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| Wilson, Tauzin Want Details On Shilling and Online Auction Fraud |
June 26, 2001 |
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| WASHINGTON (JUNE 26) – As Congress continues to examine ways to protect consumers online and combat cyber-scams, House Energy and Commerce Committee Chairman Billy Tauzin (R-LA) and Committee Member Rep. Heather Wilson (R-NM) have written several leading e-commerce companies seeking details on marketplace efforts to curb online auction fraud, specifically “shilling” (the practice of driving up bidding prices on behalf of the seller).
“Please analyze auction rules to determine whether particular rules encourage, discourage or fail to affect fraudulent behavior,” read letters sent yesterday to the chief executives of Yahoo! Inc., Amazon.com Inc., and eBAY Inc. “What processes do online auction companies use to determine the affect of auction rules on fraudulent behavior?
“What is the incidence of shill bidding in online auctions? Are online auction companies successful in detecting shill bidders,” Tauzin and Wilson want to know. “What steps could the companies take to reduce shill bidding in auctions?”
Additionally, Chairman Tauzin and Meg Whitman, President and CEO of eBAY will discuss online auction fraud and other Internet issues – Wednesday, June 27, at 10:30 a.m. in room 2218 of the Rayburn House Office Building – at a media availability.
(Below is a copy of the letter sent to Terry Semel, Chairman and CEO of Yahoo!. Identical letters were sent to Amazon.com founder and CEO Jeffrey Bezos, and eBAY’s Whitman.)
June 25, 2001
Terry S. Semel
Chairman and Chief Executive Officer
Yahoo! Inc.
701 First Avenue
Sunnyvale, California 94089
Dear Mr. Semel:
I am writing to request your assistance in assessing the prevalence of online auction fraud and the steps that are being taken to combat this fraud. We are particularly interested in what is being done to combat the practice of shilling.
In a recent study, the Internet Fraud Complaint Center reported that from May to November 2000, auction fraud accounted for 64.1% of Internet fraud complaints filed with the Center. According to these statistics, the occurrence of online auction fraud is higher than the occurrence of all other online fraud combined. The ability to disguise identity, revoke bids and maintain multiple online identities may facilitate undesirable practices like shilling.
Although there are copious statistics on Internet auction fraud, there is little analysis of the practices that facilitate that fraud. We request your assistance in determining the causes of online auction fraud as well as solutions to help protect consumers and boost confidence in e-commerce. We would be interested in specific recommendations. Please consider the following questions in your response:
1. What types of fraudulent activity occur in online auction communities?
2. Please analyze auction rules to determine whether particular rules encourage, discourage or fail to affect fraudulent behavior. What processes do online auction companies use to determine the affect of auction rules on fraudulent behavior?
3. Does method of payment affect the occurrence of fraud in Internet auction transactions?
4. What is the incidence of shill bidding in online auctions? Are online auction companies successful in detecting shill bidders? What steps could the companies take to reduce shill bidding in auctions?
5. In private auctions, bidders email addresses are concealed both during the auction and after the auction has closed. Only the seller and high bidder know who bought the item. Does this practice encourage shill bidding?
6. Online auction participants rely on feedback ratings to help protect themselves from unreliable or fraudulent sellers or buyers. Feedback “padding” interferes with a participant’s ability to make informed participation decisions. What is the incidence of feedback “padding?” To what extent does “padding” diminish the value of feedback as a tool for making informed decisions about with whom to conduct business on an auction site?
7. Do auction rules that allow for changes in identity or the maintenance of multiple identities facilitate fraudulent practices?
8. Please identify state laws or regulations that interfere with commerce on your site. Do these rules affect your ability to combat fraud on your site?
9. Please analyze the histories of the attached online auctions (if they occurred on your site) to determine if activity therein was inappropriate or fraudulent.
Thank you for your assistance with this matter.
Sincerely,
W.J. “Billy” Tauzin, Chairman
Heather Wilson, Member
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