What is auction fraud?
Online auction fraud is any type of fraud that takes place on online marketplaces or auction sites. It can be anything from misrepresenting items to fraudulent bidding to increase an item’s price. Auction fraud has existed in various forms for thousands of years. However, fraud techniques have evolved with the rise of the internet and online auction platforms.
Online auction fraud is a serious problem, especially with more people turning to online second-hand shopping. Though online auctions are not limited to used items, fraudulent sellers often claim their item is secondhand to justify the lower price. Let’s look at how online auction fraud works.
How does auction fraud work?
Online auction fraud is a general term, so how it works will depend on the type of fraud in question.
For example, someone may set up a seller account on an auction site (like eBay or Gumtree) with the intention of defrauding unsuspecting buyers. They may list items they don’t own, then sell them but never deliver them to buyers. They may also write fake reviews to make their profile look legitimate.
Another example is a fraudster shielding bids on an item so they can buy it for a much lower price than the item’s worth. In these cases, legitimate sellers may lose substantial amounts of money.
Some auction fraud incidents may even involve the use of fake websites. More technically advanced fraudsters may create fake online auction websites that mimic popular legitimate platforms. Buying from these fake sites can lead to more than just being scammed — users could actually be handing out their financial details to cybercriminals.
Types of online auction fraud
Let’s look at the most common types of online auction fraud so you can spot suspicious behavior and protect yourself on online auction sites.
Non-delivery fraud is when a fraudulent seller sells an item but never delivers it to the buyer. The seller may have never had the item in the first place — or may have it but simply choose not to send it. The buyer ends up paying for an item they never receive.
Misrepresentation fraud is when the item is not as advertised. For example, the seller may have advertised a knockoff as a genuine, high-value piece of designer clothing. With misrepresentation scams, buyers may end up paying hundreds of dollars for fake items.
Triangulation auction fraud
Triangulation fraud is a little more complicated. The item is genuine and may even be delivered to the buyer — but not everybody wins. In triangulation fraud, the fraudulent seller buys the item with a stolen credit card directly from a retailer and cleverly uses the buyer’s delivery address as billing information. Here’s the catch: the person whose stolen credit card funded the initial purchase typically disputes the transaction, and the merchant has to refund the purchase without getting the item back. The seller keeps the payment from the buyer, and the buyer ends up with goods purchased with a stolen card without knowing.
Shill bidding fraud
Shill bidding fraud is when a fraudulent seller uses an alias or a helper to increase the price of an item. This helper bids on the seller’s item without the intention of buying it solely for the purpose of driving up the price. Ultimately, this fake bidding leads to legitimate buyers paying more for an item than they would have without the fake bids. Though shill bidding may not sound as bad as some of the other auction fraud types, it is unethical and, in many cases, illegal.
Bid shielding, also known as multiple bidding fraud, is the opposite of shill bidding because its aim is to lower the price of an item. With bid shielding, a fraudulent buyer makes multiple bids on the auction of a legitimate seller using aliases or fake profiles. One bid is very high to scare away other potential buyers, while the other bid is lower than the sale price should be (but higher than the bids made by other buyers). Right before the auction closes, the fraudulent high bidder retracts their bid. In the end, the buyer gets the item for a much lower price, and the seller loses money.
Account takeover (ATO) fraud
In account takeover, hackers break into legitimate seller or buyer accounts on auction websites and use these stolen accounts to commit fraud. These accounts typically already have positive reviews, making it easier for cybercriminals to trick people into trusting them. Account takeover is a type of identity theft and can leave both legitimate buyers and sellers out of pocket.
How to avoid auction fraud
While most auction platforms take steps to protect buyers and sellers, make sure you’re also doing everything you can to avoid auction fraud. Let’s look at how you can protect yourself.
Always research the seller or buyer
One way to avoid trouble is by researching the user you’re dealing with on online auction sites. Look at their reviews — or the lack of reviews. The seller’s feedback can tell you a lot about who they are and if they’re reliable. If the user has no reviews, be cautious. They may be a new user — but they could have created this account for scamming. If it’s a completely new seller and they’re selling something of high value, think before you buy. You may be able to buy the same item from an experienced seller with plenty of five-star reviews.
Keep in mind that some fraudulent sellers may have fake reviews. When reading the seller’s feedback, look at the reviewer’s profile. If the profile seems off, it could have been created for the purpose of writing fake reviews. Watch out for reviews with poor grammar and spelling mistakes — legitimate reviews are more likely to be coherent.
Be skeptical of too-good-to-be-true deals
If a deal seems too good to be true, it probably is. Buying a piece of designer clothing that normally costs thousands of dollars for a few hundred on an auction website is not typically possible — unless the item’s a fake. If you’re buying high-value items from an online seller, ask for proof of the item’s authenticity. You may ask for a picture of the receipt, label, certificate, tags, stitching, or anything else that proves the item is not counterfeit.
You also have every right to ask questions, like why the item is on sale or where it was bought. If you’re considering purchasing a high-value item, consider whether it’s worth paying a little more to get it from a reputable online retailer rather than an auction site. Retailers will typically have various protections in place that online sellers don’t.
Pay using a credit card or PayPal
Certain payment methods — like wire transfers or money orders — can’t be reversed, which puts you in a difficult position if you’ve just paid for a counterfeit item. Using payment methods like credit cards or PayPal typically means that if something goes wrong, you can get your money back. If a seller asks you for a payment using a method that can’t be reversed, it’s a red flag.
Don’t buy outside of the auction
If a seller contacts you after you’ve lost an auction offering the item at a discounted price, be cautious. It’s a common technique — the seller says that the original buyer “disappeared” and asks you if you still want the item. They promise to send it as soon as you’ve wired over the money. If you get a similar message, don’t fall for it. It’s most likely a scam.
Carefully read the item description
Getting excited about an item may sometimes mean we don’t pay enough attention to the description. However, when we don’t read the description carefully, we may miss important details (like hidden defects).
Protect your accounts
While fraudulent sellers and buyers are a real problem, account takeover on auction sites is also a potential threat. Cybercriminals use various techniques to break into accounts and use them for online auction fraud. Protect your accounts with cybersecurity measures like strong, complex passwords and MFA. Keep an eye on your emails and account activity, and immediately report anything suspicious to the platform.
What to do if you become a victim of auction fraud
Becoming a victim of internet auction fraud can be incredibly frustrating. If you’ve been scammed by a fraudster on an online auction site, take the following measures right away.
- Report the incident to the auction site. It’s wise to report fraudulent activity to the auction website or online marketplace. Some reputable platforms will have protection in place and may be able to help.
- If you’ve lost money, contact your bank. You may be able to get the money back — especially if you paid using a credit card or PayPal.
- Report the crime to the authorities. If the fraud involves a substantial amount of money, you may want to report it to your local law enforcement agency in your country. Visit the Internet Crime Complaint Center for more information and to file a complaint in the US.
- Be cautious when seeking help to recover lost money. Losing money is distressing and can sometimes lead us to desperately search for solutions to help us get it back. However, some “scam recovery experts” could also be scammers. If you decide to approach someone for help, research the company thoroughly — and never pay for their services unless you’re absolutely sure they are legitimate.
While it’s difficult to completely prevent auction fraud, you can take steps to minimize the risk. Make sure you’re staying cautious when shopping on auction sites and always take time to do your research.