A Guide for Buyers and Sellers
looking for a collectible or thinking about selling that treasure you
discovered in the attic, an Internet auction may be just the thing for
Since their first appearance in 1995, Internet
auctions have become one of the hottest phenomena of the web. They
offer buyers a "virtual flea market" with an endless range of
merchandise from around the world and they give sellers a
"storefront" from which to market everything from sports memorabilia to
computer systems to millions of international buyers.
Whether you're a buyer or a seller, there's a smart
way to "do" Internet auctions. Here's how to make sure you get the most
from your auction action.
Internet auctions are bazaars. In most cases,
sellers offer one item at a time, but sometimes sellers offer multiple
lots of the same item. The auction web sites often refer to auctions of
multiple items as "Dutch" or "English" auctions. At some sites, the
seller may be required to sell all items at the price of the lowest
successful bid. At other sites, the seller is entitled to the prices
bid by each of the highest bidders.
Occasionally, Internet auction sellers set a "reserve
price," which is the lowest price they will accept for an item. Some
sites disclose the reserve price during the auction.
The bidding for each auction closes at a scheduled
time, when the highest bidder "wins." In the case of sales of multiple
lots, the participants with the highest bids at the close of the
auction are obligated to buy the items. If no one bids at or above the
reserve price, the auction closes without a "winner." At the close of a
successful auction, the buyer and seller communicate usually by
e-mail to arrange for payment and delivery of the goods.
Internet auctions can be business-to-person
Operators of business-to-person auction sites have
physical control of the merchandise being offered and accept payment
for the goods. In person-to-person auctions, individual sellers or
small businesses offer their items for auction directly to consumers.
Generally, the seller not the site has physical
possession of the merchandise. After the auction closes, the seller is
responsible for dealing directly with the highest bidder to arrange for
payment and delivery.
Buyers may have several payment options,
including credit card, debit card, personal check, cashier's check,
money order, cash on delivery and escrow services. However, all sellers
do not accept all forms of payment.
Credit cards offer buyers the most consumer
protections, including the right to seek a credit from the credit card
issuer if the product is not delivered or if the product received isn't
the product ordered. Typically, sellers using business-to-person
auction sites accept payment by credit card. But many sellers in
person-to-person auctions don't. Usually they require payment by
cashier's check or money order before they send the item to the winning
Some sellers agree to use an escrow service. For a fee
generally 5 percent of the cost of the item, paid by the buyer
an escrow service accepts payment from the buyer via check,
money order or credit card. The service releases the money to the
seller only after the buyer receives and approves the merchandise. This
helps protect buyers from ending up empty-handed after paying their
money. The flip side? Using an escrow service can delay the deal. As
with any business transaction, investigate the escrow service's
reputation before signing on to the service.
Occasionally, sellers agree to send items COD, with
the buyer paying when the item is received.
According to the Federal Trade Commission, Internet
auction fraud has become a significant problem. Most consumer
complaints center on sellers who:
||don't deliver the advertised goods;
||deliver something far less valuable than they
||don't deliver in a timely way; or
||fail to disclose all the relevant information
about the product or terms of the sale.
You're A Buyer...
Identify the seller
and check the seller's feedback rating.
Do your homework. Be
sure you understand what you're bidding on, its relative value and all
terms and conditions of the sale, including the seller's return
policies and who pays for shipping.
Establish your top
price and stick to it.
Evaluate your payment
options. If possible, use a credit card. It offers the most protection
if there's a problem. Consider using an escrow service if the seller
doesn't accept credit cards.
||Find out who you're dealing with. Verify the
seller's identity before you place your bid, and be wary of sellers who
you can't identify. Some sellers may use a forged e-mail header, which
makes follow-up contact close to impossible.
||Get a telephone number for the seller and use
it to confirm that you have some way other than e-mail to contact the
||Check to see how the seller has treated other
buyers. Some auction sites post feedback ratings of sellers based on
comments by other buyers. This may give you some idea of how you'll be
treated, but beware of "shill" testimonials.
||Before you bid, find out what form of payment
the seller will accept. If the seller accepts only cashier's checks or
money orders, decide whether you are willing to take the risk of
sending your payment before you receive the product.
||Find out who pays for shipping and delivery.
Generally, sellers specify the cost of shipping the item and give
buyers the option of express delivery for an additional fee. If you're
uncertain about shipping costs, check with the seller before you bid.
||Check on the seller's return policy. Can you
return the item for a full refund if you're not satisfied with it? If
you return it, are you required to pay shipping costs or a restocking
||If you have any questions about the item,
e-mail or phone the seller. Don't place your bid until your questions
have been answered.
Know the Product
||When considering whether to place a bid, know
exactly what you're buying. Read the seller's description of the item
or service, and if a photograph is posted, take time to look at it
||Try to determine the relative value of an item
before you bid. There's no guarantee that something is a good deal just
because it's on the Internet auction block. "Brick-and-mortar" stores
and online price-trading sites may be good reality checks on price. If
you find a bargain at an auction site, remember the adage about deals
that seem too good to be true. They usually are.
||Read the fine print. Look for words like
"refurbished," "close-out," "discontinued" or "off- brand," especially
when shopping for computer gear or electronic equipment.
||Consider whether the item comes with a
warranty, and where you'll get follow-up service if you need it. Many
sellers don't have the expertise or facilities to provide services for
the goods they sell. If that's the case with your seller, be sure
you're willing to forfeit that protection before placing a bid.
Know the Auction Site
||Check how the auction works. Don't assume that
the rules used by one Internet auction site apply to another. Some
sites offer step-by-step tutorials that take potential buyers through
the bidding process. Taking a few minutes to go through the tutorial
might save you frustration or disappointment later.
||Find out what protections the auction site
offers buyers. Some sites provide free insurance or guarantees for
items that are undelivered, inauthentic or just not what the seller
||If you decide to enter the bidding, proceed
with caution. Establish your top price and stick to it.
||Don't bid on an item you don't intend to buy.
Remember that if you're the highest bidder, you are obligated to follow
through with the transaction. Auction companies often bar "non- paying
bidders" those who back out of a deal from future
||When bidding, take steps to protect your
privacy. Don't give out personal identifying information like your
Social Security number, driver's license number or bank account number.
No seller should need it.
||Save all your transaction information. Print or
make note of the seller's identification, the item description and the
time, date and price you bid on the item. Print and save a copy of
every e- mail you send or receive from the auction company or the
Wrapping Up the Deal
||After you receive an e-mail with news that
you've "won" an auction, arrange to pay for your purchase. Pay with a
credit card, if possible, but it's likely that the seller will require
payment by certified check or money order.
||If you're not comfortable sending a certified
check or money order to the seller, consider using an escrow service or
paying for your item cash on delivery.
Where to Turn for Help
If you run into a problem during your transaction, try to work
it out directly with the seller or with the auction web site. If that
doesn't work, file a complaint with the Federal Trade Commission by
calling toll-free 1-877-FTC-HELP (382-4357) or visiting the FTC's web
site at www.ftc.gov. Although the
Commission cannot resolve individual problems for consumers, it can act
against a company if it sees a pattern of possible law violations. You
also may want to contact your state Attorney General or your local
consumer protection office.
You're A Seller...
Provide an accurate
description of the item you're selling, including all terms of the sale
and who will pay shipping costs.
Respond quickly to
any questions bidders may raise during the
Contact the high
bidder as soon as possible after the auction closes to confirm details
of the sale.
Ship the merchandise
as soon as you receive payment.
||Federal laws prohibit deceptive or misleading
acts in commerce, including Internet auctions. You are required to
advertise your product or service and the terms of the sale honestly
||Sellers are prohibited from placing "shill"
bids or false testimonials. Some sellers improperly create a fake
identity and bid on their own auctions to drive up the offers.
Likewise, some sellers place glowing testimonials about themselves in
the comment section of Internet auction sites. These practices are not
only unethical, they're also fraudulent.
||Sellers are prohibited from offering illegal
goods through Internet auctions. While many auction sites monitor their
sites and attempt to delete illegal items, the ultimate responsibility
for ensuring that a sale is legal rests with the seller and buyer. Some
auction sites post a list of prohibited items as a guide.
||After the auction closes, sellers are required
to ship the merchandise within the time frame designated during the
auction or, if no time frame is specified, within 30 days. If you can't
meet the shipping commitment, you must give the buyer an opportunity to
cancel the order for a full refund or agree to the new shipping date.
Advertising Your Product
||Describe your item or service and its
condition as fully and accurately as possible, including whether
it's new, used or reconditioned.
||Anticipate questions buyers might have and try
to answer them in the description of your item or service. When
possible, include a photograph of the item. The saying about a picture
being worth 1,000 words rings especially true in Internet auctions.
||When putting an item up for auction, set the
minimum bid at the lowest fair price you're willing to accept. Specify
who will pay for shipping, and add whether you'll ship internationally.
||State your return policy in your auction
description, and if you require the buyer to pay shipping costs or
restocking fees for returns. Tell bidders where to get follow-up
service. If you don't provide service for the item, say where the
bidder could get it.
The Art of the Deal
||If a bidder asks a question about the item
you're selling or the sales terms, respond as quickly as possible.
||When the auction closes, print all the
information about the transaction, making a note of the buyer's
identification, the description of the item and the time, date and
price of the bid. Print and save a copy of every e-mail you send and
receive from the auction site or successful bidder.
||Contact the winning bidder as quickly as
possible after the auction closes. That's the time to confirm the final
cost, including shipping charges, and to tell the buyer where to send
||Most sellers in person-to-person auctions
require buyers to pay by check or money order because they don't have
the capability to accept credit card payments. These payment methods
offer fewer consumer protections than credit cards, so be aware that
some buyers may not be comfortable using them. Some online auctions and
third parties enable sellers to accept credit card payments. Review the
terms of these offers carefully. If you accept credit card payments,
bill the buyer's credit card account only when you're ready to ship the
Who Can Help
run into a problem during your transaction, try to work it out directly
with the buyer or the auction web site. If that doesn't work, file a
complaint with the Federal Trade Commission by calling toll-free
1-877-FTC-HELP (382-4357) or visiting the FTC's web site at
www.ftc.gov. Although the Commission
cannot resolve individual problems for consumers, it can act against an
individual or company if it sees a pattern of possible law violations.
You also may want to contact your state Attorney General or your local
consumer protection office.
For more information from the FTC about your
responsibilities when advertising or shipping products, ask for a copy
of the Guide
to the Mail and Telephone Order Merchandise Rule. Call the FTC
toll-free at 1-877-FTC-HELP (382-4357) or access the publication online