July 26 — Scam artists have figured out a way to win eBay auctions on the cheap. In a process known as “bid shielding,” two people work in tandem — one lays down a lowball bid, then the other puts in an outrageously high bid that scares off all other bidders. At the last moment, the high bidder withdraws, leaving the lowball bidder the winner. And victims may never know why their items sold for such a low price.
A SPOKESMAN FOR EBAY confirmed the existence of the bid shielding” racket but said the problem is not widespread.
“It happens very, very rarely,” said eBay’s Kevin Pursglove. So rarely that he refused to hazard a guess about the frequency. “The great percentage of people who trade on eBay are good people, ... but like in the real world at large, in every community you always find somebody who wants to bend the rules a little bit.” He added that eBay uses software to detect suspicious bidding and boots out customers who cheat.
But eBay seller Jason Hamilton of Orlando, Fla., doesn’t think that software is very effective. He was scammed Sunday night.
As Hamilton watched the final moments of the auction for his high-end radio-controlled truck, the top bid of $405 was withdrawn with 15 seconds to go. He had to settle for $255.
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“I was sitting there hitting ‘refresh’ on my browser when it happened.,” Hamilton said. “It was frustrating. Then I checked on the bidder and saw he had withdrawn bids before.
“It should be known by everyone who uses eBay. It’s one of those ‘it happened to me, and you could be next situations.’”
eBay’s terms of service say a user can withdraw a bid only for legitimate reasons, such as a typographical error, or if the seller’s offer somehow changes. Those who abuse the withdrawal tactic will be suspended or booted off the service, Pursglove said; victims can re-auction the item. Customers who spot suspicious activity are instructed to write to Helpdesk@ebay.com
But victims may never know what happened. eBay doesn’t list amounts for withdrawn bids under bid history — the history simply displays that a bid or two were withdrawn. Hamilton only discovered the scam because he was watching as it happened, and he blames the structure of eBay for permitting the scam.
“The easiest fix to this is to disallow bidders to retract bids,” Hamilton writes on a Web page he created to chronicle his complaint. “Canceling should be an option left solely to the discretion of the seller.”
Amazon’s cancellation policy is similar to eBay’s; Yahoo only allows sellers to cancel bids; uBid says bids cannot be canceled.
Booting the offending bidder also isn’t a solid deterrent, Hamilton argues, because suspended customers can create new eBay personas and pull the scam again. eBay beats earnings estimates
Also Monday, eBay bested Wall Street’s consensus earnings estimates by a penny a share for the latest quarter as revenues surged 154 percent, registered users jumped by 46 percent and the number of hosted auctions increased 29 percent. Consolidated net income excluding the effects of non-cash and one-time merger costs, was $5.1 million, or 4 cents per diluted share, compared with $5.2 million, or a nickel a share, during the second quarter of 1998.
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