A Case of Fraud on eBay
How It Was Resolved
in a journey through the
Fraud Protection Program at eBay
with my reflections on the
Economics and Ethics of Commerce on eBay, and in Real Life
I first published this essay in 2003, when eBay was still a relatively
new phenomenon, and the novelty and euphoria of individuals implementing
commerce online was wearing into more of a routine. EBay has changed
much of their strategy, to where the conditions in 2003 seem idyllic in
comparison to today. EBay discontinued the "Fraud Protection Program",
and replaced it with a weaker "Purchase Protection" scheme. Neither of
these provided the genuine protection of the long-established US law
of buying and selling, namely the Uniform Commercial Code. Instead we
have a system seemingly designed to encourage both buyers and sellers to
misbehave, after which buyers initiate disputes and sellers act surprised.
The only guaranteed result is a massive waste of time and transportation.
Buyer dissatisfaction and seller losses are more likely than ever.
I hoped that eBay would advance both fairness and freedom in an online
marketplace, but that hope remains unfulfilled.
-- March, 2018
While eBay is a ongoing flea-market of mammoth proportions and astonishing depth, actual fraudulent dealing is
rather rare, and successful resolutions even rarer. I find eBay to be a useful
source to buy exotic and surplus technical items for my more unusual projects,
but it seems that despite the utmost care, about 1 in 100 transactions something goes quite wrong.
This is usually a matter of
sellers playing loose with facts, such as over-optimistically stating the amount or quality of something,
or casually applying technical specifications without basis.
I take this as part of the overhead of doing business on eBay; you have to allow for it and
look at the benefits in the long run, not in any specific case.
However, after about 500 transactions, with a few of those bumpy ones, I encountered a more
serious case. I purchased a pair of specialized electric motors for $151, which had been offered for sale on eBay as new,
yet turned out to be quite used. After a lengthy and quite involved process, I was able to recover most of that
expense back from eBay under their Fraud Protection Program.
Here is the timeline:
Timeline of Events
- 1/31/2003: Listing starts. Seller describes items as "new old stock" and not "yet been put to work."
- 2/2/2003: Seller responds to an email question from me regarding technical specifications,
says the items "have never been fired up".
- 2/7/2003: Sales closes at $151. I send email to the seller asking for UPS ground shipping charges,
or to have shipping billed collect to my UPS account.
- 2/8/2003: Seller confirms he will ship via UPS collect on my account, and estimates charges at $14.
I send payment for the items via Paypal.
- 2/14/2003: Items arrive. It is clear they are used, not new as the seller stated.
- 2/21/2003: I email the seller asking why used items were sent, when he had described them as new.
I unilaterally offer to accept the goods in exchange for a partial refund that accounts for the non-conforming condition.
Seller replies that "the description was the same" when he bought them, and that "I have never fired
them up". Seller also states his opinion that he has no responsibility for the condition of the goods,
because he recited at the end of his description, "item is sold as is".
- 2/22/2003: After several unproductive email exchanges,
seller states that his language "new old stock" doesn't
mean that the items had not been well-used.
- 2/22/2003: A UPS bill arrives in the amount of $61 for collect shipping charges on
the package that was supposed to cost $14. The seller sent the heavy package
via UPS 2nd day air, even though UPS guarantees ground delivery in 2 days,
and even though I had specified ground delivery.
- 2/24/2003: I have UPS adjust the $61 to be collected from the shipper instead of from me.
Shippers are always liable to UPS for the costs, even if a shipment is sent collect.
UPS is very helpful to me in this way.
At least this part of the bargain won't be costing me.
- 2/27/2003: I begin a fraud claim by sending a "fraud alert" to eBay via their
"Fraud Protection Program" pages.
This is the first step in collecting their "insurance" (which eBay claims is not "insurance",
not wanting to be involved in all the government regulations applied to insurance companies,
but that is another quarrel).
I have no appreciation for how long the process is going to take.
- 3/1/2003: Lynn at eBay responds with email detailing the fraud reporting procedure.
In that procedure, eBay opens a case number, and both buyer and seller enter a brief statement
of their respective cases on an eBay Web page. The parties are also supposed to make a final attempt to settle
based on those textual statements.
I am also directed to the "Protection Claim Form" on an unpublicized eBay Web page, which I must print on paper and
submit by fax or post as the "real" claim (apparently submitting the online claim forms
is just a preliminary hurdle).
I also submit a parallel claim online to Paypal, who also promise "buyer protection".
- 3/6/2003: Paypal declines to resolve the fraud claim, stating that they only pay for
non-delivery, not for disputes about quality of goods.
- 5/1/2003: I submit the written fraud claim form to eBay's processing center in Utah via fax.
This requires that I get an "independent appraiser" to examine the goods and sign a statement
about their condition or value. Since eBay nowhere explains what this "independent
appraiser" is supposed to be, I select a friendly tool dealer to perform that service.
EBay requires that I send all this paperwork by fax or (horrors!) postal mail; for some reason eBay's universal approach
to doing all business via the Web doesn't apply to the "Fraud Protection Program".
It is also not clear to me why the processing is done in Utah, when eBay is in San Francisco.
I just do as I am told.
It was about at this point that I gave up hope of recovering my economic loss without a greater
waste of time and effort.
I am now just playing along to see how the game works.
- 5/3/2003: Duke, the claims adjuster at eBay,
emails me to say the written form is incomplete, that they need proof of payment.
I print out the Paypal information page and fax it to Utah.
Again it is not clear why I am providing this information, since Paypal is part of eBay.
This bureaucratic complexity seems very un-eBay-like.
- 5/13/2003: More email from eBay. Now they want another response from me saying that the
claim is still open and hasn't been resolved with the seller.
They also want my name, mailing address, and an estimate of "what you feel the merchandise you actually
received, would be appropriately valued at [sic]. (A good basis for this
estimate might be what you feel it would realistically sell for if
listed accurately on eBay)." Apparently eBay will not pay the full claim (isn't that your true loss?),
but deducts any shipping/handling you paid, a $25 "processing fee" for eBay, and any salvage value you
estimate for the goods.
(The cost of liquidating and realizing that salvage value is up to you.)
Among many other conditions listed
you must also retain the disputed goods in their received condition, for the duration of the process,
or else your claim will not be covered.
This latest email from Duke also advises me that if I do not respond to all of these requests within 72 hours,
eBay will throw out the whole claim.
On a level of gamesmanship, I suppose that having eBay pay at least a partial claim in real dollars
will keep their "Fraud Protection Program" genuine.
- 5/14/2003: Duke emails again, saying that eBay is "contacting the seller again" and
"continuing with our investigation", and to expect further response in "7 to 10 days".
This is turning into the hardest $100 I've ever earned.
- 5/20/2003: Duke advises:
"We are pleased to inform you that this claim has been found [sic] on your
behalf. A claim check will be issued in the amount of $106.14 through
eBay, Inc. If you do not receive a claim check in the next 60 days,
please notify us via email."
Sometime about this date or shortly after, the seller is NARU'ed (his feedback says he is "not a registered user",
his user ID history reports "User Suspended"),
I later discover. I am beginning to feel vindicated.
- 6/6/2003: The check is cut.
- 6/14/2003: The paper check arrives in my postal mail.
The check looks like this:
(see it at higher resolution) (certain indicia have been removed
to protect accounts numbers, etc.). I feel both vindicated, and like I never want to bother with this
My Observations After This Experience
- Selling "as is" is not a magical immunity incantation.
It does not override other specific representations you, as a seller, might make in describing something for sale.
For example, if you say something is "new", it must in fact be new, even if you say you are selling it "as is".
Your descriptions of qualities or specifications always constitute "express warranties" under the Uniform Commercial Code
(the law of buying and selling in every jurisdiction of the USA), and override any disclaimers, including "as is".
If you show a photo in an eBay listing, you had better deliver the object exposed in the photograph,
not just one "like it";
If you copy a photo from a manufacturer's Web site or shoot a photo of another specimen that you had handy, you must disclose that
the photo is only representational and not of the actual item.
You can't describe a horse, deliver a mule, and then plead that you said "as is".
- Likewise, the Latin proverb, "caveat emptor" (let the buyer beware), is merely good advice for buyers,
not a statement of some duty of buyers to ask every possible question about hidden defects, lest they be swindled.
The principle of caveat emptor is not absolution for stupid seller tricks,
like selling worn-out items that look good in a photograph, without disclosure of the essential facts.
You should disclose the general condition and any hidden defects of what you sell.
While a cautious buyer can ask questions, it is tedious to have to do so, and a marketplace like eBay cannot
operate efficiently when this basic trust is routinely violated. The burden is on the seller to disclose,
even in the crazy eBay milieu. The effort and verbiage to do this should be in proportion to the value at stake, but
even the most casual seller should take some time to "play store" in this way.
The law doesn't generally hold casual sellers responsible for such disclosures, however;
this duty is typically only enforceable for commercial dealers and traders.
The confusion with eBay is that anyone can effectively become a commercial dealer, without a storefront or even
a formal business organization.
The Uniform Commercial Code (UCC) is an elaborate legal system that governs commercial transactions
in all states (except Louisiana, which has similar state laws).
These laws are vital components of successfully running any business.
They are the essence of government enforcement of honest trading, no matter how casual.
Thanks to the UCC, you don't need to write a big contract every time you buy or
sell something, because the UCC is fair and well-written, and applies by default.
Large portions of the UCC have to do with preventing commercial
disputes, and resolving them fairly when they do occur.
Yet eBay is attempting to both circumvent and reinvent
these complex protocols of commercial dispute resolution, and is not doing a perfect job of it.
They act as if there is some better system to do business via the Internet that makes the UCC obsolete, and that
they want to be the authors of such a system.
My observations are:
- While there are some novel aspects to doing business on the Internet, most of the
UCC is still very applicable and vital.
- The UCC represents the distilled wisdom of centuries of human transactions.
To dispense with it as a stuffy, verbose legal code is to invite severe, uneconomic confusion.
- Most people, especially if not in a regular business, are utterly ignorant of the UCC, why it applies, and
why it is important.
- The UCC applies to just about everything you buy every day, even casual purchases.
- If eBay is, in effect, attempting to replace the UCC with their own improvised system, they can't hope to improve on the
UCC. Just because they stumbled into doing that, doesn't mean that they should continue.
- Avoiding the UCC because it is complex does not really simplify any system of commerce.
If anything, it makes it more complex, because the UCC is as simple as it can be to cover all the contingencies
of buying and selling.
- Isn't eBay really selling insurance, running a small-claims court, and banking (Paypal), even if they
use other descriptions than these?
Should they be claiming that the Internet exempts them from all the legal governance traditionally applied to such
- Negative feedback is rare on eBay, and rarely appears on a seller's record when you need to know.
I have bought items from a few sellers who deserved negative feedback on the transactions,
but I didn't want to risk getting a undeserved negative in retaliation, so I leave no feedback at all in such cases.
The exception is when the seller leaves me positive feedback first, then I can be completely frank without fear of
a retaliatory negative. The normal process should be for the buyer to accept the goods and give positive feedback
to the seller, and then the seller reciprocates. This is one of the eBay design issues that aficionados like
to debate to death.
- For most types of eBay sales, sellers with about 1 or more negative feedback items per 100,
or a track record of less than 100 total, are especially risky.
Some of the worst sellers, the kind who go bankrupt, get NARU'ed, and leave buyers with nothing,
get kicked off eBay with something like 98.5 percent positive feedback.
An active seller with 2 or 3 per hundred is almost certainly going to be a problem, unless the goods are
some peculiarly risky type of item.
A 95 percent positive seller has some serious problems; this in no way means you are
95 percent likely to be satisfied with any given transaction.
Problems are far more frequent than you'll ever see recorded as feedback.
It is a good thing that we don't know the true human condition in detail.
- Negative feedback items can also be undeserved.
These feedback comments typically consist of emotions and opinions instead of factual complaints.
When evaluating a seller, one might discount such input.
This kind of "noise" in the system, like any statistical process, is only reduced by large numbers.
- I offer unconditional 30-day returns on just about everything I
sell on eBay. The overhead cost alone in a dispute exceeds what you
might lose taking a return, not to mention the cost in stomach lining.
Major retailers learned this principle long ago. It applies just as much, if not more, to
casual sales. My returns rate is negligible (less than 1 percent),
so this is not a costly policy, and might even be a money-maker if it boosts the bidding on items.
Accepting returns is a simple and easy way to add genuine value to what you sell, and you earn the
return on that value for nothing more, in almost all cases, than adding a brief statement to your descriptions.
It does require that you be
complete, strictly factual and conservative in your listing descriptions,
so that you don't tempt buyers to be justifiably upset.
- The eBay "Fraud Protection Program" reminds me of small claims court:
even if you win, you can probably make new money faster than the time it takes to
engage a legal process to win back lost money.
The fees and other deductions that eBay retains, and the limit of $200, prove that the purpose is public relations and
not enforcing fair trading.
This is especially true of being in the
business of selling, or buying things for your business. If your business is so
weakly profitable that small-claims litigation is worth the time and effort, then you need another business.
- The term "new old stock" (NOS) means a new, unused item that has been around for a while, collecting dust.
Sometimes this is "as good as new" if the item is not subject to spoiling or other effects of aging.
It doesn't mean an old, used item that is "new to you".
You can't get away with the excuse that, "Well, I never used it."
Sadly, a few, rare characters will play this kind of childish word game.
By Gresham's law, their prominence among the population of eBay sellers is amplified.
- An AOL email address is always a risk factor for problems.
So is email containing bad spelling, grammatical errors, or poor techniques like
ill-formed paragraphs or HTML-only settings.
People who don't "get it" with email or the English language are likely not to have "gotten it" with eBay, either.
- The market is an abstract of humanity, with all its flawed magnificence.
As the world's largest markeplace, eBay is the biggest piece of art in the gallery of the human condition.
It is a phony, snooty attitude to think involvement in eBay is beneath your station in life.
Yes, some neighborhoods can be remarkably seedy, just like real life.
Parts of eBay are indeed a low-class flea market, but lately
the fine works of art and scientific instrumentation are to be found as well.
Stuff is just stuff. You have to shop in the grimy marketplace, if you are to find that pearl of great price.
EBay is surprisingly difficult to deal with when you try to list items for sale.
No intelligent person can possibly want to use their clumsy online forms to create listings.
EBay provides an XML interface to their system that would allow one to produce scripts to
initiate listings, but you have to pay substantial licensing and usage
fees for that "privilege".
Years ago, eBay had a facility (Mister Lister aka ML) where you send new listings
via email consisting of HTML with some simple markup added for title,
price, etc. This came with a Windows GUI editor that you could use to
compose new listings, but since it all came down to emailed text in a
simple mark-up language they specified, you could just as well compose
the text in Linux and email that. I had a nice canned format with which
I could easily modify details of a particular item. These would show up
as provisional listings on their site which you could optionally edit and
then OK to go live. This was free and open. I used it extensively, with
text files that I could copy and modify easily, and a simple script to
sendmail it over. Of course eBay cancelled this facility after a while.
After killing ML, eBay replaced it with "Turbo Lister" (TL), an annoying
Windows GUI app which you are *forced* to use to compose and send
listings. TL obviously communicates to eBay via XML, but eBay doesn't
permit you to do that on your own; details aren't disclosed such that
one could produce another composition method in plain text.
The only redeeming aspect of TL is that it lets you import listings in
a clumsy (but at least mostly documented by eBay) CSV format. So I
wrote a few more awk scripts that accept a simple mark-up text file
format for listings, and convert that to the import format for TL.
It isn't possible to convert and send the such listings directly;
after you edit the listing text and run the script, you have to click
(annoying) a bunch of stuff in TL by hand to import a CSV file for
an item, and then click some more to send it off to go live on eBay.
But it beats composing from scratch in TL.
There are occasional glitches in TL that prevent its listings from being
accepted by eBay at all, which eBay doesn't explain or fix, so sometimes
I still have to cut and paste from imported listings onto their Web site
item-listing pages as a last resort. Ugh!
Some Principles and Tips for Dealing on eBay and in Real Life
- In life in general, do not insist on absolute justice in small matters.
In the eternal perspective, the final day of judgment will even all books.
We should always be mindful of this as we order our temporal affairs.
If instead, you harbor a hard-bitten, worldly approach, you will ultimately be unhappy, and
constantly in fear of the next mishap. Business is ultimately a spiritual exercise.
In designing any ambition or worthwhile enterprise in your life, do not unnecessarily make the ultimate success
contingent on all the elements succeeding. If you aim to launch a rocket, then every element
of that design must work; this is the extraordinary nature of rocketry. But if you aim to launch a more ordinary business, do not
continge your success and happiness on, for example, every customer paying on time. Allow for imperfections,
and frame your mind such that the experience of injustice does not leave you with hard feelings.
This is critical to one's commercial business versus personal life. The world is fallen, and
commercial success in a fallen world only comes to those who can accept and accommodate some
proportion of foul-ups.
- A hallmark of professional conduct is confidence that you will make money in the long run,
but not necessarily in any given transaction. Be willing to accept the occasional economic loss with
good cheer. Perfectionism in such details is not a virtue, and is a severe handicap in commerce.
If your feelings of success hinge on every single transaction working out positively, then
you will will often feel unsuccessful. I do not advocate a mindless optimism, but it always helps to keep
the long-term trends in mind, rather than the crisis of the moment.
- See Don Lancaster's essays on eBay at http://www.tinaja.com/.
We don't agree on much (I've made big profits selling things I "can't hold at arms length"), but he is a critical thinker
and observer who ought to be emulated in those regards. And he is an authentic guru in several technical subjects who
just deserves to be read in general. If you know his personal history, you have to admire how he has successfully
exploited various trends in disparate technologies over the long run.
- For some reason, eBay tries to make composing listings easy, and winds up just making it infuriatingly difficult.
Creating listings directly on their Web pages is far too tedious.
Then they came up with "Mr Lister", where you could email text files to ebay.com to set up proposed listings,
which then took only a few maddening minutes of mouse-clicking to actually activate.
(Don't you love cute, whimsical names give to hideously complex systems, as if to make them seem simple?)
I wrote my own Linux tools to work with that difficult system, and things were tolerable for a few years.
Then eBay announced a new Windows-based listing tool, Turbo Lister,
and the decommissioning (not just deprecation) of Mr Lister in 2003.
All my hard-wrought tools were wasted.
I had to write new tools for Turbo Lister; I won't go into my complaints about how that has to work.
Lesson 1: If you are serious, make or buy your own listing tools, don't use eBay's.
Lesson 2:Hedge your tool investments in the event eBay chooses to spoil their utility.
Lesson 3: eBay is not a good thing because it makes selling easy, but because it makes it possible where it
wasn't possible before.
Lesson 4: Selling on eBay is quite complex, in many ways more so than running a physical storefront (but see Lesson 3).
- Computer wizards have a competitive advantage selling on eBay, because they can work around the
technical barriers to efficiency.
They also have an advantage buying; I have my own expert-agent software constantly searching eBay for rare items,
so I don't have to.
- Selling can be a little like entertainment or scientific research.
You may have good judgment for what will likely do OK, but you can't predict what will be a big hit.
Fortune favors the bold.
Beware the fallacy of "selection".
- Profit in any enterprise has everything to do with adding value.
When selling on eBay, information and presentation alone can contribute or amplify much of that value
(like selling the proverbial soap: it costs next to nothing to make, but is worth much more in the right dress).
You can exploit a great potential for creating this intangible value on eBay,
but it does take brains and effort to do so.
- The marketplace on eBay is both big and remarkably efficient,
thus things almost always sell for what they are worth, as the economic textbooks tell us.
- You can make money in arbitrage on eBay; just not reliably or all the time.
It is strictly an opportunistic prospect.
- The value of a personal reputation is undergoing a marvelous renaissance at eBay through the feedback system, flawed and
imperfect as it is. Every honorable person can be known for concrete virtues in commerce, or lack thereof.
When buying, I search nowadays as much through favorite sellers as by title.
- Online auctions are a natural monopoly, and eBay is that monopoly.
It is gradually fulfilling all the textbook characteristics of a monopoly. Learn some economics,
and you can predict the future in this regard.
- Ludwig von Mises understood the economics now unraveling on eBay better than any other
economist, although he died long ago. This is especially true of his views of entrepreneurship.
His theory of money and credit predicted Paypal.
- You can educate your kids with eBay selling. Let them participate in whatever aspects they can handle.
Pay them a share (or all) of the profits in cash.
- "A quick nickel beats a slow dime" (Bruce Williams).
Velocity of sales is a definite component of profitability, not just price and volume.
The speed of an auction should make up for any discounted selling price.
- Frequent the well-travled spice routes: domestic not international, what you know not what you don't.
Any tempting profits to marginal expansions would be better sought improving your core business.
- Arrange your life with the flexibility to exploit occasions for novel good business.
If you can't be interrupted to claim a big prize, you are limited to a safe, mediocre career.
If you don't enjoy taking risks for profit, then work for wages.
- Transactions will often go wrong. Design your system such that it succeeds from general
trends, and not from unbroken strings of perfect outcomes.
If you cannot be happy in such a system, then eBay is not for you.
- Google is to intellectual life (helps you find and acquire what you want to know),
as eBay is to commerce (helps you find and acquire what you want to own).
Each is revolutionary, massive, more powerful than the old ways
(libraries, storefront or catalog retailing), and without peer in
- Although eBay acts as the world's biggest lending library (Lancaster: buy the book you want,
read it, sell it in turn), a world that has eBay should have no use for paper books any longer.
Economics predicts the price of any item equilibrates at its marginal cost of production; why are we
paying $28 for new hardcover books that require $0.0028 worth of Internet bandwidth to download?
The paper publishing industry is doomed; it only exists because paper was once the cheapest way
to distribute the written word. If it were to magically disappear overnight, it would not be
reconstructed in anything like its present form or scale (the same could be said of the landline telephone network,
or broadcast television).
The same applies to every business that is in essence a purveyor of information.
The market will not tolerate premium prices for obsolete, expensive media that
persist in commerce chiefly as impediments to casual copying.
We would not long be paying $28 for a tank of gasoline, if it could have been delivered for
1/10,000 of that price; how can books still command that price?
The government may be able to still enforce profitable obsolescence in landline telephones and broadcast
TV, because of the locality of the physical apparatus (utility poles and transmitting towers),
but fluid fungibility of Internet data disperses information qua information beyond the easy reach
of government licensing.
- Since eBay does not permit "buyer's choice" listings, profitable sales of low-cost items in
detailed variations is not possible (e.g., timing belts in 1000s of length/width/pitch combinations,
with little demand for any given size, but significant aggregate demand).
Have a comment or question about this page? Email me at:
Richard J. Kinch
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