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Shill Bidding on eBay: A Case Study

Discussion in 'Internet & Social Media Law' started by PhilipCohen, Jul 2, 2009.

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  1. PhilipCohen

    PhilipCohen Law Topic Starter New Member

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    My jurisdiction is: Australia

    For any eBay “buyers” that are still interested I have done a major update to my detailed case study of shill bidding on eBay and the abuse of eBay’s proxy bidding system—all exacerbated by eBay’s introduction of “hidden bidders”—

    Also now included is a postscript containing a response from eBay to a journalist who put the matter of these cases of shill bidding to eBay. Apparently, whereas they will not tell a reporting eBay user anything, they will give an investigative journalist a response—even if it is disingenuous.

    I am wondering how long it is going to take before the various consumer affairs regulators finally give this eBay snake a good shake?
     
  2. Michael Wechsler

    Michael Wechsler Administrator Staff Member

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    "Shill bidding is the act of bidding on your own auction against other bidders in order to raise the price at which your item will eventually sell. It is a violation of both eBay rules and federal law."

    Going after these guys is tough, that is why it exists. Considering the fraud that has gone on in the US, it seems these guys are even on the bottom of the totem pole. These are scary times. The best that can be done is to campaign against eBay's introduction of new products that create additional problems. I don't think eBay wants to lose its credibility and the problem is much on how to stop it from continuing to occur.
     
  3. PhilipCohen

    PhilipCohen Law Topic Starter New Member

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    “The Register” has done a story on the problem of shill bidding on eBay at
    theregister.co.uk/2009/07/10/ebay_and_shill_bidding
     
  4. tpajet

    tpajet New Member

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    The information is much more in the open now. It's after a sale is over, but it's there. When the sale is over, go to the bid history. It will show each bidder on that item, as well as how many items that person has bid on for that seller. If you see tons of bids to that seller's items, it kind of becomes clear it's a shill.

    However eBay should be automatically logging this.
     
  5. PhilipCohen

    PhilipCohen Law Topic Starter New Member

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    You have to check the Bid History pages before you bid. There is not much point in suspecting that you have been shilled after you have won the item, because you will get no support in the matter from eBay.

    The only system eBay has for the detection of shill bidding is “reactive” and comes into operation, reluctantly, after one of those annoying users reports some suspicious activity and, even then, if eBay does find evidence of shill bidding, they won’t so advise the victim. The only result may be that the naughty seller may receive a “thrashing with a feather”—nothing more!

    That is effectively an “aiding and abetting” of a the fraudster after the fact: the concealing of a criminal act, surely a crime in itself. If follows therefore that eBay has no need for a mechanism for a defrauded buyer to recover the funds he has been defrauded of.

    eBay, demonstrably, has no proactive system for the detection of shill bidding. Let's face it, why would they bother, it's actually of advantage to their bottom line—at least in the short term. The long term undoubtedly will be another matter. But then the boys in control can’t see any further than their next quarter’s performance bonuses, you know, those bonuses that aren’t presently getting—because they aren’t performing!

    Anyway, the link to "The Register" story (which contains a link to the case study referred to therein) is at
    theregister.co.uk/2009/07/10/ebay_and_shill_bidding

    I look forward to the second quarter results due out on the 22nd. Should make interesting reading once all the spin is peeled off.
     
    harigupta likes this.
  6. harigupta

    harigupta New Member

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    SMH Article and shill bidding

    Dear Philip,

    Was very interested in your article in the Sydney Morning Herald - looks as though you have done extensive research on this and I must say that even 'non-fraudulent' ebay sellers employ this or similar methods to hike up their prices. I really feel that the ACCC should be doing something about this - Ebay has become a untouchable giant with all their disclaimers and limitations of liability and I feel that the courts of equity need to get involved to look past the sham like user agreements that all help Ebay and disadvantage consumers. Buyer protection does not exist in online trading sites (I will no longer call them online auction sites).

    Please keep up the great work

    Kind regards

    Hari
     
  7. Michael Wechsler

    Michael Wechsler Administrator Staff Member

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    How do you guys suggest policy handling with regard to your suspect sham members? What standards would you use? Is this issue one eBay should be taking a hard stance or would it be more appropriate to educate users. After all, how can one know for sure that all these bids are definitely illegitimate? There is a probability but rough to be sure - perhaps raising your recommendations might be a good start.
     
  8. tpajet

    tpajet New Member

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    I would say it's something that eBay needs to address. And their computers could easily do most of the dirty work for them.

    They already show if a particular bidder has bid with that seller, and how many times.

    In my case, I do antique radios as a hobby, and sometimes buy radios or tbues on ebay. It is possible that I could (and in fact I have) bought from the same seller in the past (if they have multiple auctions or are a regular seller). So there are legitimate cases of someone bidding to a perticular seller multiple times.

    The red flag here needs to be if the repeat bidder never wins, or wins a small number of auctions from that seller, and also if the bidder is repeat bidding on unrelated items from the same seller. Also if the bidder only ever bids to that one seller, or only a couple.

    I think if it's a regular seller that they probaby have created another user account instead of having a friend bid. So it wouldn't be that hard if eBay saw that the bidder has bid on 1,000 items from that same person, never wins them (or very rarely) and they even need to keep an eye out for if the items that the bidder wins show back up for sale on eBay.

    The problem with eBay is trying to get them to listen. Their whole feedback system is screwed up these days, and I tried to make a suggestion about how to change it to make it better, but still skirt the problems that led to the change. There is so much red tape that you can't really get anyone to listen. They claim it is becasue they want to make sure it's not one of their employees making the suggestion (posing as someone else) but not sure why that would matter.
     
    Last edited: Jul 23, 2009
  9. Michael Wechsler

    Michael Wechsler Administrator Staff Member

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    Very interesting... the challenge here is that the victim probably hasn't suffered a large enough loss (perhaps $50-150) although in the aggregate, the seller benefits greatly. Let me think about this a little - although I still don't see any simple resolution.

    Note - I have often seen the same bidder seem to bid on a number of items, usually in tickets. But the truth is that I can't tell whether it's a shill bidder or someone else privately looking to buy and resell items. As I said, I'll have to give this some thought - but what do you think of eBay's earnings release? Brutal!
     
  10. PhilipCohen

    PhilipCohen Law Topic Starter New Member

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    My fifth post. Sorry about the "work around", but I need at least five posts before I can post a link.
     
    Last edited: Jul 26, 2009
  11. PhilipCohen

    PhilipCohen Law Topic Starter New Member

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    I don’t know how easy it would be for eBay to implement a “shill score” mechanism or the like, I only know that it can be demonstrated that they are doing nothing proactive, which in effect is an aiding and abetting of the fraudsters before the fact. And, after the fact, eBay will deliberately cover up the fraud, surely a crime in itself.

    As long as you don’t notice that you have been defrauded then there is no problem for eBay: they get a higher FVF. I have no doubt that eBay are totally disinterested in spending any of their vast revenue on any such mechanism that might actually reduce their revenue, even in the short term, no matter how slightly. (Actually, they are succeeding very nicely in reducing their revenue with their many other inane actions.)

    Educate the users? All 84 million of them? Doubtful. No, eBay offers a service to consumers from which they make a great deal of money; they surely have an obligation to supply users with at least the security that they claim to supply but in fact do not. They are a most unscrupulous, disingenuous organisation.

    What could eBay do about it? I have attempted to comment on the possibilities in the case study posted on auctionbytes.com.

    Is it a shill or is it not a shill? Difficult to say with any certainty most times; but, would you believe, I have had people question whether or not the examples that I quote in the case study are in fact examples of shill bidding! Dah! I have to assume that those who don’t want too see are either idiots or are themselves practisers of the craft.

    For those who have not perused my autionbytes “diatribe” (as one critic called it) it is a living document and still growing at

    http://www.auctionbytes.com/forum/phpBB/viewtopic.php?t=24033

    What do we think of eBay’s earning release? When you have an incompetent at the helm, what else can you expect; more interesting is the “spin” that the captain (and some of the idiot analysts) put on the results; one could get the impression that eBay had actually offered an improved result, which, in some respects, is what Amazon actually did do. Frankly, if it all wasn’t so absurd it would be comical.

    The real question is, can the turkey, Donahoe, possibly survive another Xmas?
     
    Last edited: Jul 26, 2009
  12. harigupta

    harigupta New Member

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    Philip,

    Would you say that victims of this or other fraud on Ebay have an action in tort against Ebay for the damages? Especially given Ebay's secrecy and apparent complicity in the fraud?

    Hari
     
  13. PhilipCohen

    PhilipCohen Law Topic Starter New Member

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    Hi harigupta,

    That is the question! I have to rely on my common sense. I am not a lawyer and that is the reason I here posted a link to my little "diatribe" in the hope that someone expert in the law might comment thereon.

    Many experienced eBay users have been complaining about eBay’s disingenuous attitude to shill bidding since time began. Why someone else has not previously done a detailed examination of this "clunky" auction system, I cannot say. However, I have done the exercise, and I can only offer the facts as I found them, and draw some of my own conclusions therefrom.

    I would like to understand, however, why no governmental regulator seems interested in taking eBay to task, if not for the facilitating of such fraud before the fact, then at least for their clearly demonstrable concealing of such fraud after the fact. I always had the impression that the concealing of a crime was in itself a crime. Maybe such laws only apply to we peasants?
     
  14. Michael Wechsler

    Michael Wechsler Administrator Staff Member

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    Sorry about the link posting requirement - we have to do what we need to do!

    The problem is that eBay doesn't have a duty that I am aware to protect this exploitation. It's our ability as consumers to choose not to use eBay. My guess is that government regulators have much more clear cut examples of fraud and criminals. eBay isn't the criminal - they are just arguably a facilitator and then the government would need to then compile evidence against every bidder. That's a lot of investigative joy unfortunately even though I'm with you on this.
     
  15. harigupta

    harigupta New Member

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    What would the situation be in a real auction, should a plant bid against real bidders. If found out, the plant would be up for criminal and tortious damages, but would the auction house be liable? I'd say, unless they actually aided and abetted the action, they'd get away scott free. However, let's say that an auction house has a 10% occurence of this type of bidding. I'd say that the consumer protection agency involve would be closing down that auction house pretty quickly or at least consumers would receive a strong warning that they should be aware of the track record of the auction house. Admittedly, as we have already mentioned, Ebay pertains not to be an online auction house - it is simply a means by which buyers and sellers may meet. However, the fact that a bidding system can be used and the fact that they have placed software in place that allows fraudulent bidding or shill bidding to take place implies that although an actual duty of care might not be found there may be an implied duty of care (to create software that prevents known criminality from taking place) that regulators/consumer protection agencies would be able to latch onto. The problem with a leviathon, is that it is so hard to control - especially when there are humans involved in its creation and its functioning. Having said that, as mentioned above, the losses are too small as individual losses to make a difference to Ebay - without a class action Ebay will not bother to do anything - I certainly wouldn't invest money into a fix that will result in me losing money. I think that public awareness is really important, and that's where I really must applaud Philip in his campaign. Who knows, maybe someone who counts may fall victim and then the consumer protection agencies may listen!

    Hari
     
  16. Michael Wechsler

    Michael Wechsler Administrator Staff Member

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    I certainly applaud Philip with his crusade. My comments are made in the hope of helping shape the way it's being pursued and hopefully effect a change for the better.
     
  17. jackey

    jackey Banned

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    rerply

    That is effectively an “aiding and abetting” of a the fraudster after the fact: the concealing of a criminal act, surely a crime in itself. If follows therefore that eBay has no need for a mechanism for a defrauded buyer to recover the funds he has been defrauded of.
     
  18. PhilipCohen

    PhilipCohen Law Topic Starter New Member

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    Shill Bidding on eBay: an Ugly Story

    My eighth post ...
     
  19. PhilipCohen

    PhilipCohen Law Topic Starter New Member

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  20. PhilipCohen

    PhilipCohen Law Topic Starter New Member

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