspect it’s fairly typical, if not particularly dramatic. I took the eBay gamble early on in checking out online auctions. I decided to pick up an old second-hand Canon EF 50mm mark I lens, since it wasn’t worth that much money anyway. I won the auction at too high a price, and then ended up losing the gamble.
Not horribly badly - I wasn’t swindled out of all my money or anything and so I count myself lucky. But the lens turned out to have serious damage not described in the advertisement - the barrel had two cracks and the autofocus switch plate immediately fell off. (it was clearly old damage, caused by a sharp blow to the lens, and could not have been caused by shipping, as the lens was actually reasonably well wrapped)
This was injury to add to insult, as the lens was weeks late in arriving, and the seller did not respond to my repeated requests for tracking information. He did offer to refund my money if I returned the lens, but that hardly addresses the basic problem - that he did not honestly describe the condition of the lens. “Great condition” does not mean cracks in the barrel, as far as I’m concerned.
And if I did return the lens and he actually honoured the refund I’d still have lost at least $30 for absolutely nothing - money lost on shipping the lens both ways, on getting a money order together, on paying the US-Canada exchange rate and sending it to him via registered mail. $30 lost, with no recourse, because some random guy chose not to describe his merchandise fairly.
Luckily for me I was able to get the lens professionally repaired, (at Brighouse camera repair - thanks guys!) so I didn’t lose out too badly. But it was still an exercise in frustration.
Incidentally, his user ID is Wat20740, if you’d like to avoid this sort of pain yourself.
Suggestions for avoiding auction pain.I spent a couple of months tracking dozens of camera lens auctions, and the final prices for most of the gear were near or sometimes over the grey-market* price for the same brand-new stuff at B&H Photo Video in NYC (a large, popular and reputable retailer which also offers mail-order sales).
Were those bidders on crack? Did they not do their homework? Did some sort of weird auction fever take over their brains? I can’t think of a sound reason why anyone would pay $260 on eBay for a cheap Canon 75-300 USM lens that’s available new at B&H for $190 at the time of writing.
So. I ended up with a couple of reasonable deals to show for my time tracking auction prices. Nothing outstanding, though. And luckily only 1 of the 5 auctions I’ve won involved a deceptive advertisement. But I’m pretty fed up of the time required to track auctions and prices, so I don’t expect I’m going to use it much anymore, though it was an interesting experiment. Except perhaps for selling gear - the eBay system favours the seller, particularly given the ludicrous prices some items seem to fetch.
* Grey market means that the product was not imported by the official Canon importer - in this example B&H themselves brought the product into the US. This means that the product is sold at a lower price than standard retail because the importer’s markup is bypassed. The drawback is that the original manufacturer may not honour the warranty, so you’d have to send the item back to the grey market importer for repairs. As it is, Canon allegedly honour the warranty for products sold worldwide, which is cool of them. B&H have this page detailing their grey market policy.
Okay. So you’ve decided to throw caution to the wind and take the gamble as a buyer at an online auction. Maybe you’ve heard from some friends who’ve been lucky and have had good experiences. Well, if you’re gonna try it here are my suggestions for using eBay to your advantage as a buyer. Sellers already are at an advantage, so it’s a different story there.
Find out what the thing is actually worth. Don’t bid higher than what you realistically think it’s worth. In the case of camera equipment, B&H Photo Video’s prices seem about the lowest around and are a useful benchmark for new pricing. Compare to B&H’s grey market pricing, as grey market products are guaranteed by B&H itself and not necessarily the manufacturer, so the price is much lower.
Remember to factor in your expenses. Unless you pay via escrow (see below) you’ll need to obtain a postal order and send it via registered mail. There are non-refundable costs associated with this, which may wipe out any savings you may see. If the seller is in a different country you will likely have to pay import duties and brokerage or administration fees. These extra costs are particularly problematic for low-cost items (minor accessories such as lens caps, etc). It may be cheaper to buy new and pay shipping and, if necessary, taxes.
And remember that we’re talking about mass-produced camera equipment here, not rare commodities. Don’t let auction fever take over your brain! You don’t have to win this auction. Another identical auction will come up again soon. Camera gear of all kinds is out there - there’s nothing unique about a given piece of gear - extremely rare old collectors’ items notwithstanding.
Finally, be really suspicious of fixed-price great deals on auction sites. If the price is far too low to be true it probably is. Electronics and cameras often have heavy markups, but nobody can sell a popular brand new camera for a third the list price and make a profit. Chances are the camera fell off the back of a truck or doesn’t exist at all.
Most eBay ads are, of course, quite awful and frequently sound like they were written by barely literate 9 year-olds on a sugar high. “This lens is in perfect minty condition! A+++++ Has scratch’s but don’t effect image quality! Take’s tack-sharp photo’s!!!!” Not to mention all the huge fonts, random colours, awful graphics and so on.
I sometimes wonder if these ads, laced with uppercase letters, exclamation marks and spelling errors, reflect the mental state of the people making them or if they’re a deliberate and cunning attempt by sellers to come across as just ordinary folks and not slick dealers, or what. Certainly in one auction I won the seller turned out to be a pawn shop in a Los Angeles suburb and not a private seller as he implied in his ad.
The abuse of the word “mint” in particular is incredibly common. It has a specific meaning to collectors and reputable sellers, (mint means that the merchandise is utterly indistinguishable from new out of the box - any marks or signs of use of any kind automatically disqualify the item as mint) but people seem to use it to describe goods in any condition other than totally mangled. And God knows how the cutesy and irritating eBayism “minty” got started.
Look out for obvious mistakes. An ad full of factual errors about a product probably means it’s being sold by someone who didn’t use it. Which means there’s a good chance they just scooped the thing at a garage sale or pawn shop and are trying to day-trade it on eBay. That increases the likelihood you’re getting a bad deal.
Look at the seller’s previous auctions. Do they match up? Does the seller just have a bunch of small sales of small trinkets at very low prices followed by a single expensive item like a new digital camera? Chances are the account was hijacked. Does the account say the seller is in Iowa but the seller says in email to send money to Eastern Europe or somewhere? Do they ask you to send money via untraceable Western Union accounts? Are the photos on the Web site photos taken from the manufacturer’s sales brochures and not of the actual item? These are all hallmarks of fraud.
Double-check shipping and handling costs. It’s pretty common for eBay sellers to charge outlandish shipping costs for things and bury that fact away in the corner of the ad somewhere.
I’m also a bit suspicious about auctions placed by camera shops. If they can’t sell it in their shop, why are they auctioning it? Also, a lot of the stores set ludicrously unrealistic starting and reserve prices. One camera store had a whole batch of Canon RC-1 remotes up for auction, with a starting price of $25. They’re 20 bucks new at B&H. (I was pleased to see, however, that nobody bid on any of them, so maybe not everybody is stupid after all...)
The only items I’ve found that have been halfway reasonably priced have been discontinued items. If you can get that lens at B&H for 50 bucks more, plus get a year’s warranty, what’s the point of taking a dumb risk with some random camera day-trader on eBay?
Frankly, why not? It’s not to your financial advantage to bid steadily throughout the auction period. You aren’t there to make friends, but to get a decent price on a piece of merchandise.
All that happens when people bid constantly and gradually on an item is that the price of the item goes ridiculously high as people bid and re-bid to stay on top. That’s to the seller’s advantage, but not yours if you’re a bidder.
Of course, this does mean that you’ll be sitting there, watching the clock count down with your finger hovering over the mouse button, along with all the other snipers out there. Some people seem to enjoy this game; others don’t.
After the fiasco above, I’m careful to ask a few questions of all sellers, in order to check them out. If the seller doesn’t reply or replies curtly or unprofessionally, don’t bid. I always ask about the physical condition of the item, (scratches, etc) even if it’s described in the advert. That way you have some stuff in writing in case of a dispute. Flimsy evidence is hopefully marginally better than none at all. If what they say doesn’t add up or doesn’t seem right for some reason, trust your instincts - it’s probably a fishy deal.
Make totally sure you know what’s being sold. eg: some otherwise identical Canon lenses have ultrasonic motors; some don’t. Big price difference between the two kinds, so double-check.
If I can’t think of anything else to ask, I’ll ask if they know when the item was bought. Anything as an excuse to get a response back from the seller to gauge how reasonable they appear to be. There’s no guarantee a seller won’t be pleasant to deal with before the auction but a total jerk after you win it, but at least you’re winnowing out some likely problem sellers.
You’ll need to check to see if the seller is willing to use escrow instead of riskier (for you) payment systems such as cheques or postal orders. Escrow is useful because eBay’s feeble insurance policy protects up to $200 US. That’s fine if you’re buying glass crystal bunnies or black velvet Elvis paintings, but it’s peanuts in the world of camera gear. With escrow the inherent risk is tipped slightly back towards the buyer, which is one reason I think some sellers don’t like it. One drawback is you don’t know what those escrow firms might do with your personal data, but then, that’s the case with any online retailing, really. The other is that you have to check to see if the purported escrow company is for real or not - there have been scams involving phoney escrow companies.
Escrow is particularly handy for people like me who are in Canada. The fees actually work out to be less than the cost of getting a money order made up and sending it out registered mail. It’s a bit of a hassle, as escrow firms don’t treat Canadians as first-class citizens and you may need to fax in your payment information and so on, but I think on balance it’s still worth it. Of course, if your lose your eBay gamble and the product turns out to be garbage and you get a refund, you still lose the money you spent on escrow/money-order fees and mailing. Ah well.
Note that PayPal and Billpoint, while popular payment systems, are not escrow services. They offer limited protection in this regard. (though I have successfully used PayPal’s complaint system to obtain a refund from a fraudulent seller. Just remember you’ve only got a month within which to file your complaint!) And never ever ever give a seller your bank account number or chequing account information or anything like that. Unless you feel like watching your money mysteriously evaporate. Credit card payments are another possibility, since there are dispute mechanisms in place with the credit card company if you get ripped off. Unfortunately debit cards don’t offer such protections either. If you live in the US then buying a postal order through the post office is probably better than getting some random third party money order, as the US Post Office has a fraud investigation system, which is better than none at all.
I’ve purchased two items in person. The risks are obviously much lower when you can examine the merchandise in person and pay the seller immediately.
A common eBay scam is for someone to put in a fake winning bid for something. Then, a day or two after the auction is complete, the seller contacts you privately saying that gosh, the winning bidder didn’t come through - are you still interested? Beware. There’s a good chance in this instance that the seller is trying to rip you off and is doing so outside the eBay system, knowing you have no way of retaliating even with bad ratings. It’s not worth the risk. Note, however, that there is now an official eBay second chance system which affords protection - I’m talking about people who contact you outside the eBay system itself.
A scam reported by a number of news sites goes like this. An online seller offers something (usually a high-ticket item like a computer) on a Web site. They then say they’ll ship the item to you for you to examine risk-free before you send them money via wire transfer.
Sounds good, doesn’t it? What do you have to lose? Well, you might end up losing your money and inadvertently be in possession of stolen goods. This is how the scam works. First, the seller gets your name and address from you. They then set up an account on an online retail Web site and buy the product in your name using someone else’s stolen credit card number. The product is shipped to you from the retailer. Then they ask you to pay for it by sending them money to a wire transfer account.
So. If you ever receive merchandise that was shipped directly from a distribution company or an online retailer, (rather than from the private seller him or herself) contact that company’s fraud department immediately. There’s a good chance you’re a victim of such a scam. A good online retailer should spot this type of scam and prevent it from happening - the credit card won’t match the shipping address - but it may well still be happening.
Other opinions and links.
Anyway. My notes on the whole online auction game. Hope they’re of interest to someone. Remember next time you’re price-shopping that purchasing from reputable dealers may cost a little more, but that this extra cost is essentially insurance minimizing (though not eliminating) your risk. Sure there are great deals to be had on online auction sites, and I buy lots of small-ticket items regularly. I’ve bought little accessories for my discontinued Palm handheld PDA many times.
But there is also massive potential for you to lose money as well, especially with more expensive items. Never forget that it’s a gamble. If you enjoy gambling then go for it. But gamblers can end up losers as well as winners.
And if you don’t believe me that the whole scheme is incredibly vulnerable to fraud, check out these articles from mainstream US media sources:
Forbes: Sleaze Bay.
New York Times: Making losers of auction winners. (unfortunately requires payment to read)
ZDNet News: Scam tricks users into ‘stealing.’
Washington Post: Bidding for trouble.
Fortune: eBay’s worst nightmare.
Macintouch, the Macintosh news site, has also compiled an interesting collection of reader reports on the topic of auction fraud. Related to computers and not cameras, but obviously still quite relevant.
- NK Guy, PhotoNotes.org.
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