Faith fades in eBay fraud software

[MORTARDUDE]

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Faith fades in eBay fraud software
Obvious swindle slips past Net auction site's radar
By Rachel Konrad
Associated Press

SAN JOSE, CALIF. - Robert Beck suspended his distrust of online auctions last month and went for a top-of-the-line speaker system. He cast a winning bid of $1,900, paid by credit card, and waited for his first eBay purchase to arrive.

The speakers never came.

Last week, detectives told the 25-year-old engineer that the sellers, an Arizona couple, had emptied their bank account and fled town. The couple allegedly stole more than $100,000 from more than 500 bidders.

The case has cast doubt on eBay Inc.'s anti-fraud software known as FADE,which the San Jose-based company installed nearly a year ago to counter complaints about fly-by-night sellers.

Beck and other victims say the software, which ostensibly gets better the longer it's in use, should have alerted eBay to cancel the auction long before the couple parted with his money in a classic swindle.

``The red flags in this case were all over the place,'' said Beck, a St. Louis resident who may sue eBay for negligence. ``For eBay to say that the software works, the principle of it makes me sick.''

EBay spokesman Kevin Pursglove said the company's Fraud Automated Detection Engine (FADE) was never meant as a panacea.

``The reality is that no single tool is going to be able to eliminate fraud in the offline world or the online world,'' said Pursglove, who would not discuss specifics of the Arizona case. ``We've been very honest with our users on this one: FADE will go a long way in terms of combating fraud, but it's not going to be the end-all be-all.''

EBay maintains that less than one one-hundredth of 1 percent of its listings are fraudulent. But with 180 million items for sale in the fourth quarter of 2002, eBay could have hosted as many as 18,000 fraudulent auctions in the last three months of last year.

Chief Executive Meg Whitman introduced FADE at the annual shareholders meeting in June. She promised it would make ``major strides'' in combatting fraud.

FADE collects data from defrauded customers, compiles it in a central database, then alerts eBay's private fraud busters of new auctions that match the patterns of known scams.

Red flags include unexpected changes in a seller's behavior; a new user with large quantities of very expensive merchandise, particularly computers and other electronics; or an address linked to a country -- particularly eastern Europe -- with a high rate of eBay fraud, Whitman said during the annual meeting.

EBay has the right to halt any suspicious auction -- ideally before users part with their cash.

The company also has forged closer ties with police, the U.S. Postal Service and international delivery services to stop scams.

Auction enthusiasts said they never expected FADE to halt all fraud, but they question why it couldn't stop the Arizona scam.

``You could see all the signs of what was going to happen.... If it can't catch this, FADE is almost laughable,'' said David Steiner, president of AuctionBytes.com, a watchdog group for eBay buyers and sellers.


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