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Evidence undercuts eBay’s tough talk on fraud
Wrongdoing goes unpunished, MSNBC investigation finds
By Mike Brunker

Writer

MSNBC

Oct. 9, 2002 - EBay officials say they are aggressively fighting fraud in the massive online marketplace, but an investigation by MSNBC.com shows that the company doesn’t routinely inform customers when they have been ripped off or regularly notify law enforcement about apparently illegal activity on its site — even when presented with solid evidence of wrongdoing. The review of two-dozen cases also raises questions about how eBay measures fraud and lends credence to accusations that the company has adopted an especially laissez-faire attitude toward sins by profit-driving “power sellers,” whose fees are crucial to its bottom line.

The investigation grew out of a series of complaints from disgruntled eBay users who wrote to MSNBC.com in response to previous articles on fraud on the No. 1 online auction site. The specifics varied widely, but the underlying charge was remarkably constistent: Fraud complaints filed with eBay rarely trigger any disciplinary action against sellers, even when accompanied by extensive documentation of wrongdoing.

Many of the complaints were directed at “power sellers” - vendors who do at least $2,000 of business on eBay each month - and suggested that the company was looking the other way while the big fish violated its rules and the law.

Rosalinda Baldwin, editor of TAG Notes, an online newsletter published by the watchdog group The Auction Guild, said she regularly hears the same refrain from her readers.

‘Ebay doesn't care'
“The only ones getting hurt are the buyers, and eBay doesn’t care,” she said.

EBay acknowledges that it doesn’t automatically suspend the cheating sellers it catches, saying the punishment depends on its assessment of whether there is a pattern of misconduct as well as other factors. But at the same time, senior company officials insist that it is taking a more aggressive stance in combating fraud.

“We are more actively involved in preventing fraud on the eBay site and cancel a number of auctions proactively, and even contact bidders after an auction to warn them if we suspect a problem,” Rob Chestnut, a former federal prosecutor who is now the company’s point man on fraud, assured customers in a recent email chat.

With eBay declining to make public whatever evidence that might prove or disprove the charges, citing privacy concerns, MSNBC.com turned to eBay’s critics and asked them to provide a substantial sampling of alleged fraud cases for independent review.

To test the perception that the company is more likely to ignore complaints directed at power sellers, the review focused on fraud claims leveled against peddlers who either are members of the rewards program or sellers who meet the sales requirement and could join if they wanted.

Many complaints merely suspicious
Most of the complaints alleging shill or phantom bidding, misrepresentation of items, non-delivery of purchases and “feedback building” - manipulation of eBay’s unique system for measuring reputation - detailed suspicious behavior but lacked the hard evidence necessary to conclude that eBay was ignoring misconduct.

But in four of the cases that were submitted, the evidence that illicit or criminal activity had occurred appeared particularly strong.

Three of the cases alleged phantom bidding - identical to shill bidding, but perpetrated by an individual rather than co-conspirators. The fourth was more elaborate: an alleged philatelic fraud ring in which collectible postage stamps were being altered and resold at a substantial profit.

EBay’s response in each instance was apparently inconsistent with its repeated statements that fraud will not be tolerated in the “safe and happy trading place”:

In the case of a Florida power seller who used identical contact information on both the eBay user ID he was using to peddle sports memorabilia and the ID he was using for phantom bidding, a member of eBay’s “Safe Harbor” fraud-fighting team found there was “insufficient evidence” to take action. After a second complaint was filed, a representative of eBay’s power seller program phoned the seller and warned him not to do it again, but did not suspend his account or notify a buyer who paid at least $200 more for an item than he would have if the phantom bidding hadn’t occurred.

In the other two phantom bidding cases, eBay suspended the sellers, but only for 24 hours and 48 hours, respectively, according to the complainants. One of those who was suspended, a high-volume ticket broker who wasn’t a power seller at the time, joined the program shortly after the suspension ended, one of the complainants charged.

In a case in which postage stamps were allegedly being altered to increase their value and then resold “as is,” eBay took no action to halt the auctions despite receiving a litany of complaints from a group of stamp experts who assembled detailed evidence on the purported scam.


No hint law enforcement notified
There was nothing to indicate that law enforcement was notified in any of the cases, although phantom bidding and the sale of altered stamps would violate state and federal criminal fraud statutes and constitute fraud under civil law, in the opinion of Steve Proffitt, a Virginia attorney who specializes in auction law.

MSNBC.com’s review also calls into question the validity of eBay’s oft-reported fraud rate of 0.01 of all transactions, an internal measurement based on insurance claims filed with the company. None of the four cases in question would be included in that figure because no claims were filed.

Company officials said Chestnut, the head of eBay’s anti-fraud team, was too busy for an interview to discuss the cases.

But eBay spokesman Kevin Pursglove said that company investigators had reviewed the complaints and “are comfortable that they were handled correctly.” He did not dispute the facts of the cases as presented by the complainants.

While declining to comment on the specifics of the cases because of privacy concerns, Pursglove said that fraud complaints are considered on a “case-by-case basis” and do not always result in punishment, depending on whether investigators find a pattern of misconduct.

He also said that decisions on whether to notify buyers who purchased items in fraud-tainted auctions or to alert law enforcement to potentially criminal misconduct are made only after studying the circumstances. Among the factors that are weighed, he said, are whether the bidder demonstrated that he or she “valued that item at a particular price” by continuing to bid in the face of phony counterbids and whether law enforcement would be likely to pursue the case.

Authorities would be ‘annoyed’
“We’ve been doing this for a long time and have developed a lot of relationships with both state and federal law enforcement agencies, and I think we’ve got a pretty good idea what cases are going to be prosecuted,” Pursglove said. “I think some law enforcement officials would be annoyed with eBay if we passed on every shill that we came across.”

That contention was supported by a Justice Department official who has been involved in numerous investigations of online auction fraud. The official, who spoke with MSNBC.com on condition of anonymity, indicated that eBay has been “very responsive” in cooperating with federal authorities and has approached law enforcement agencies to request that criminal investigations be initiated.

“EBay would be happy if every instance where they thought fraud was involved would be picked up by law enforcement,” the official said.

That view draws a derisive laugh from “Ron,” a former eBay Safe Harbor employee, who said that the fraud reports often are subjected to only a cursory check. He said the odds that a report will be ignored are especially high if the culprits are power sellers, who in recent years have assumed an increasingly important role in fueling eBay’s amazing financial growth.

“Power sellers get their hands slapped, other users get suspended,” said Ron, who spoke with MSNBC.com on condition he not be identified by his real name.

Part of the problem is that members of the Safe Harbor team are overwhelmed by the volume of complaints, he said.

‘I wasn't allowed to do that'
But he also said that the company makes it clear that power sellers are not to be trifled with.

“I suspended (a power seller) who had over 1,200 auctions going on … after I found over 47 emails the guy was using to shill his auctions,” he said. “To put it bluntly, the s—- hit the fan. I got a call … saying I wasn’t allowed to do that anymore.”

Pursglove said he could not comment on the allegation without knowing the details of the incident — which could not be provided without identifying the former employee — but he vigorously denied that power sellers receive preferential treatment.

“The process we use (in investigating fraud complaints) is exactly the same,” he said. “If the fraud complaint is confirmed, we will kick them out of the power seller program immediately as well as suspend their account. … And if the act was intentional, that suspension will be permanent.”

But eBay’s critics say that the exceptions to that policy are too numerous to count.

“One would think that most companies would favor their best customers — that’s a normal thing to do,” said Baldwin, the editor of the The Auction Guild newsletter. “But they shouldn’t be allowing them to get away with things that others can’t.”
 

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Discussion Starter · #2 ·
Re: Interesting Article about Ebay from MSNBC

Cautionary tales of two auctions
Phantom bids draw a warning; alleged stamp ring unchecked
By Mike Brunker

Writer

MSNBC

Oct. 10, 2002 - When an online bidder with the handle of “dd9191” paid $1,825 for a nearly complete set of 1959 Topps baseball cards on eBay in July, the winner wasn’t the only one who walked away with a rare and valuable prize. The auction also provided two self-appointed detectives with conclusive evidence that the seller used a phony identity to illegally dupe the buyer into paying an extra $531 for the cards.

While Ebay users who devote considerable time and energy to expose fraud on the site say they are sure that phantom bidding and other scams occur every day, proving it is far more difficult. Even when they can point to suspicious activity that appears to defy rational explanation, eBay policies that the company says are designed to protect the privacy of sellers and buyers usually make it impossible to prove that a crime has occurred. And eBay responds to complaints with boiler-plate e-mails stating that action has or has not been taken, but never reveals details of what it found.

In the course of a two-month investigation into complaints that eBay is unresponsive to reports of fraudulent auctions on its site, especially when they concern profit-generating merchants known as “power sellers,” MSNBC.com examined 24 complaints that fell into the suspicious-but-unprovable category.

Now and then, paydirt!
But every now and then, the seekers hit paydirt.

During MSNBC.com’s review, investigators unearthed evidence that strongly indicated wrongdoing in four of the cases they presented.

Two of those cases are particularly revealing, both for the insight they provide into eBay’s practices in dealing with fraud complaints and for the light they shed on the self-appointed sleuths’ determination and ingenuity in pursuing their quarry.

While shill and phantom bidding are difficult to prove in the online environment, eBay user Bruce Moreland of Seattle found a “smoking gun” when he examined the results of the auction in which the Topps baseball cards changed hands on July 19.

The seller, “brsz-2,” listed contact information at the bottom of the auction as Broadway Rick’s Strike Zone, a sports memorabilia shop in Boynton Beach, Fla. “Bid with confidence - we have been in business for over 12 years!” the tagline read.

Moreland soon discovered that the bidder who drove “dd9191” upward in the late bidding on the cards — “nsports” — had provided identical contact information on another auction. He immediately used the company’s online complaint form to alert eBay’s “Safe Harbor” team that the seller and the bidder in the baseball card auction apparently were one and the same.

EBay should have had no difficulty recognizing this as seller or phantom bidding, said Steve Proffitt, a Virginia attorney who specializes in auction law.

‘Strong and powerful evidence'
“If you got the same identifying information from different screen names, that’s pretty darn strong and powerful evidence that would convince most people that he’s bidding up his own items,” said Proffitt. “That’s seller bidding and it’s illegal.”

But “Samantha,” a representative of the “Power Seller Trust and Safety” team, which investigates many fraud complaints against eBay’s biggest vendors, didn’t find the evidence so compelling.

“In accordance with our site policies, we have found that there is not enough evidence to show that a violation has taken place,” she replied in an e-mail to Moreland. “We understand your concern about this situation, and can reopen the investigation if any additional information can be provided.”

The rejection might have stood had not another eBay user, Alan P., who asked that his last name be withheld, followed up with a second complaint. After elaborating on the original complaint and citing eBay’s policy statement that “shill bidding is considered a felony with severe consequences,” he received a response from another power seller representative assuring him that “we have taken appropriate action in accordance with our site policies.”

Even though phantom bidding - identical to shill bidding, but perpetrated by an individual rather than co-conspirators — violates state and federal criminal fraud statutes and constitutes fraud under civil law, the “appropriate action” turned out to be a warning to the seller.

In a phone interview with MSNBC.com, Broadway Rick’s owner Richard Kohl acknowledged that he improperly bid the cards up using an account that he originally created for a friend, but said he did so only to avoid taking a financial hit on the item.

‘I will never do it again'
“I started my piece out at $1 and (the false bid) was to get people up to get the price I paid for it, and not to take a great loss,” he said. “I should have started at the price I wanted. I was warned by eBay. I’m ashamed of myself and I will never do it again.”

The buyer of the baseball cards — “dd9191” — did not respond to numerous e-mails seeking comment.

But another buyer — who ended up paying $200 more than he otherwise would have in another sports memorabilia auction in which “nsports” bid on an item offered by “brsz-2” — said he was never informed by eBay that he had been victimized.

Ronald Marshall of Oakland, Calif., said it was “disconcerting” to learn from a reporter that he had paid too much for the rare 1910 boxing book, “My Life,” by former heavy-weight champion James Jeffries, and that the seller had gone unpunished.

“If they find out somebody is shill bidding they should be removed from the system forever,” he said.

EBay spokesman Kevin Pursglove said that under the company’s privacy policy he could not discuss the specifics of the case, but he indicated that the officials with the company’s fraud-fighting team were “comfortable” that it was properly handled.

Meanwhile, since receiving the warning from eBay Kohl has used the “brsz-2” account only for “private auctions,” which hide the identities of bidders and make it impossible for anyone other than eBay to determine if fraudulent bidding is occurring. EBay help files state that auctions should not be made private “unless you have a specific reason, such as potential embarrassment for bidders and the buyer.”


Teamwork unmasked alleged forgeries

If the trading card auction shows how an opportunistic tag-team can occasionally uncover wrongdoing, the case of an alleged stamp forgery ring demonstrates the power of relentless teamwork.

Well-known U.S. stamp authority Richard Frajola and other philatelists operating under the umbrella of SCADS (Stamp Collectors Against Dodgy Sellers) say they have lodged “innumerable complaints” with eBay asking it to shut down what they say is a fraud ring selling altered postage stamps.

The SCADS experts have assembled a damning dossier showing that the ring has systematically purchased stamps with obvious flaws that diminish their value, then altered them to make them appear to be in better condition or to be different, more-valuable stamps.

The alterations use techniques like bleaching cancellations, recutting and reperforating and overlaying “grills” — an anti-counterfeiting measure that the U.S. Post Office used in the late 1800s — to improve the appearance of the stamps or otherwise increase their value in the eyes of unwary buyers, SCADS charges.

To hide their tracks, the group uses two eBay accounts — “chickfrdstk” and “stazy4” — to buy the stamps, and two others — “schuylerac” and “pcheltenham” — to sell the altered stamps, according to SCADS.

Stamps put under microscope
The stamp sleuths use techniques that would be at home in the FBI crime lab to keep track of the sales, including microscopic examinations of the “before” and “after” versions that show they share flaws like uneven perforation that would otherwise be undetectable. The comparisons demonstrate “with 100 percent certainty” that the stamps have been altered, SCADS says.

The stamps are matched using a database that the group began assembling early this year after linking the various identities.

“We would basically capture all the things that ‘chickfrdstk’ and ‘stazy4’ would purchase … then we would watch the other two gentlemen and we would capture all the auctions of everything they sold,” said SCADS member Richard Doporto of Oakland. “It quickly became very clear what they’re doing.”

“Schuylerac” is an eBay power seller while “pcheltenham” is not, though not because he doesn’t qualify for the rewards program. Since SCADS began tracking their sales in late March, the pair has sold nearly $89,000 worth of altered stamps after spending less than 10 percent of that for the originals, Doporto said.

MSNBC.com attempted to contact all four members of the alleged ring, but received a response only from “pcheltenham” — or Percy Cheltenham, according to his e-mail.

“I can only refer you to my feedback file, which represents actual participants and buyers,” he wrote, referring to his eBay rating showing more than 1,474 positive comments from purchasers and only a dozen negative ratings.

'Disclaimer' on auctions
He also referred the inquirer to a “disclaimer” on a recent auction that warned would-be buyers they were buying “a pig in a poke” — an expression that refers to buying something without knowing its inherent quality.

The statement says the stamps in question are part of a “handed down collection of over 20 boxes,” and adds, “It is the obligation of the buyer to determine which stamp it is, and to determine its condition, and subsequently the buyer’s decision on how much he is willing to pay for it.”

Proffitt, the auction law expert, said that the disclaimer would not protect a seller who is knowingly auctioning altered goods.

“The ‘as is’ disclaimer would do nothing to alleviate a knowing and intentional misrepresentation done with the purpose of defrauding the unknowing out of their money,” he said, adding that such conduct also could violate federal laws against stamp alteration and counterfeiting.

SCADS members say eBay’s apparent lack of action is particularly puzzling given that “schulyerac” and “chickfrdstk” have previously been brought to the attention of the company’s fraud investigators.

Accounts reportedly suspened

Both accounts were suspended in 1999 amid allegations of shill bidding, Linn’s Stamp News reported. Those allegations surfaced after eBay users complained to the company that bogus grading certificates were being advertised on “schulyerac” auctions with the apparent intent of duping unsuspecting buyers, the philately publication said.

EBay spokesman Pursglove said he could not confirm that the accounts were previously suspended or comment on the current allegations, citing the privacy policy. But he again said that the company’s fraud team reviewed the complaints and was confident they had been correctly handled.

While eBay has not taken any discernable action to shut down the alleged fraud ring, SCADS members say they did eventually succeed in getting the company’s attention.

After members started flooding the eBay stamp billboard with discussion about the alleged fraud ring, the company eliminated the stamp section of the billboard, Doporto said. Then, after SCADS members began contacting bidders on suspect auctions to warn them that they may be bidding on altered goods, eBay suspended several of them for up to 60 days for “auction interference,” he said.

Frajola, the stamp expert, said that eBay’s lack of response to the complaints has persuaded virtually all the veterans of the site’s stamp-collecting community that eBay is putting profit ahead of customer protection.

“This is criminal activity, cut and dry, and they don’t want to know and they don’t want it to be exposed,” he said.


© 2007 MSNBC Interactive
 

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Re: Interesting Article about Ebay from MSNBC

‘Deadbeat bidders’ dog eBay sellers
Auction winners who don’t pay up are a growing trend
By Bob Sullivan
Technology correspondent
MSNBC
Sept. 5, 2002 - It’s the quiet fear behind anyone who’s ever sold anything on an auction Web site. What if the winning bidder doesn’t pay? Sellers offering up pricey Cisco Systems hardware on eBay recently know what that feels like. Well over $1 million in Cisco auctions have been ruined by bidders who simply disappear after the auction has ended. Some say it’s an elaborate fraud orchestrated by “the Cisco Raider.” Others think it’s just vandalism. But perhaps of greater concern, some eBay sellers are getting the feeling that the problem of disappearing auction winners is getting worse.

They're called “deadbit bidders.” They ready a bid that’s sure to win an auction, far above market value, and when the auction’s over, they just disappear. After three such incidents, eBay generally suspends the user. But that’s no deterrent. Determined deadbeats just re-register under a new name and start all over.

It’s more than just an aggravation for the eBay seller, who now has to start the selling process over again. eBay doesn’t refund the listing fee — $3.30 for items over $200 — so that’s lost. Any other marketing fees, such as placement on eBay’s front page, are also lost. The seller must fill out two separate forms and wait about a month to issue a complaint and ensure that eBay doesn’t deduct its selling fee.

And the consequences are even worse than that, according to one repeat victim of deadbeats who asked not to be identified. The loss of time can cut deeply into sale prices.

“One item I had to list three times,” he said, because the first two auctions for the Cisco router he was selling were ruined by deadbeats. On the third try, he sold it using eBay’s “Buy it Now” feature “just to get rid of it” at $650. It likely would have sold for $800 at the initial listing, but in the interim four weeks, routers from failed dot-coms flooded the market.

It’s difficult to say just how widespread the problem is, but three avid eBay sellers told MSNBC.com their deadbeat rates can vary between 5 percent and 15 percent. eBay power seller Geoff Giglio, who auctions 300 to 500 items each month, said he sees 20 to 40 deadbeats monthly.

Marc Van Horn or Ft. Lauderdale, Fla., says deadbeat rates are high and getting higher.

“In one month I had 14 percent deadbeat bidders for my auctions,” Van Horn said.

eBay spokesperson Chris Donlay said “that sounds high,” but added that “I have not heard a sitewide statistic.”

“It’s not a large amount,” Donlay said. “If you look at all sorts of fraud, it amounts to just one-one hundredth of 1 percent of transactions.”

For some reason, deadbeat bidder rates among Cisco routers has been extraordinarily high of late. A source who requested anonymity provided MSNBC.com with evidence of hundreds of auctions that had been ruined by deadbeat bidders during the past 9 months. In a single day, deadbeats ruined over $40,000 in sales, the source claimed. Donlay confirmed eBay is investigating the situation, but declined to say more.

Cisco equipment auctions that were allegedly ruined by 16 eBay bidders foiled hundreds of thousands in sales during recent months. User feedback on the bidders is riddled with complaints.

“You are quite correct, someone decided they wanted to be the high bidder on three pieces of Cisco equipment I was selling and then after the auction never responded to emails in any way or made any effort to pay for the auctions,” said one victim. “So the equipment is still sitting here, I haven’t had a chance to re-list it.”

Sellers from these auctions who were contacted by MSNBC.com revealed the same pattern. Many think a single person is behind all those IDs, a character they call “the Cisco Raider.”

But eBay power seller Giglio, who says that he himself is a victim of the “Cisco Raider,” thinks the ruined auctions are really just the work of pranksters.

“I think the majority are kids screwing around, people who have nothing better to do,” said Giglio, the CEO of Worldwide Technology Asset Recovery Exchange. He estimated that the non-payments cost him $600-to-$700 in listing and marketing fees. “They tend to go for high dollar items... It’s someone who says, ‘I’m just going to mess around, oh, here’s an expensive thing.’ ”

But the source who compiled extensive research on deadbeat Cisco auctions believes something much more serious is happening. He believes the “Cisco Raider” is purposefully ruining auctions by the competition to force bidders towards his own auctions, driving up prices and raising profits.

“He’s selling the items at the higher price. Say your system broke down today. You have to buy from him now,” the source said.

Rosalinda Baldwin, who operates an auction watchdog service called The Auction Guild, thinks the regularity of deadbeat bidding on certain Cisco equipment lends credence to the idea that it’s more than random vandalism. But whether the Cisco Raider is a fraud artist or a collection or pranksters, the number of deadbeat bidders is clearly disturbing to auction sellers. Baldwin thinks deadbeat rates reach 20 percent in some categories, “and eBay is doing nothing about it.”

“They keep telling us, ‘We want to make it as easy as possible for bidders,’ Well, when are bidders going to be held liable for what they bid on?” Baldwin said.

Baldwin is among those who think eBay should have some way of charging bidders if auctions go badly, by tying bidder accounts to credit cards or checking accounts that can be automatically deducted.

But free bidding has been a hallmark of eBay since it opened, so the site would likely be reluctant to do anything that might hamper bidders, Baldwin said. In addition, since eBay collects listing fees on deadbeat auctions, the firm has little incentive to act, she said.

“That’s not true,” Donlay said. “We have a huge incentive to fix it, because if (users) are unhappy, and if they decide to sell less we’re definitely affected.”

© 2007 MSNBC Interactive
 

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Discussion Starter · #4 ·
Re: Interesting Article about Ebay from MSNBC

Ten things you didn't know about eBay
CNBC Special Report looks behind the scenes of global online marketplace
CNBC
updated 3:52 p.m. ET, Wed., June. 29, 2005

Just shy of its 10th anniversary next September, eBay has exploded into both a cultural and an economic phenomenon. Some 1.8 billion items, worth more than $40 billion, are expected to be traded on its global electronic marketplace this year: Everything from cars, clothing and electronics gear to Justin Timberlake's French toast breakfast and a gumdrop sucked and discarded by Arnold Schwarzenegger. Some people are addicted to the site.

And the company has changed the fortunes of many — in fact, if eBay employed the 430,000 people who earn an income selling on its site, it would be the nation's No. 2 private employer, behind Wal-Mart. Those people include a disabled mother of two who makes a living selling on eBay; an Army wife who turned to eBay when her husband was sent to Iraq; and an Iowa couple who transformed a $2,000 investment into an eBay business expected to reap more than $1 million in sales this year.

These people help make up the eBay community, and management works hard to understand them at "voices" focus groups, trying to make sure the site will keep their interest. But despite those efforts, some former sellers feel betrayed and have deserted the popular auction site.


In a CNBC Special Report hosted by David Faber, including exclusive interviews with CEO Meg Whitman and founder Pierre Omidyar, “The eBay Effect” reveals little-known facets of the company’s history and operations, including:

EBay has been the fastest growing company in the history of U.S. business. Though it will not turn 10 until Labor Day weekend in September, eBay will take in more than $4 billion in revenue this year. It has 9,000 employees and 135 million customers.

EBay — the dominant global cybermarketplace — conducts more transactions every day than either the New York Stock Exchange or the Nasdaq. This year, about 1.8 billion items are expected to be listed on eBay and, by year-end, more than $40 billion worth of cars, clothing, computer and anything else you can think of, along with many you will not, will be traded. More than $80,000 dollars of goods and services get traded every minute.

EBay is different from virtually any other company because its business depends on the hard work of hundreds of thousands of people who sell on its Web site but are not employed by eBay. Almost half a million people earn all or most of their income from selling on the Web site. If they worked for eBay it would be the second largest employer in the country- after Wal-Mart.

EBay goes to great lengths to stay attuned to this “community” of users. Ten times a year, it brings a group of eBay buyers and sellers to corporate headquarters in San Jose in a program called “Voices,” to find out what they do and do not like about eBay. These consultations last two days and nights, and afterward eBay officials continue to keep in touch with Voices members.

Ebay’s Network Operating Center keeps track of every transaction, every visit to the eBay auction site. That means that, at any minute of the day, eBay knows exactly where its money is coming from, how many people are on the site, their listings per second, the number of bids and so on. This monitoring allows eBay to troubleshoot problems. In the aggregate, the traffic information provides a fascinating study of American activity, allowing eBay to track social events. For example, when the American Idol show is on, traffic dips, lasting for about two to three hours as it cycles through from the East to the West Coast.

Although eBay says that fraud occurs in less than one hundredth of one percent of all its transactions, victims continue to be frustrated by eBay’s stance — that buyers and sellers should try to resolve their differences on their own. Complainers about fraudulent transactions generally get only an automated response to that effect from eBay, though the company does monitor the site from bases in San Jose and Salt Lake City for fraudulent items — bouncing blatantly fake art, for example.

EBay’s recent fee increases for sellers continue to diminish its business. According to powersellersunite.com, some 7,000 eBay stores have shut down because of the increases.

EBay’s Rules, Trust and Safety committee meet to review whether questionable items should be allowed on the site. Among those the team has rejected: Breast milk (for safety considerations), personal sexual services, and families for rent.

EBay, which entered the European market six years ago and the Asian market four years ago, is counting on major growth from overseas. The company operates in 27 countries, and this year roughly half of its revenues will originate outside the U.S. Germany is eBay’s largest market outside the U.S.’ meanwhile, its user base in China grows by some 20,000 people every day and is already above 20 million. International eBay users look for many of the same things as Americans, and it is true, too, that the London Tube buys spare parts on eBay.

EBay has spawned a raft of businesses for others – including school districts that make money offering classes in eBay, the drop-off stores for people who want their stuff sold for them on eBay, and many businesses that help people sell wares on eBay like pink packing peanuts and software designed to help buyers win auctions at the lowest possible price.
© 2007 CNBC, Inc. All Rights Reserved
 
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