eBay keeps fraud at bay

Brad Stone

Brad Stone

The online auction giant, eBay, wants the world to know that it is trying to clean up its site.

In January the 12-year-old company, based in San Jose, California, announced what it characterised as a significant shift in its philosophy towards protecting eBay members from fraud.

Instead of a more hands-off approach that emphasised giving members the tools to make their own choices, it rolled out new efforts to combat the sale of counterfeit items and revised its feedback system to give buyers and sellers more information about each other.

At the yearly three-day eBay Live conference for its members, which begins today in Boston, the company plans to discuss the progress of those efforts for the first time.

The results are promising. The company will report a 60percent decline in the number of complaints from luxury goods makers that counterfeits of their products are being sold on the site.

It also says that in the past four months it has banished tens of thousands of sellers from its auction marketplace who did not meet new, elevated standards.

But many of its efforts have also fallen short. Companies whose products are not yet protected by the new anti-counterfeiting measures still complain about piracy on eBay, and some longtime sellers complain that they are left in the dark about changes to the complex ecosystem on which they depend.

"Whenever you do things on eBay, you never necessarily get 100percent of people happy with you," says Meg Whitman, eBay's chief executive.

"We are very pleased with our anti-counterfeit efforts. We've seen some dramatic results.

"We've also seen good adoption of our enhanced feedback system, though not every seller loves it. But I think over time it will help."

Some ominous statistics forced eBay to get tough on fraud. The percentage of active users on the site, those who have participated in auctions in the past 12 months, declined from 41percent in 2005 to 36percent this year - a possible sign that fewer eBay members find the site a safe place to do business.

"A piece of improving the buyer experience is improving trust and safety," Whitman says.

The cornerstone of that effort is the anti-counterfeiting campaign.

eBay says the sale of fake brand-name goods on its site exploded when it expanded to China in 2004, but rights holders have complained to eBay about the problem for years.

eBay has responded in the past by asking companies to monitor auctions of their products and send them notices on items they believe to be fraudulent.

That frustrated rights holders, who had to spend valuable time and money scouring the site.

In 2004 the jewellery retailer Tiffany sued eBay in New York after concluding that 73 percent of the products sold on the auction site that bore its name were counterfeit. The trial is to start in October.

eBay's biggest challenge is making improvements to a network that has so many stakeholders that it is almost impossible to nudge it painlessly in any one direction.

"Fraud is inherent in marketplaces of our scale," says Whitman.

"We have got to stay ahead of the bad guys. They get more sophisticated so we have to get more sophisticated."