How to prevent E-auction fraud?

E-auction, also called procurement auction, reverse auction , sourcing event, e-sourcing or eRA, is a tool used in industrial business-to-business procurement. It is a type of aution in which the role of the buyer and seller are reversed, with the primary objective to drive purchase prices downward. In an ordinary auction or known as a forward auction, buyers compete to obtain a good or service. In a reverse auction, sellers compete to obtain business. It is a tool used by many purchasing and supply management organizations for spend management, as part of strategic sourcing and overall supply management activities.
Buyers, sellers, and market makers should adhere to auction rules and industry codes of conduct for the use of reverse auctions, if they exist. Problems arise when one or more parties fail to conform to auction rules. This can range from simple cries of "foul" to litigation.

As a smart consumer, you should know how to protect yourself when you are doing E-auction? So, what is our concerns when involving in E-auction? The well known and the largest Internet auctioneer is eBay which has introduced several measures in an effort to reduce fraud. The following are prevention to e-auction fraud:

• User identity verification such in IC number, driver’s license number or date of birth. For example, verified eBay user, the voluntary program, encourages users to supply eBay with information for online verification. While users are also adviced to save all transactions information as a backup document to yourself and it will be useful when fraud are occurred.


• Authentication service. It is to determine whether an item is genuine and described appropriately. It difficult to perform because their training and experience, experts can detect counterfeits based on subtle detail.


• Grading services which is a way to determine the physical condition of an item, such as ‘poor quality’ or ‘mint condition’. Different item have different grading systems. For example, some are graded from A1 to F1, or by ranking from 1 to 5, while coins are graded from poor to perfect uncirculated.


• Feedback forum. It allows buyers and sellers to build up their online trading reputations. It provides user with ability to comment on their experiences with other.


• Escrow services. Both buyers and sellers in a deal are protected with an independent third party. Buyer mails the payment to escrow services which verifies the payment and alerts the seller when everything checks out. An example of a provider of online escrow services s i-Escrow. Users also should not giving out their personal privacy information until you have thoroughly checked out the seller and the escrow service.


• Appraisal services which use a variety of methods to appraise items. It includes expert assessment of authenticity and condition, and reviewing what comparable items have sold for in the marketplace in recent months.


• Physical inspection. It can eliminate many problems especially for collectors’ item. But in fact, this is not practicable due to some limitations.


• Item verification which is a way of confirm he identity and evaluate the condition of an item. Third parties will evaluate and identify an item through a variety of means. For example, some collectors have their item “DNA tagged” for identification purpose. It provides a way of tracking an item if it charges ownership in future.


• Non-payment punishment. In order to protect sellers, a friendly warning for first-time nonpayment. A sterner warning is for second-time offense, with a 30 day suspension for a third offense and an indefinite suspension for a fourth offense.

Further reading about prevention of e-auction fraud:

1. Prevention methods for e-auction
2. What's Internet Auction Fraud, And How Do I Prevent It?