NOT MY OPINION FOLLOWS

(PLEASE NOTE: Misterßetamax takes no responsibility for the information contained in the article below. It is the authors opinion, not mine. It is interesting to read because it explores the many sides to online buying. — This article is readily available from the archives of Forbes magazine and they are responsible for it's content.)

Sleaze Bay
by: David H. Freedman, Forbes Magazine

Tom Peace figured he'd had enough of extortion and refused to pay another penny to the blackmailer. The blackmailer, furious that the well had run dry, carried out his threats. In one month he cost Peace $10,000 in business, by Peace's estimate, and, as this is written, there's no end in sight.
Clearly, the blackmailer had something extremely damaging on Peace. Compromising photographs? Evidence of illegal activity? An old drug bust? None of the above. Try negative feedback on Peace's eBay listing. If that sounds far-fetched, you're probably not one of the 16 million people who do business regularly on eBay, where approximately $14 million changes hands every day and 18 million new listings are posted each month. EBay is often gushingly described by fans, many of whom are self-described addicts, as the ultimate frictionless marketplace. Following in eBay's wake, auction sites of all sorts have proliferated. Enthusiasts consider them the Web's killer application, one that breaks down geographic, logistical, and informational barriers to the point where buying and selling become acts of economic purity. Well, that's one way of looking at it. Here's another: Ebay and its like are a free-for-all for con artists, sleaze balls, shady operators, and outright thieves.
Why shouldn't it be? As is true of much of the Web, the characteristics that make auction sites so appealing—anonymity, speed, low overhead, access to millions of people, lack of outside regulation, an ability to interact from a great distance—are the very same characteristics that make rip-offs so easy.
To be fair, most people who use eBay and similar sites feel they have had positive experiences, and those satisfied users include me. That's partly because scam activity is clearly not the rule. When it comes to quantifying the rate of fraud, eBay likes to throw around a figure of about 25 out of 1 million transactions. But the catch is that this number refers to the rate of "confirmed fraud," meaning instances in which eBay investigated a complaint and ended up siding with the complainant. Thus, that minuscule figure may say more about eBay's unwillingness or inability to nail scammers—despite the company's claim that it operates a 200-person fraud team—than it does about the safety of its trading environment. The Federal Trade Commission logged 10,700 fraud complaints last year from users of online consumer auctions, and since eBay so powerfully dominates the fledgling industry, a great many presumably pertain to that site. That figure is probably absurdly low, as well. Would you call the FTC if Robogoo38 in Indiana sent you a defective clock? (Be my guest: The complaint hot line is 877-FTC-HELP.)
One reason most eBay users seem content despite the possibility of fraud may be that many have absolutely no idea they've been swindled. "The average person who uses eBay is just completely ignorant," says one frequent seller (who, like many of the people interviewed for this article, requested anonymity because of his dependence on eBay for his livelihood). Part of the problem is that eBay is growing so rapidly that a high percentage of its users are newbies ill-prepared to defend themselves against the unfamiliar tactics of the online unscrupulous. "Novice buyers are the biggest victims," says Rodrigo Sales, CEO of AuctionWatch, an online service that helps buyers and sellers manage their auction transactions. Unfortunately, some eBay users are unconcerned about scams because they've simply adopted many of the sleazy tactics themselves. Almost every one of more than a dozen experienced buyers and sellers I've spoken to admitted to sometimes using at least one blatantly unethical tactic, and several confessed to activity that could conceivably be prosecuted as felony fraud in most states.
An educated consumer is a safe consumer. In that spirit, here is Forbes complete guide to the dark side of online auction trading.

SHILL BIDDING
Shill bidding involves a seller directly or indirectly placing a bid on his or her own item in order to encourage legitimate bidders to bid higher. If there are no bidders on an item, for example, a shill bid or two can attract others, since bidders often feel there is safety in numbers. Or if there is only one bidder, shill bids give him or her someone to bid against, driving the price up. Sometimes bidding simply stalls, and a few well-timed shill bids will help rekindle bidders' enthusiasm. Shilling, which is against eBay's rules and in some cases is illegal, can be particularly devious and effective when done in the final minutes of an auction, at which point bidders may be tipped into a bidding frenzy. If the seller, or a confederate, finds that his or her own bid is ending up on top, under eBay's rules he or she can simply retract the bid. Even if the shill bid ends up winning the auction, the seller can e-mail the second-highest bidder afterward saying that the winning bidder turned out to be a deadbeat, and the item is available at that second-highest bid price.
Some sellers set up fairly elaborate shilling schemes. Many enlist friends or relatives as shills, and often entire communities of sellers—a group of antique dealers who know one another, for example—will help each other out. "If things are going slow, I know 10 different guys I can call to shoot in a bid, and I return the favor," says an eBay seller who makes an average profit of more than $2,000 a month on the site. (EBay may not be very effective in ferreting out cheaters, but it has proved fierce when it comes to dealing with those whose transgressions are exposed.)
Other sellers simply create multiple eBay identities, so that one seller can simulate a crowd of eager bidders simply by opening up and bidding from several eBay windows, each logged on under a different identity. In a rare case of prosecution for online shilling, a woman in Twinsburg, Ohio, was charged earlier this year with maintaining at least 36 eBay identities for shilling purposes. Sellers without multiple identities can borrow eBay IDs and passwords from friends to pull the same trick.
By many accounts, shilling is rife in the online auction world, and there probably isn't much eBay or others can do about it. Unlike a live auction, bidders and officials can't see the faces behind the bids. EBay claims its computers are programmed to ferret out patterns of shilling—it won't provide details, but presumably the software could look for bidders who always seem to bid on the same seller's merchandise without ever winning, or who frequently retract high bids. Still, eBay spokesperson Kevin Pursglove concedes the programs haven't solved the problem. "At 1,200 bids per minute," he says, "it's quite a chore."
It's possible that eBay doesn't see all shilling as a terrible thing, on the theory that shill bidding early in an auction can be regarded as harmless "pump priming." Shilling used to be within eBay's rules, in fact, and even today, according to Pursglove, such low-key shilling is unlikely to inspire any official action. Unless, apparently, the pump priming works a little too well: Last May, a California lawyer with at least five eBay identities was booted off the site for entering a $4,500 bid on the second of 10 days of bidding on a painting rumored to be by well-known California artist Richard Diebenkorn, kicking off a bidding frenzy that saw the price climb to $135,805. EBay later voided the sale.
EBay advises users to rely on its "proxy" bidding system to, among other things, avoid overpaying for items. In this system, you enter the maximum price you're willing to pay for an item, at which point the system will enter your bid as being just over the current high bid, and it will continue to bump your bid up just above any higher bids until your maximum bid is reached. Sellers who use shill bidding love it when legitimate buyers enlist proxy bidding in this way because it enables the seller to very quickly bring a bidder to his or her maximum via shill bids. The seller simply keeps entering shill bids until the system stops coming back with higher bids, at which point the seller just retracts his or her last bid. EBay essentially says, "So what?" to this scenario. On its site, it suggests that a buyer who uses proxy bidding need not be concerned about paying too much, because the maximum bid entered into the proxy system is supposed to be a price that the buyer is willing to pay. So where's the harm?
Of course, that misses the whole point. A major attraction of the auction process (for the bidder) is the opportunity to buy for less than your maximum—otherwise everyone would just immediately post their best bid, and the highest would take it. At eBay, as at any auction, you're supposed to be able to buy an item by topping the second-highest legitimate bid. If you end up paying more than that because you had to top a shill bid—even if you still end up at or below your maximum—you've been defrauded.
EBay and its defenders never tire of pointing to the site's feedback system, which allows buyers and sellers to rate each other publicly, as the ultimate safeguard against pervasive fraud. If a seller rips someone off, then the victim can say so in black and white, and other buyers will stay away. At least that's how the system is supposed to work. In actuality, the feedback system is massively corrupt and ends up abetting some of the most predatory behavior that takes place on eBay.
The biggest problem with feedback is retaliation: If you have a legitimate reason to single out someone for negative feedback, that person can easily turn around and trash your reputation with no justification. There's usually no way for someone reading a negative blurb to determine whether or not it bears any relation to reality. EBay won't help you out if you've been dinged by undeserved, retaliatory feedback. It provides the opportunity to add a response to feedback, but everyone hit by negative feedback, bogus or not, offers an indignant denial.
EBay's position? "If I were defrauded, I'd want to alert my fellow eBay users," says Pursglove. That's disingenuous. A buyer zapped by retaliatory feedback after providing negative comments on a sleazy seller has a real problem. One of the few protections eBay places in users' hands is the ability for sellers to cancel bids from buyers with whom they'd prefer not to do business. Many sellers adopt a policy of routinely canceling bids from buyers with negative feedback, and some even openly say so in their item listings. In other words, if you expose a fraudulent seller via feedback, you may be locking yourself out of a large number of auctions. No wonder most buyers hesitate to blow the whistle, even when it's clear they're dealing with a crook. This is why so many scammers operate with near impunity on eBay.
Even worse, some of the biggest scam artists manage to amass some of the best feedback because the system is simple to manipulate. Want some nice feedback without having to actually go through the trouble of giving a buyer a good experience? Just sell something nonexistent to a friend (you'll do it for him in return), or to one of your other identities. Do this sort of feedback "padding" or "surfing" 20 or so times, and you've got a sterling reputation. Or then there's feedback "trolling," where you can cheaply build legitimate feedback by selling a few dozen inexpensive items in an obliging manner. Now you've got a golden identity that can be used for a big score. It's a classic element in any con game.
Persistently unscrupulous sellers eventually run into buyers who are so honest (or whose impulse control and need for vengeance are so high) that they leave bad feedback in spite of the near certainty of retaliation. Does that close the sellers down? Hardly. True, eBay will at least temporarily boot you off if your negative feedbacks total four more than your positive feedbacks. But sleazy sellers rarely let things go that far. As soon as the eBay identity under which they do business has one or two negative feedback blurbs, they simply set up shop under one of the many other identities they most likely maintain. No need to close the old identity down; it can still be useful for shill bidding and feedback padding.
EBay established a new rule some months ago requiring sellers to provide a credit card number to cut down on this sort of identity shell game, but by that time many experienced sellers had already established dozens of identities. In July, in another rare case of eBay pressing charges against one of its members, a Chicago man accused of harassing other members was claimed by eBay to be operating more than 50 identities. Besides, fake or borrowed credit card numbers aren't all that hard to get hold of.
Auction sites could easily dig a little deeper into their sellers' real identities, but in keeping with the spirit of the Internet, they bristle at the notion of the company learning too much about members. That attitude has hamstrung efforts to detect and crack down on even blatant fraud, notes Delores Gardner of the Federal Trade Commission. "Nobody wants Big Brother," she says. "They want to use the least-intrusive means possible."

NONDELIVERY
The worst scam that a seller can run on a buyer is also the simplest: Take the buyer's payment and don't send anything in return. More than 80% of the online-auction complaints the FTC receives fall into this category.
A seller who pulls such a blatant rip-off can't expect to get away with it for long, at least under one identity. So multiple identities are mandatory. Equally important, the scam artists who do it right go for big kills: Typically, they'll troll for good feedback for one or more of their identities, then offer a number of expensive items in a fairly short period of time. To improve their take, they may also contact several of the non winning bidders to claim that they have another, identical item available, or that the high bidder got cold feet. Then they simply stall the increasingly impatient buyers. Under federal law, sellers have 30 days to deliver the goods. In 30 days, a crook can collect from dozens, even hundreds, of sellers before disappearing from the system.
Even after 30 days, who's going to try to hunt them down? Try telling your local police or your state attorney general's office that you lost $293—the average online auction loss reported to the National Consumer's League—to Cloudman6. Kind of makes you forget for a minute that this whole breaking down of geographical barriers and physical infrastructure was supposed to be a good thing, doesn't it? Expensive storefronts, back rooms filled with inventory, employees—maybe these aren't just useless overhead but rather are indicators of a commitment to legitimate business.
Some sellers go for a lower-key variation on this theme by sending out an item that's in worse condition or is otherwise less valuable than what was described in the listing. A particularly egregious example of this came to light recently in a San Diego courtroom, where eBay is being sued for ignoring repeated warnings that a ring of sellers was peddling phony sports memorabilia, ultimately cheating buyers out of $10 million. (It may be indicative of the general state of affairs in online auctions that eBay claims it didn't take the warnings seriously because it often receives bogus tips about supposedly fraudulent behavior from sellers who are simply trying to get a rival seller into trouble. In other words, the site apparently faces not only ordinary fraud but fraudulent fraud.)
Buyers aren't completely without defense on eBay. Escrow services, such as I-Escrow.com, hold buyer payments until the buyer acknowledges that the item has been received and is as advertised. Scam sellers won't agree to use an escrow service, of course, but many legitimate sellers won't either because of the costs—which can be as high as 4% of the sales price—and the time delays involved, not to mention being put at the mercy of the buyer's opinion. So insisting on escrow will cut you out of many good auctions.
Many people are convinced they'll be protected if they pay by credit card. Actually, though, many credit card companies put you through bureaucratic hell before agreeing to refund your money on a bad purchase, and some won't even talk to you if your deal was with a private seller. Besides, as with escrow, legitimate as well as crooked buyers may not accept credit cards.
EBay says it will reimburse burned buyers on items up to $200, minus a $25 deductible. I couldn't think of a legitimate way to test this claim, but in any case sellers can circumvent even the small chance of being investigated simply by arranging to close the deal privately, outside of the auction, using the trick of contacting the second-highest bidder to offer the item. When the deal is conducted in this fashion, eBay won't have anything to do with it.

BID SNIPING
It's not just sellers who play games with the system at eBay. Buyers can subvert the auction process and shortchange sellers by waiting until the final moments of an auction to shoot in a bid, a process known as bid sniping. EBay's position on sniping is that it's all part of the fun of online auctions; if you've got your maximum bid into the proxy system, the company argues, then the only way you'll lose the auction item is if the last-second bidding goes higher than your maximum, in which case you would have lost anyway, right?
Wrong. Most experienced buyers on eBay don't like entering their maximum bids into the proxy system. For one thing, it sets you up for being quickly shilled to your maximum. For another, it robs you of the opportunity to monitor other bidders' activity and alter your bidding strategy accordingly. Serious bidders are no more interested in having a computer dole out their bids than serious poker players would be in entering their maximum bet into a computer and having the computer play out the hand. But when snipers enter the picture, bidding strategies go out the window because you won't have an opportunity to top the sniper's last-moment bid. The obvious response is to become a sniper yourself. There are even software programs and Web sites that automate the sniping process, so you can be at the movies while your last-moment bid is being submitted. That's why so many eBay auctions involve low bidding throughout, then a flurry of high bids in the final instant.
A more devious version of bid sniping is known as bid shielding. Here's how it works: A person puts in a fairly low bid on an item early in an auction, immediately after which a confederate (or the same person operating through a second identity) puts in a bid so high that it's unlikely to be topped. Then, in the final moments of the auction, the confederate retracts his or her high bid, reestablishing the first person's low bid as the high bid. If it is timed correctly, no other bidders will have the opportunity to get in a bid before the close of the auction, leaving the low bid as winner.

FEEDBACK EXTORTION
When you win an auction, you haven't just agreed to buy an item; you've won the ability to break the seller's reputation on eBay via negative feedback, warranted or not.
Some buyers take advantage of that power, essentially blackmailing the seller into renegotiating the deal to the buyer's satisfaction. The buyer, of course, knows that if the seller holds firm and the buyer carries out his or her threat, he or she will be trashed in retaliation. But negative feedback tends to be much more damning for sellers than buyers, so mutually assured destruction isn't a viable deterrent. That's why legitimate sellers who do a lot of business on eBay are often quick to cave in to feedback extortionists, typically refunding some of the payment or sending additional product.
That's what happened to Tom Peace, who handles eBay used car sales for the Peter Fuller chain of car dealerships in New England. Peace sells an average of about 60 cars a month on eBay and claims his listings are obsessively honest about the cars' flaws. For a good reason: He lives in such fear of negative feedback, he says, that he will do almost anything to keep a customer from reacting badly, even if it means taking a loss on a sale. "Peter Fuller's reputation is more important than making money on every car," he says. That's why when a car dealer in Ohio complained that a car he bought from Peace lacked an owner's manual, Peace sent him one, even though it hadn't been promised in the listing. When the buyer later complained that there were no remotes for the alarm system—a system that had been deactivated and hadn't been mentioned in the listing—Peace dug up three and shipped them off, no charge. When the buyer said the spare tire was missing and he wanted $300 to replace it, Peace sent him a check, even though Peace had personally noted the spare tire before the car was picked up. When the same buyer said he found a scratch that Peace was sure hadn't been on the car, and wanted another $200 back, Peace begged him to give the car back for a full refund. The man refused, holding out for the money, and threatened to blast Peace with negative feedback. Peace didn't pay, and the man let loose, even sending copies of the bad feedback to some of Peace's other online customers. "I've sent eBay copies of his threatening notes, but they won't do anything," says Peace. "And there's no way in hell you can get a human being on the phone at the company."

BAD PAYMENT
Buyers have some straightforward options for shafting sellers: sending them bad checks or phony money orders. Most sellers know enough to let paper clear before shipping off the merchandise. But some sellers, especially those eager to get that positive feedback from a very friendly sounding buyer, will jump the gun. From the crooked buyer's point of view, it probably won't hurt to try. Sellers who wait before shipping usually won't bother to take any action against the buyer, figuring they'll just sell to the next-highest bidder or relist the item rather than risking retaliatory feedback. Sellers who find themselves burned after shipping the item might go after the buyer, but if the buyer is smart about it, he or she will be hard to track down.
A slightly more subtle ploy is to pay by credit card, receive the item, and then call the credit card company complaining that the item never arrived. Some credit card companies will place the burden of proof of delivery on the seller, and if the seller is paranoid about feedback and isn't being dinged for too large an amount of money, he or she may just write the whole thing off.
The most underhanded version of this category of ploy involves switching merchandise on the seller. Says AuctionWatch's Sales: "A guy breaks the screen on his Palm Pilot, buys a new one at auction, and then when he gets it he returns the damaged one and tells the seller it arrived in that condition." Even escrow may not be able to protect sellers from this trick.
Buyers who pull these sorts of scams can switch identities at will. EBay doesn't require any sort of ID whatsoever from buyers unless they place a bid of more than $15,000.

ARE THE VAST SELECTION AND PLENTIFUL BARGAINS on eBay worth having to face all this sneaky behavior? That's a personal decision. For myself, I figure that if I can average a 30% discount on the items that I successfully buy from eBay, which isn't difficult, then if I'm only scammed less than one out of four times, I'm probably still ahead of the game.
In any case, the online auction situation isn't likely to get much better in the foreseeable future. Why should eBay change its rules to cut down on fraud, as it so easily could? The company and other online auction sites thrive on the perception that they are big, friendly, virtual flea markets, so a crackdown would almost certainly do more harm than good to that image. Don't count on regulators to clean up online auctions, either. They've got bigger fish to fry. According to a Louis Harris survey commissioned by the National Consumers League, 92% of U.S. adults say they've been hit by scam telephone offers, a racket that bilks Americans out of $40 billion a year. EBay is barely a blip on the fraud radar screen in comparison.
So, as eBay exhorts users, trade on! Or, if you can't stomach the thought of occasionally getting bamboozled, consider this advice: Buy from an established online retailer. They operate professionally, want to protect their reputation, and strive to expand their customer base, also something usually can be worked out If you run into a problem.

Forbes editor Michael S. Malone holds shares in eBay.