Internet auction fraud accounts for 87 percent of all incidents of online crime, according to a new study released Tuesday by eMarketer.
As part of its "ePrivacy & Security Report," eMarketer also found that more than 34 percent of Internet users have been targeted by a Web-based privacy or security breach. Moreover, the study estimates that the average fraudulent transaction costs roughly US$600, which outpaces most research estimates of average online retail spending.
eMarketer said that half of all users falling victim to online fraud are in either the Generation X or the baby boomer bracket, two of the most tech-savvy Net populations.
"For most Internet users, the protection of personal information is a real and valid concern," said eMarketer analyst Rob Janes. "Offerings of free services and promises of wealth lure participants into binding contracts or unbelievably great deals enticing consumers to buy products that never arrive or don't meet the quality promised."
Credit Cards Safe?
eMarketer also found that the rate of credit card fraud as a percentage of all credit card transactions is extremely low. Citing data from Visa and Mastercard, the report said 22 million fraudulent credit card transactions occurred either online or offline in 1999, out of an estimated total of 25 billion transactions.
Despite these figures, eMarketer said that the majority of Internet users who do not make purchases online are afraid of hidden costs, leery of fraud and question companies' ethics. The report said that consumer fears resulted in roughly $2.8 billion in lost sales in 1999 and could top $18 billion in 2002.
Although they spur only a fraction of the complaints for auction fraud, the other categories of online crimes cited by eMarketer were general merchandise sales, Internet access services, computer equipment service, and work-at-home scams.
Net Auctions Up
Recent studies have forecasted that consumer-to-consumer online auction sales will spike to over $15 billion from the $3 billion racked up in 1999. eMarketer said that these figures naturally open the door for a concurrent increase in online criminal activities.
"Given that 16 million unique users may visit eBay in a given month, it's no surprise that auctions consistently rank as the most fraud-prone online activity," said Janes.
In recent weeks, eBay -- which was the 13th most visited Web site according to the latest Media Metrix statistics -- has taken steps to crack down on deal scams. At the end of December, the online auction giant said it would begin enforcing a prohibition on offline deals between members, saying that user complaints sparked its decision to take action since buyers who conduct business outside of eBay are not protected by the company's insurance program or feedback system.
Under the new policy, sellers who use their eBay connections to conduct business offline will first be warned and then suspended from the site. Prohibited conduct includes offering to sell a listed item outside of eBay to avoid paying a listing fee, as well as offering to sell users merchandise similar to what they are bidding on at eBay.
Comparing Studies
Several recent studies dovetail with the eMarketer report. A study issued in November by the National Consumers League (NCL) found that Internet auctions generate the largest number of online fraud complaints.
Similarly, the U.S. Federal Trade Commission cited auction fraud as the No. 1 online scam, with the number of reported cases mushrooming from 100 to 1997 to a whopping 10,000 in 1999.
On a positive note, the NCL said that
incidents of fraud in online auctions
may be decreasing. According to NCL, 79 percent of
complaints filed in 2000 were related to auction
fraud, as compared to 87 percent in 1999.
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