Jul 22, 2024

How Internet Auctions Work — Rules of the Marketplace

Internet auction sites give buyers a “virtual” flea market with new and used merchandise from around the world; they give sellers a global storefront from which to market their goods. But the online auction business can be risky business. The Federal Trade Commission (FTC) wants to help buyers and sellers stay safe on Internet auction websites. Among the thousands of consumer fraud complaints the FTC receives every year, those dealing with online auction fraud consistently rank near the top of the list. The complaints generally deal with late shipments, no shipments, or shipments of products that aren’t the same quality as advertised; bogus online payment or escrow services; and fraudulent dealers who lure bidders from legitimate auction sites with seemingly better deals. Most complaints involve sellers, but in some cases, the buyers are the subject.

Whether you’re a buyer or a seller, understanding how Internet auctions work can help you avoid most problems.Role of the Auction Site. Most Internet auction sites specialize in person-to-person activity where individual sellers or small businesses sell their items directly to consumers. In these auctions, the seller — not the site — has the merchandise, and often, the site will not take responsibility for any problems that may arise between buyers and sellers. Before using an Internet auction site for the first time, buyers and sellers should read the Terms of Use, and review any information the site offers.

Registration. Most Internet auction sites require buyers and sellers to register and obtain a “user account name” (or “screen name”) and password before they can make bids or place items for bid. Keep your password to yourself. If you share it, another person could access your account and buy or sell items without your knowledge. That could damage your online reputation — and eventually, your bank account.

Fees. Some sites require sellers to agree to pay a fee every time they conduct an auction, whether the item is sold or not. Other sites charge a fee only when an item is sold.

The Auction. Many sellers set a time limit on bidding and, in some cases, a “reserve price” — the lowest price they will accept for an item. When the bidding closes at the scheduled time, the item is sold to the highest bidder. If no one bids at or above the reserve price, the auction closes without the item being sold.

Some auction sites allow sellers to set a price at which a buyer can purchase the item without competing with other bidders. A buyer can choose to purchase the item for the price the seller has set, without bidding.

After the Auction: Arranging to Pay and Deliver Merchandise. At the end of a successful auction, the buyer and seller communicate — usually by email — to arrange for payment and delivery.

Be aware of “phishing:” emails sent to you asking for your password or other personal information that look like they’ve been sent by an auction website or payment service. Usually, these emails are fishing for your information and are coming from someone who wants to hack into your account.

If you get an email or pop-up message that asks for personal or financial information, do not reply. And don’t click on the link in the message, either. Legitimate companies don’t ask for this information via email. If you are concerned about your account, contact the organization mentioned in the email using a telephone number you know to be genuine, or open a new Internet browser session and type in the company’s correct Web address yourself. In any case, don’t cut and paste the link from the message into your Internet browser; phishers often make links look like they go to one site, but actually send you somewhere else.

The information on this site was created by the Federal Trade Commission and has been compiled by the site owners, who are not responsible for any errors or omissions. Site design is a trademark of quantastic.com © 2008

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