An online auction is an auction which is held over the internet. Online auctions come in many different formats, but most popularly they are ascending English auctions, descending Dutch auctions, first-price sealed-bid, Vickrey auctions, or sometimes even a combination of multiple auctions, taking elements of one and forging them with another. The scope and reach of these auctions have been propelled by the Internet to a level beyond what the initial purveyors had anticipated. This is mainly because online auctions break down and remove the physical limitations of traditional auctions such as geography, presence, time, space, and a small target audience.

Online auctions have become big business, with millions of items for sale at any given time. (5 million+ at eBay alone, right now.) Tens of thousands of people around the world currently make a full-time living selling items through Internet auction houses.

One reason for their incredible growth and popularity is that they make it easy for people to find great deals on hard to find items from around the world. The excitement also makes them prime hunting grounds for scam artists, ready to play on the desire many auction bidders have for that “unbelievable deal.”

We want to mention right off the bat that the vast majority of sellers and buyers at online auctions are honest people, and deliver on their promises. According to eBay, only one auction in 40,000 on their site ends with a reported case of confirmed fraud.

Tips for Avoiding Internet Auction Fraud:

• Understand as much as possible about how the auction works, what your obligations are as a buyer, and what the seller’s obligations are before you bid.
  
  
• Find out what actions the website/company takes if a problem occurs and consider insuring the transaction and shipment.
  
  
• Learn as much as possible about the seller, especially if the only information you have is an e-mail address. If it is a business, check the Better Business Bureau where the seller/business is located.
  
  
• Examine the feedback on the seller.
  
  
• Determine what method of payment the seller is asking from the buyer and where he/she is asking to send payment.
  
  
• If possible, purchase items online using your credit card, because you can often dispute the charges if something goes wrong.
  
  
• Be cautious when dealing with sellers outside the United States. If a problem occurs with the auction transaction, it could be much more difficult to rectify.
  
  
• Ask the seller about when delivery can be expected and whether the merchandise is covered by a warranty or can be exchanged if there is a problem.
  
  
• Make sure there are no unexpected costs, including whether shipping and handling is included in the auction price.
  
  
• There should be no reason to give out your social security number or driver’s license number to the seller.