Things to Take Note to Prevent E-auction Fraud When A Consumer Participating in An E-Auction

E-auctions is an electronic "reverse" auction where suppliers use internet-based software to bid against each other online and in real time against a published specification. E-auctions can be based on price alone or can use transformational bidding to account for other criteria such as quality and delivery. E-auctions are most often used in the final stages of the procurement where all "non-price" factors have already been agreed like quality evaluation and terms and conditions.

E-auctions work best where:

• the requirement is of sufficient size to attract competition
• the requirement can be accurately specified
• there is a competitive market

Types of e-auction fraud:

• Bid shielding: Used by buyers to push down the price
  
• Shilling: Used by sellers to push up the price
  
• Fake photos and misleading descriptions
• Improper grading techniques
• Bid siphoning
• Selling reproductions
• Failure to pay
• Failure to pay the auction house
• High shipping costs and handling fees
• Lose and damage claims
• Fake Escrow Services
• Switch and return
• Other frauds
  

Protecting against e-auction fraud:

1. User identity verification: Verifying users' identification to ensure their validity. E.g. IC number, driver's license number, date of birth
2. Authentication services: Verifying identity of a party who generated some data, and of the integrity if the data, and to determine whether an item is genuine and described appropriately.
3. Grading Services: To determine the physical condition of an item.
   
4. Feedback: A way for participants in a transaction to rate one another and for others to see those ratings. And a large percentage of negative feedbacks is a clear signal to stay away from a particular seller.
5. Insurance Policy: Some sites (Amazon.com) provide insurance on auction frauds but extra cost is incurred.
6. Escrow Service: To avoid being deceived by fraudulent email, choose to pay or be paid through an Escrow Service, that both buyers and sellers in a deal are protected with a independent third party. This third party will verify the payment from the buyer and inform the seller. This third party will also hold onto the money from buyer until confirmation is received from buyer to pay seller.
7. Nonpayment Punishment: A friendly warning for first-time offense, sterner warning for second-time offense, a 30-day suspension for a third-time offense, an indefinite suspension for a fourth-time offense to protect sellers.
8. Item Verification: It provides a way of tracking an item if it charges ownership in future. Neutral third parties will evaluate and identify an item through a variety of means.