Internet auction fraud

Internet auction fraud involves fraudulent advertisements on auction sites such as eBay or Gumtree. The seller is selling goods that do not exist or is selling the one item to everyone who bid on the item, saying the person who won the auction no longer wants the goods and they are the next highest bidder.

How does this work?

When an item is purchased via an Internet auction, it is not bought from the auction house (eBay, or Gumtree) but from an individual or company. The auction site is merely providing a forum to enable individuals to trade with one another and usually adopts a policy of not taking legal responsibility for any loss suffered from using their service.

Once the bidding has concluded; the payment for and delivery of the purchase is negotiated between the purchaser and seller. If the item is not delivered after it is paid for, or is not what was represented on the auction, the auction site will not refund any money. The onus remains with the purchaser to approach the seller to negotiate a proper settlement.
The statutory warranties that exist under the Trade Practices Act do not cover goods bought at auction. The seller's obligations include giving clear title, ensuring the goods are as represented and delivering the goods as agreed.

Some criminals have sold a large volume of goods online and never made any effort to deliver them despite receiving payment.

How do I protect myself?

• Understand as much as possible about how the auction works, what your obligations are as a buyer, and what the seller’s obligations are, before you bid.
• Find out what actions the auction house takes if a problem occurs and consider insuring the transaction and shipment.
• If a problem occurs with the auction transaction, it could be much more difficult if the seller is outside of Australia because of the difference in laws.
• Review the seller's trading history on the site as well as on the internet in general. Ask questions about any concerns you have with the seller.
• If you have any reservations about the seller, do not trade with them.
• Learn as much as possible about the seller, especially if the only information you have is an email address.
• Before a payment is made for any auction purchase, the seller's identity and contact details should be verified in case there is a problem with the delivery of the item.
• Keep communication through the auction house email/messaging service to provide a level of transparency in case there is any problems.
• Determine what method of payment the seller is asking for and how they are asking to send payment. Services such as PayPal provide a level of protection when goods are purchased on eBay. Direct payment into a person’s bank account may reduce the level of protection that you have through the auction website.
• Ask the seller about when delivery can be expected and, if there is a problem with the merchandise, whether it is covered by a warranty or  you can exchange it.
• Use registered mail to enable tracing of parcels. This will assist in eliminating claims that the parcel was sent or it has been lost in the mail. Find our more from Australia Post.
• Check that the auction account information matches email, bank account and location information.
• If in any doubt about the integrity of a person selling via an online auction, utilise an escrow agent. An escrow agent is an independent third party which holds payment in trust until the buyer receives and accepts the agreed upon item from the seller. This service incurs a fee; however, it protects buyers because the third party holds the money until the goods have been received and inspected. Also, check on the legitimacy of the escrow agent as many fraudsters will create their own website to help defraud the buyer.
• Beware of goods being sold significantly below their normal price.