Calkins, Volume VII, Issue 4, Richmond Journal of Law & Technology 

 

Volume VII, Issue 4, Spring 2001



My Reputation Always Had More Fun Than Me: The Failure of eBay's Feedback 

Model to Effectively Prevent Online Auction Fraud

 

by: Mary M. Calkins(*)

 

Cite As: Mary M. Calkins, Comment, My Reputation Always Had More Fun Than Me: 

The Failure of eBay's Feedback Model to Effectively Prevent Online Auction 

Fraud, 7 RICH. J.L. & TECH. 33 (Spring 2001), at 

http://www.richmond.edu/jolt/v7i4/note1.html.

 

TABLE OF CONTENTS

Abstract

I. Introduction

II. eBay's Auction Process, Economic Incentives, and Legal Incentives

  A. How an eBay Auction Works

  B. eBay's Economic Incentives: Honesty for Sale Cheap

  C. eBay's Legal Incentives: Regulating Just Enough to Avoid Being Regulated

  D. Trust and Safety: User Agreement: What Does "eBay is Only a Venue" Mean?

  E. Conclusions About eBay's Process and Incentives

III. The First Level of Protection: User Registration

  A. User Registration Procedures

  B. Obtaining a Registered eBay User's Contact Information

  C. Conclusions About User Registration

IV. The Second Level of Protection: The Feedback Forum

  A. How the Feedback System Works

  B. The Feedback System's Benefits and Drawbacks, From a User's Perspective

V. Beyond Feedback: Methods of Effectively Preventing Fraud

  A. Third-Party Service Providers

  B. Private Investigation and Netcopping

VI. A Proposed Scheme for Third Party Feedback Administration

VII. Conclusion



ABSTRACT



{1}Online auctions for goods are currently a popular and lucrative form of 

e-commerce, but present special problems of trust and fraud prevention, because 

most deals involve buyers and sellers who do not know each other and are 

separated by distance. Online auctions for goods have been largely unregulated 

by formal laws. For that reason, trust-building and fraud prevention have 

primarily been accomplished through creative private regulatory models 

implemented by the auction houses themselves.



{2}This Comment examines one popular model, a registration and feedback system 

pioneered by the leading online auction company, eBay. Under this system, a user 

builds a public online reputation over time by engaging in a number of 

transactions and receiving public feedback from his transaction partners. By 

checking a potential transaction partner's feedback file, a user can 

theoretically receive information about that party's honesty and 

trustworthiness, and make an informed decision about transacting with that 

person. However, as this Comment will show, the growth of the user community has 

rendered this "community policing" model increasingly unreliable and unable to 

prevent bad behavior, although the model still has some psychological benefits. 

Therefore, eBay cannot rely on feedback systems to reliably prevent fraud, and 

must implement other forms of regulation (some of which are discussed in this 

Comment) or face being externally regulated by government entities.



I. Introduction



{3}In the past few years, online auctions for goods have emerged as a popular 

new sales form unique to the Internet.[1] Sellers enjoy reaching a wide audience 

at a low cost and getting the highest possible price that buyers are willing to 

pay. Buyers enjoy the fun and the excitement of bidding and the potential for 

finding unique bargains from all over the world without leaving their homes. 

Online auction site operators can also reap great profits with relatively little 

effort since their contribution is limited to maintaining the auction server, 

and the other transaction costs such as inventory maintenance and shipping are 

borne by the seller and buyer.



{4}However, in order to draw customers and inspire consumer confidence, online 

auction companies must find ways to prevent fraud and harassment, and encourage 

only serious, honest transactions.[2] On the "buy side," the auction buyer 

usually cannot personally inspect the seller or the actual goods. Many sellers 

are individuals or very small businesses such as antique dealerships. When these 

sellers operate outside their local communities, they may not be subject to the 

reputational and legal constraints that govern larger, established businesses. 

The nature of the goods being sold frequently collectibles of uncertain value 

causes concern about misrepresentation, shill bidding to drive up the price of 

an item, and other deceptive sales practices. Deals usually involve buyers and 

sellers separated by distance who complete the transaction by mail, so a 

dishonest seller might also take the money and never deliver the goods. During 

the past two years, significant increases in the number of fraud complaints 

involving dishonest sellers has spurred the Federal Trade Commission and 

consumer watchdog organizations to take up the buyer's cause.[3]



{5}On the "sell side," the auction seller's concern is to screen out "deadbeat 

bidders" who back out of the deal after the auction or bid more than they are 

able to pay. Although the most widely reported examples of the deadbeat bidder 

problem have involved big-ticket items,[4] this problem regularly occurs for 

less expensive items as well.[5]The seller is also concerned with protecting 

himself against non-serious bids by unfair competitors and pranksters. In the 

real world, a seller could make judgments based on appearance or demeanor and 

could invoke control mechanisms, such as calling police if a customer acted 

disruptive or failed to pay. These conventional methods are not available 

online.



{6}Because interstate (and international) online auctions for goods have been 

largely unregulated by formal laws,[6] online auction companies have been free 

to come up with creative private regulatory models to promote serious, honest 

transactions and build consumer confidence. One popular method, pioneered by the 

online auction company eBay, is a registration and feedback system. New users 

register with eBay by providing a certain amount of personal information and 

receiving a unique username associated with a public feedback file. At the 

conclusion of each transaction, each user posts a short report to her 

transaction partner's feedback file indicating whether the transaction went 

well. Over time, as a user engages in a number of transactions, he accumulates 

comments from many members of the community, essentially building up an online 

reputation. By checking these feedback files, users can receive information 

about whether a particular buyer or seller is likely to be a good and an honest 

transaction partner, and can thus decide whether to transact with that party. In 

theory, a user who conforms to accepted transactional norms will receive many 

positive comments, while a user with many negative comments will be punished by 

being shunned by transaction partners in the market. In extreme cases, a formal 

rule may be invoked to expel the user from the community. In this manner, the 

community theoretically polices itself with little intervention from eBay.



{7}Although this method of self-policing has some benefits, as eBay has grown 

from a small community into a huge worldwide business, this "community policing" 

model has become increasingly unreliable and unable to prevent bad behavior. In 

order to maintain the culture of trust essential to eBay's current business 

model, eBay as the intermediary must take some action to maintain a climate of 

trust and avoid having outside regulation, such as federal law, imposed on its 

business. 



{8}eBay has responded to eroding trust in two ways. First, it has added some 

protective mechanisms to its operating code, causing some forms of dishonest 

behavior to become mechanically impossible. However, this code-based regulation 

is weak because a strong form of code-based regulation would discourage 

legitimate users.[7] Second, eBay has attempted to shift responsibility for the 

problem by partnering with third party intermediaries, such as credit card 

companies, who offer a stronger and more effective form of market-based 

regulation.[8] But reliance on third parties does not absolve eBay of all 

practical responsibility, and perhaps not even of all legal responsibility. 

Moreover, in implementing stronger controls, eBay must somehow admit that its 

original trust-based protective systems have failed without losing credibility.



{9}Part I of this paper provides a brief description of eBay's operations and 

incentives, and shows why eBay, despite a legal incentive to remain passive, 

must take steps to prevent fraud to avoid harm to its business. Part II 

discusses the flaws in eBay's user registration scheme that shift the burden of 

fraud prevention onto the post-registration stage. Similarly, Part III discusses 

the problems with eBay's post-registration feedback model and how it fails to 

prevent fraud. Although the feedback system provides some communitarian 

benefits, especially to well-intentioned users who plan to be repeat players, 

effective fraud prevention is not among those benefits. Part IV briefly 

discusses the real ways in which fraud is effectively prevented on eBay: 

third-party private solutions and private investigation by cyber-vigilante 

users. Part V proposes an alternative scheme for third-party feedback 

administration. Part VI concludes by suggesting some ways in which eBay could 

improve its handling of the fraud problem within the bounds of its economic and 

legal concerns.



II. eBay's Auction Process, Economic Incentives, and Legal Incentives



{10}eBay, located at http://www.ebay.com, describes itself as "the world's 

largest personal online trading community" that "help[s] people trade 

practically anything on earth."[9] Although it includes big-ticket items such as 

real estate and automobiles, eBay is best known as a sort of online flea market 

for a vast variety of antiques, collectibles, computer equipment, used household 

goods, and junk of every description.[10] Founded in 1995, ostensibly as a site 

for the founder's wife to sell collectible Pez candy dispensers,[11] it 

pioneered the online auction model and spawned many competitors that imitate 

some or all of its features.[12] The company went public in 1998 and, unlike 

many other publicly traded dot-coms, has consistently shown a profit.[13] From 

1997 to the present, eBay has undergone phenomenal growth, expanding from a 

community of approximately 150,000 users in 1997 to approximately 19 million 

user accounts as of October 2000.[14] On a typical day, several million eBay 

auctions will be in progress, covering more than 4,500 item categories.[15]



{11}This section first details the basic operation of an eBay auction, then 

discusses the economic and legal incentives that drive eBay's regulatory schemes 

and motivate its use of third parties. As this section will show, although eBay 

has had incentives to remain passive up to this point, passivity is not a viable 

option in the face of escalating fraud. Therefore, eBay is forced to take some 

steps to preserve the economically advantageous atmosphere of trust and avoid 

potential legal liability.



A. How an eBay Auction Works[16]



{12}The eBay auction process operates as follows. In order to buy or sell on 

eBay, a user must first register with eBay through a web-based process and 

provide some personal information.[17] The registration process is outlined in 

more detail in Part II, infra. Newly registered users choose a unique username 

and password, to which is attached an initially empty feedback file.



{13}eBay makes money by collecting listing fees and commissions from auction 

sellers. Most eBay products are sold by individuals or small businesses such as 

antique dealerships, to other individuals or small businesses.[18] A seller pays 

a listing fee to put an item up for auction by listing a picture, description 

and opening bid in the appropriate eBay category.[19] Interested buyers may find 

the item by browsing the eBay site or by using a search engine. A buyer who 

wishes to purchase an item enters her bid electronically on the eBay site. Each 

auction runs for a fixed time period, normally several days; at the conclusion 

of the auction, the highest bidder is awarded the right to purchase the 

item.[20] The high bidder and seller are expected to obtain each other's e-mail 

addresses (and other contact information, if needed) from the eBay site and 

complete the transaction on their own without further assistance from eBay. The 

buyer pays the seller and the seller pays a commission to eBay.[21]



{14}At the conclusion of the transaction, each party has the option to leave a 

positive, negative or neutral comment, or no comment, in the other party's 

feedback file. The feedback process is discussed in more detail in Part III, 

infra. This feedback is meant to provide low-cost information to future 

potential transaction partners, so they can better decide whether to transact 

with the person in the future.[22]



B. eBay's Economic Incentives: Honesty for Sale Cheap



{15}As a for-profit business, eBay's behavior is primarily driven by economic 

incentives. In a nutshell, eBay wants to encourage many customers, both buyers 

and sellers, to visit its site and transact business, resulting in more listing 

fees and commissions for eBay. At the same time, eBay would like to minimize its 

own costs of doing business, including the costs of operating internal 

regulatory systems, meeting externally imposed requirements (such as laws) and 

obtaining capital. Regulatory processes such as registration and feedback must 

take these economic drivers into account.



{16}In order to make the comparatively new business model of online auctions 

credible and profitable, eBay must provide a trading environment that is 

trustworthy enough to engender confidence in users, stockholders, government 

enforcers and regulators, large private market "regulators" such as Microsoft 

and America Online, and potential business partners. If any one of these groups 

lost confidence in eBay, business might suffer as a result, with eBay losing 

sales or strategic access and incurring the costs of self-defense or increased 

governmental scrutiny.[23] Therefore, eBay strives to provide a default image of 

trustworthiness and credibility as well as convenience.[24] In particular, site 

browsers must quickly get a positive image of eBay, so that potential customers 

will like what they see and want to transact.



{17}First and foremost, eBay's site must communicate an image of trust. eBay 

realized early on that many people hesitate at the thought of transacting with 

unseen strangers on the Internet, particularly for collectibles of uncertain 

value sold in an auction format. Users cannot see their distant transaction 

partners, and must transact through non-rich communications such as e-mail, 

telephone calls and viewing photographs of the item. The cheapest and easiest 

method of communication, e-mail, may be difficult to use effectively within the 

short auction time window, since each party must wait for the other to respond. 

Other methods, such as long-distance telephone calls, are inconvenient and may 

be expensive compared with the value of the item at auction. Original users 

suggested community-provided feedback to eBay. It allows eBay to provide some 

free information and paint an honest picture with lower cost and less 

involvement than if eBay itself had to investigate each user and post an 

evaluation.[25] Feedback profiles showing many positive comments also contribute 

to a trustworthy overall image.[26]



{18}Second, eBay's site must be easy to use and allow new visitors to quickly 

start buying and selling. New buyers especially need speedy involvement in order 

to make impulse purchases and bid on auctions that might be ending. Therefore, 

initial registration, especially for buyers, must not be burdensome or 

intrusive. Added pre-screening is costly and may discourage new users, 

particularly those who value their privacy more than the potential value gain 

from transacting.[27] If a new user feels that she must undergo the "third 

degree" in order to buy a five-dollar Pokemon toy on eBay, she is likely to take 

her business elsewhere. 



{19}Third, eBay's site design must be "sticky" it must keep customers on the 

site for long periods of timeand it must also encourage repeated visits. Long 

browsing sessions and repeated trips are more likely to result in transactions, 

and also increase other competitive metrics such as the number of page 

views.[28] To keep users on the site, eBay has not only product listings, but 

additional features such as online magazines, discussion groupsand feedback 

forums. To keep users coming back, eBay attempts "code lock-in," a technology 

design that discourages visitors to take their auction business to a 

competitor.[29] Code lock-in is an important consideration in designing features 

such as feedback, which is currently not portable to other auction sites. Once a 

user goes to the trouble of building up a good online reputation with eBay 

through amassing feedback comments, that user will be less likely to go to a new 

site where, assuming his established transaction partners choose to remain on 

eBay, he will have to start building an online reputation again from scratch 

with new transaction partners. Under this scenario, a collective action problem 

arises because all users suffer from the same code lock-in problem and, barring 

a mass exodus of many users from eBay, there is no incentive for any one user to 

leave.[30]



{20}Fourth, eBay must be responsive to its customers' needs, particularly those 

of its sellers. Sellers are preferred because they generate eBay's fees and 

commissions, they are closer to the market, and they act as eBay's eyes and ears 

in the field. In addition, as dealers attempting to earn income, they are more 

likely to be repeat players than buyers, who might only make purchases 

sporadically.[31] Therefore, if customers, particularly sellers, want a specific 

feature, eBay must take their desires into account. Customers have played a 

significant role in developing the eBay feedback model up to this point, and are 

likely to continue to do so in the future.[32]



{21}Potential adverse effects on stock are very important to eBay management, 

who not only receive stock as part of their compensation, but also might lose 

investors' confidence, as well as their own money, if the stock drops. Stock is 

most likely to be affected by high-profile incidents of fraud, several of which 

occurred during 1998 and 1999. In one case, a 13-year-old boy bid on and won $3 

million of merchandise, including a 1955 convertible and a Van Gogh painting, 

before his parents discovered his activities.[33] Another mishap occurred when 

eBay auctioned for charity a jacket autographed by Katie Couric, host of NBC's 

"Today" show. The winning bid of $200,000, after being announced on the show, 

was found to be fraudulent, and the jacket sold for a much lower price.[34] On 

the sell side, in November 1999, a California man became the first person 

sentenced to prison for online auction fraud as a result of an eBay scam that 

netted him approximately $37,000.[35] While these public humiliations affect 

investor behavior, ordinary users are just as likely to depart in frustration 

over smaller incidents of fraud occurring on their auctions.



C. eBay's Legal Incentives: Regulating Just Enough to Avoid Being Regulated



{22}Although economic drivers are eBay's foremost concerns, eBay also has to 

take legal and regulatory concerns into account. In the past eBay has remained 

as passive as possible in order to escape legal liability, but increasing 

regulatory pressure coupled with legal uncertainty make this strategy risky and 

untenable for the future.



{23}Like any Internet business with potentially "deep pockets" and a large 

number of users, eBay wishes to avoid legal liability for anything that might 

happen on its site, such as fraud, harassment of a user, or defamation of a 

user. Historically it has done this by attempting to stay out of the 

transaction, and it prefers to characterize itself as a passive provider, "only 

a venue" where transaction partners meet and go about their business.[36]



{24}In taking this stance, eBay appears to characterize itself as a passive 

Internet service provider ("ISP") and relies upon decisions such as Zeran v. 

America Online[37] and Blumenthal v. Drudge[38] to absolve itself from tort 

liability based on the behavior of its active users. In Zeran and Blumenthal, 

America Online ("AOL") was absolved of liability for defamatory statements 

posted on its service by individual users,[39] despite the fact that, in 

Blumenthal, AOL had contracted with the defendant Drudge, a journalist, to carry 

his column on AOL's Internet service and to remove content if it violated AOL's 

terms of service.[40] The holdings in Zeran and Blumenthal relied on an 

interpretation of federal communications law[41] that protected providers from 

tort liability based on the actions of its users, on the grounds that a large 

provider cannot afford to police the activities of many users without cutting 

back on services.[42]



{25}However, the current regulatory environment offers only weak support for 

this passive stance. So far, only three circuits have explicitly adopted the 

holding of Zeran.[43] Furthermore, most interpretations of Zeran and Blumenthal 

read the decisions as exempting service providers from liability based on the 

published statements of their users. It is unclear whether the holdings would 

protect the providers when users commit tortious acts that go beyond publishing 

defamatory statements. Furthermore, when the liability at issue involves a 

broken contract for sale of goods, rather than a tort such as defamation, the 

ISP may not be permitted to escape liability so easily.[44]



{26}It is also questionable whether eBay truly falls within the policy 

definition of an ISP. The ISP involved in Zeran and Blumenthal, AOL, could be 

seen as providing the societal beneficial service of low-cost user-friendly 

Internet access to U.S. citizens.[45] Internet access is seen as increasingly 

essential for purposes of educating children, gathering information, 

communicating with others, and completing work tasks; the importance of this 

service might justify limiting AOL's liability for user misconduct, so that 

increased liability does not force AOL to cut back service to many subscribers. 

By contrast, an online auction house such as eBay might be viewed as providing a 

nonessential service. The goods sold on eBay are not the necessities of daily 

life; rather, they are almost entirely lifestyle products, enjoyable but 

certainly not essential. Therefore, as a policy matter, eBay might not merit the 

same protection as AOL.



{27}In the area of fraud, the government has shown signs of increasing 

unfriendliness toward eBay. While in 1999 the federal government took a "wait 

and see" position toward Internet regulation,[46] the rapidly increasing number 

of online auction fraud complaints[47] has drawn federal regulatory attention to 

online auctions.[48] Several states also recently attempted to enact laws 

regulating online auctions.[49] eBay's posted statement, quoted below, shows the 

difficulty of maintaining a passive position: 



D. Trust and Safety: User Agreement: What Does "eBay is Only a Venue" Mean?



{28}The eBay user agreement states: 



  eBay acts as a link between the buyer and seller. We just provide the 

  automated bidding system. We do not authenticate users, we do not verify 

  items, we do not guarantee that you will receive payment or the item. However, 

  we are extremely concerned about our community and your safety within our 

  community. To that end, we work with third parties to offer you services to 

  authenticate users, insure and escrow your transactions.[50]



{29}By going through third parties, eBay probably hopes to take advantage of 

existing regulation without exposing itself to possible new liability or 

regulation, as well as sending a message to government that it is trying to do 

something about fraud. Some of the third parties, such as Equifax for some user 

credit verifications[51] and Lloyds for free insurance of an item purchased on 

eBay up to $200 (with a $25 deductible),[52] are longstanding brick-and-mortar 

businesses that are governed by existing laws covering credit reporting and 

insurance. However, other partners such as I-Escrow.com (offering escrow 

services)[53] are new business models themselves, with unclear liability, and 

may not actually relieve eBay of legal burdens.



{30}The obvious need for additional fraud protection is part of a larger picture 

showing the need for increasingly formal regulation in many areas of a rapidly 

growing global business. In eBay's early days, prior to going public, eBay had 

few formal rules, and in the absence of law governing eBay's operations, relied 

almost exclusively on informal regulation by social norms and the market.[54] 

Users who violated eBay norms, as determined by the feedback reports of the 

greater user community including eBay staff, were punished through market means 

when other parties refused to transact. The eBay community also benefitted from 

the efforts of private users who engaged in the cybervigilantism popularly known 

as "netcopping" by personally investigating and tracking down suspected eBay 

fraud perpetrators.[55]



{31}As eBay has grown, extended its territory worldwide, and become more 

sensitive to public concerns, it has been forced to implement stronger, more 

formal control policies across the board.[56] Large, diverse growth in the eBay 

community also tended to disturb the formation and maintenance of group norms 

that may have worked well for a smaller community.[57]



{32}Although geographic proximity is not required for norm formation, shared 

common interests and interdependence are required.[58] The users on eBay do not 

share a common interest. This is due to the diversity of products sold and 

varying levels of involvement, from repeat play to infrequent use. In addition 

varying roles, including professional dealer, frequent buyer, and infrequent 

buyer or seller add to the diversity. Therefore, in order to avoid an increased 

number of bad transactions caused by mismatched expectations, eBay needs to take 

a greater role in enforcing some regulation, rather than leaving transactions up 

to purely private ordering.[59] If eBay does not step in, it is likely that 

formal legal authorities will increasingly be called upon to do so.



E. Conclusions About eBay's Process and Incentives



{33}eBay has a strong incentive to stay out of user-to-user transactions in 

hopes of avoiding massive liability for fraud under the holdings of Zeran and 

Blumenthal. However, when fraud reaches a certain point, eBay cannot continue to 

remain passive without undermining its economic goals. This is not a matter of 

eBay having a moral responsibility to promote trustworthy dealings, but a 

practical matter that if too many users complain about fraud, eBay's business 

will suffer, its reputation and access to capital may be harmed, and it may be 

subject to unwanted outside regulation by federal or state government. In 

attempting to seek solutions to fraud, eBay will attempt to balance the need to 

preserve its trustworthy reputation against the economic incentives to keep the 

site open to as many users as possible and the legal incentive, provided by 

Zeran and Blumenthal, to remain as passive as possible. The difficulty of this 

situation suggests that Zeran and Blumenthal may provide an inappropriate 

incentive for providers, such as eBay, who are not just providing a vehicle for 

allowing outside parties to engage in speech, but are actually facilitating some 

nonessential non-speech action in this case, economic transactions for 

non-necessities between users.



III. The First Level of Protection: User Registration



{34}In attempting to ensure an honest and well-mannered user community, eBay's 

first potential challenge is registration for new users. The desire to sign up 

as many users as possible conflicts with the goal of screening to ensure that 

all users who join will be trustworthy. In striking a balance between these 

concerns, eBay has chosen to encourage as many registrations as possible, and 

address registration abuse through weak code and market solutions. As a result, 

user registration, while no doubt serving eBay's business billing and 

data-gathering purposes, is largely ineffective as a means of pre-screening new 

users or preventing banned users from returning. Thus, most regulatory burden is 

shifted onto post-registration control systems such as the feedback forum and 

private third-party solutions. Post-registration control systems are further 

burdened by the ease with which malicious users can register anonymously.



{35}The first part of this section details eBay's registration procedure and 

demonstrates how it fails to adequately screen users at the initial stage. The 

second part discusses eBay's system of maintaining user contact information and 

how lack of anonymity, while in some ways contributing to an atmosphere of 

trust, exposes "good users" i.e., repeat players to risks and harassment, while 

permitting "bad users" to misbehave in the short term due to lower stakes.



A. User Registration Procedures



{36}The original eBay registration system allowed any user to sign up for an 

account without providing verification of his identity. There was no 

pre-screening of new users, unless they had recently been suspended under the 

same name and contact information. As a result, the entire burden of controlling 

abuses fell on the post-registration stage. When eBay finally determined that 

some type of control should be placed on registration, it chose a weak code and 

private third party solution that can be easily circumvented by users bent on 

fraud.



{37}The current system works as follows. In order to buy, sell, or use features 

on eBay, a user must first register at eBay's web site and provide eBay with a 

name, mailing address, telephone number, and e-mail address. An e-mail 

confirmation is sent to ensure that the user's e-mail is working. The registered 

user chooses a unique username, which is usually anonymous (although some choose 

to use their real names or e-mails), and a password.[60]



{38}The new eBay rules differentiate between sellers and buyers, with sellers 

required to give more personal information. If a registrant wishes to sell items 

on eBay, she must also undergo identity verification, preferably by providing a 

valid credit card number to eBay. Alternatively, if the user does not want to 

provide a credit card, she can select the more difficult and time-consuming 

option of having Equifax, a third-party credit reporting agency, verify identity 

based on a credit report.[61] The verification rule is meant to screen out 

minors, pranksters and fraud perpetrators.[62] Providing the credit card number 

also allows eBay to charge the card for listing fees and commissions.



{39}Buyers can still register and bid on most eBay auctions, with few 

exceptions, without providing a credit card number, and the vast majority of 

sellers will also accept money orders and/or personal checks for payment.[63] 

eBay does require a credit card number if a user registers with a free e-mail 

address. Although this feature is not widely publicized on the website, in fact, 

the requirement does not even appear until the user is several screens into the 

registration process, thus making it less likely that he will not finish.[64]



{40}Users wishing to buy and sell can either use the same account for both, or 

use one account for buying and another (with different user ID) for selling as 

long as the two accounts do not interact. A seller is not permitted to shill bid 

on his own auctions using his buying account.[65]



{41}If a registered user is caught seriously violating eBay policy, the ultimate 

sanction is revocation of the user's registration, known as NARUing the user, 

which expunges the user's account and bans the user from bidding, selling, or 

using other features at eBay. NARU stands for "not a registered user."[66] Users 

are generally NARUed only after their violations are reported to eBay by other 

users, since eBay does little or no policing of individual accounts. NARUed 

users are theoretically not permitted to return, but in reality are able to open 

new accounts if they use different identifying information.



{42}While this registration scheme could theoretically screen out some 

pranksters and fraudulent sellers, it is a weak protection against fraud. Clever 

fraudulent users, particularly bidders, can get around the screening 

requirements. Some ways of beating the system might include registering for a 

buyer account that does not require a credit card, in order to engage in 

fraudulent acts such as shill bidding; using false information, such as the name 

and credit card number of a relative or friend; or engaging in forms of fraud 

that are not visible to your transaction partner, such as selling stolen goods. 

These fraudulent acts are compounded by the fact that most transaction partners 

are located at a distance from each other in different jurisdictions, creating 

barriers to effective private investigation and enforcement.[67]



{43}In making this decision, eBay probably considered the economic costs of 

requiring users to provide extra information, since eBay has an economic 

incentive to sign up as many users as possible. From an economic standpoint, it 

is likely that new sellers will agree to give some additional personal 

information in return for using eBay's established brand-name site to make 

money. Sellers are planning to establish an ongoing business relationship with 

eBay anyway, and may like the convenience of paying eBay with their credit 

cards. An alternative verification procedure is available if sellers do not want 

to give eBay their credit card number.



{44}New buyers, upon registering, are less likely to give eBay a credit card 

number, since they are not transacting directly with eBay. They may also feel 

that being asked to give personal credit information to eBay in return for the 

chance to bid on a collectible (and, if they win, to pay the seller directly 

rather than paying eBay) is not a worthwhile trade. Therefore, eBay limits the 

amount of screening required of buyers and buries the screening procedure in the 

registration process or uses code so buyers will be less likely to resist. And 

while credit cards may be required to cover buyers using some well-known free 

e-mail services, it is unlikely that eBay can identify every small, free e-mail 

provider, nor does it wish to screen that many buyers. While eBay may have made 

a correct evaluation of the buyer privacy tradeoff, obtaining a bogus buyer 

account is still fairly easy.[68]



{45}Although auction sites including eBay generally claim that registration 

abuse is not a problem,[69] abuse incidents have nevertheless been 

documented.[70] The ease of obtaining an account, particularly an unverified 

buyer's account, technically facilitates the creation of bogus accounts for 

fraud, harassment, and retaliation. Depending on what scheme a user is 

attempting, he might even sign up for multiple accounts, perhaps keeping one 

account for "good" purposes such as transactions, and using other accounts for 

"bad" purposes (or for the questionable purpose of "netcopping" - investigating 

other users while masquerading as a legitimate user). With 10 million active 

accounts, eBay is unlikely to incur investigation costs to find bad actors, at 

least until bad behavior is reported by a victim or netcop.[71]



{46}The lack of control at this stage continues to place a greater burden on 

post-registration policing methods, including community policing methods such as 

the feedback forum. It is noteworthy that eBay instituted the strongest 

requirementa credit card or equivalent, less convenient credit check for only 

those users (sellers) who pay eBay directly. When its own pocketbook is 

involved, eBay recognizes the superiority of existing regulatory systems, such 

as credit checks, over its own community policing models to weed out sellers who 

do not pay. However, while the credit card requirements may discourage some 

malicious sellers (and a few fraudulent bidders in certain categories), the 

prevalence of credit card fraud in the U.S. suggests that a malicious user will 

be able to easily supply a fraudulent credit card number.[72] 



B. Obtaining a Registered eBay User's Contact Information



{47}Any registered user can easily obtain the contact information of another 

registered user. This is normally done when a potential buyer wishes to contact 

a seller to get more information about an item up for auction, or when an 

auction has concluded and the winning bidder and seller need to contact each 

other to complete the transaction. However, a user's contact information may 

also be obtained outside the context of a transaction if another user suspects 

him of fraud, wishes to send him spam, or wishes to harass him.



{48}Requests for contact information are built into the site code. To obtain an 

e-mail address, a user simply enters his password and views the e-mail addresses 

of other users on the eBay web site.[73] To obtain additional contact 

information, such as a name, mailing address and phone number, a user normally 

sends an e-mail request to the e-mail address he obtains. Alternatively, a user 

can request another user's full contact information directly from eBay via an 

automated procedure known as "pulling contact information," causing e-mails to 

be sent to both users containing both parties' full contact information. (Note 

that this information is limited to name, address, phone number and e-mail 

address. Credit card numbers, if on file with eBay, are not released.) Pulling 

contact information is intended for situations when attempts to contact a user 

by e-mail have failed, or when there is some doubt about a transaction partner's 

identity.[74] The dual e-mail serves to inform the target that the requestor has 

pulled his contact information, but since the information is also disseminated 

to the requestor by the dual e-mail, the target cannot prevent the dissemination 

from occurring; he can only complain after the fact.



{49}eBay's poorly controlled dissemination of a user's personal contact 

informationthe name, address and telephone number associated with a particular 

user ID to other registered users effectively destroys any anonymity or 

pseudonymity[75] provided by the user ID.[76] This means that all actions taken 

by a user, including leaving feedback comments, are essentially done in the 

public eye, unless the user obtains private market security or lies to protect 

himself. Since dissemination of user contact information is not restricted to 

transaction partners, a legitimate user basically consents to publicizing the 

registered name, address and phone number associated with his user ID to all 

other registered users on demand, including many with whom he did not choose to 

transact, thus widening the pool of potential harassers.[77] In fact, one might 

say the user has consented to disseminating this information to the general 

public, since anyone can quickly register for a buyer account (perhaps using a 

false identity), immediately pull contact information, and the targeted user 

cannot object until after the fact.



{50}Even when the target does object, the ultimate penalty is unclear. Although 

eBay limits the purposes for which a user can use another's personal 

information,[78] any evaluation of purpose still occurs after the factafter the 

data has already been disseminated. Since e-mail notification is sent to the 

target after contact information is pulled, merely pulling contact information 

can act as a veiled threat, even if nothing is done with it. Moreover, eBay's 

website states that contact information may be used for "matters regarding 

eBay,"[79] or "eBay-related communications that are not unsolicited commercial 

messages,"[80] terms that are broad and vague enough to cover a multitude of 

questionable uses, at least in early stages.



{51}At first glance, providing contact information on demand appears to be 

reasonable because it is expected that transaction partners, having chosen to 

transact, will not be anonymous to each other. Rather, they will exchange 

personal contact information[81] to facilitate mailing payments and goods to 

each other. It also makes eBay appear more honest since, theoretically, no one 

is permitted to transact anonymously. Furthermore, anonymity and pseudonymity 

have little value in a transaction context concerned with protecting other 

parties from harm caused by a user's actions, rather than emphasizing the user's 

freedom of self-expression.[82]



{52}However, a user who plans to commit questionable acts and is only going to 

remain on eBay long enough to carry out his plans has little incentive to 

provide correct contact information.[83] This "bad user" may well lie and take 

short-term advantage of "good users" who are truthful because, as repeat 

players, they have a large stake in appearing honest.[84] Under the current 

scheme a bad user who has already taken pains to disguise his identity for 

purposes of committing bad acts has nothing to lose, but a good user who might 

be subject to harassment, reputational harm, or business loss does. As the next 

section will show, this risk influences the willingness of good users to take 

part in post-registration community policing schemes.



{53}Alternatively, good users might try to disguise their identities or take 

advantage of private market security such as P.O. boxes. However, they then run 

the risk of being thought untrustworthy by the community and suffering sanctions 

as a result.[85]



{54}It should be noted that e-mail addresses receive even less protection than 

contact information.[86] E-mail addresses can be viewed simply by entering a 

registered user password, with no notification given to the owner of the 

address. This is less of a concern for several reasons. First, e-mail addresses, 

unlike personal names, addresses, and phone numbers, are widely disseminated on 

the Internet, and e-mail through a reasonably anonymous Internet service is 

widely available at little or no cost. Therefore, eBay's low level of e-mail 

protection is commensurate with the Internet in general. It is also desirable to 

have e-mail be easily available to potential transaction partners to avoid 

resorting to more costly and intrusive means of communication, such as telephone 

calls and personal visits. However, the easy availability of e-mail suggests 

even more strongly that other personal contact information should receive more 

protection than it currently does. 



C. Conclusions About User Registration



{55}As shown above, eBay's user registration scheme provides only a bare minimum 

of user screening, thus shifting most of the regulatory burden onto 

post-registration forms. Bad users will likely find ways to register and remain 

on eBay until their bad acts are either reported by other users or impact eBay 

directly (in the case of sellers who fail to pay eBay's fees). Moreover, by 

requiring a credit card or similar verification for those users (sellers) who 

pay eBay directly, eBay tacitly admits that its own post-registration 

protections, such as the Feedback Forum, are inadequate.



{56}Furthermore, while eBay's public dissemination of personal registration 

information appears to promote an honest and open atmosphere, it actually 

exposes good users to harassment risks if their behavior angers someone. Good 

users who depend on the community's trust for their repeat business must 

transact in the public eye, unlike bad users with short-term malicious agendas. 

By contrast, bad users with bogus accounts and a short-term focus have little or 

nothing to lose. As the next section will show, risk of harassment influences 

the behavior of good users at the post-registration stage. Keeping this 

atmosphere in mind, we turn to the discussion of the second stage of consumer 

protection--eBay's feedback forum. 



IV. The Second Level of Protection: The Feedback Forum



{57}The Feedback Forum is one of the most discussed and copied aspects of eBay. 

Commentators are fascinated with the Forum because it theoretically provides a 

means of overcoming the anonymity inherent in transacting on the Internet. It 

has been hailed as a triumph of community, and a means of creating cooperation 

in an unpromising setting.[87] The Feedback Forum does provide positive rewards 

such as motivation, learning and encouragement to users with inherently good 

intentions. However, over time, it has grown into a complex system prone to 

collective action failures and fraught with indiscretion. Therefore, at least 

where negative comments are concerned, it is a far cry from the simple ratings 

system promoted by eBay. It is not a strong means of preventing fraud or even 

dissatisfaction, and hence must be backed up with other methods of regulation.



{58}This section first describes how the feedback system works, including recent 

rule and code changes meant to strengthen the system against abuses. (Note that 

the mere description of its operation goes on for some paragraphs, thus 

providing the first hint that this system is not so simple after all.) Next, 

user benefits from the feedback system, including low cost, flexibility, ease of 

use, and psychic benefits are analyzed. Finally, drawbacks to the feedback 

system are discussed, the first and foremost being that the system does not 

prevent fraud. It also does not permit easy appeals, is not portable to other 

contexts, discourages truthful negative reporting, and is governed by complex, 

unwieldy norms. 



A. How the Feedback System Works



{59}Early in its existence, eBay realized that users would be wary of doing 

business with far-away individuals whom they do not know. Therefore, eBay 

created a feedback system that allows users to post short, public reports on 

their transaction partners after each transaction.[88] Currently, the feedback 

system operates as follows--each registered user automatically gets a feedback 

file, starting with no comments and a value of zero. Thereafter, when users, for 

example, Ann and Bob, complete a transaction with each other, Ann has the option 

of leaving a feedback comment for Bob, and vice versa. Ann and Bob can also 

choose to leave no comment, although eBay strongly encourages users to leave 

feedback through exhortations on the site,[89] code features,[90] and rewards 

for good feedback levels that inspire users to push their transaction partners 

for positive feedback.[91]



{60}If Ann chooses to leave a comment for Bob, Ann may do so by entering her own 

user name and password, the user name of the target (Bob), and the transaction 

number of the auction which the two completed. Ann then checks a box indicating 

a positive, negative, or neutral comment, and types the text of the comment for 

Bob. The comment, dated and marked with Ann's user name, then appears in Bob's 

publicly viewable file. The feedback entry pages contain warnings that feedback, 

once left, cannot be removed, that the feedback leaver is responsible for his 

own words, and that the feedback leaver should make an effort to work out 

differences first and then think carefully before leaving negative feedback.[92]



{61}The comment is meant to give other users a sense of what it is like to 

transact with the other party, and many users prefer that it discuss the 

transaction.[93] A typical positive comment might be, "Item as advertised, 

shipped promptly, pleasant seller, would buy from again." When leaving a 

negative comment, the feedback leaver is expected to calmly state the grounds 

for the negative comment in order to be credible, although the feedback system 

does not force him to do so. Neutral comments are regarded by experienced users 

as constituting "weak negatives" indicating some displeasure with the 

transaction. Therefore, users dislike receiving neutrals, even though their 

feedback ratings are not affected by them.[94]



{62}A user's feedback profile consists of three items, all of which can be 

viewed by any site visitor, not just registered users: the list of comments a 

feedback rating calculated by giving each positive comment by a unique user +1 

point, each negative comment 1 point, and each neutral comment 0 points and 

summing the points; and a star icon "award" whose color changes at different 

levels of feedback rating (ranging from yellow for +10 to a "shooting star" for 

+10,000). Repeat transaction partners can leave additional comments, but only 

one positive comment by each unique user name can count towards the numerical 

rating.



{63}If the feedback rating reaches 4, the user's account is automatically 

suspended.[95] However, since the rating is calculated as a sum of all comments, 

more than 4 negatives will be required to reach 4 if the user has one or more 

positives. Therefore, users with the same rating can have different feedback 

comments. For example, a rating of +50 can mean 50 positives and no negatives, 

or 100 positives and 50 negatives. Obviously, a user with a significant number 

of positive comments would have to get many negative comments before being 

suspended.[96]



{64}eBay has also instituted a special feedback rule for dealing with "deadbeat 

bidders" those who bid and win the auction, then fail to pay for the item. eBay 

states that when a bidder fails to pay, and the seller requests a refund of the 

commission paid to eBay, eBay will sanction the deadbeat bidder and may suspend 

him.[97] However, any negative feedback comments received by a deadbeat bidder 

regarding his failure to pay will not count towards the 4 score required for 

suspension of the bidder.[98]



{65}Because of this, the rating's information is incomplete, and eBay advises 

users to view the text of the feedback comments.[99] However, to do this the 

user must take time to load the comments and scroll through them on the screen, 

which typically displays 25 comments at a time. Thus, a relatively small number 

of comments, for example 100 comments, would require the user to load, scroll, 

and read four pages of comments. Regular sellers usually build up even larger 

feedback files, containing several hundred or even several thousand comments. It 

is difficult to isolate comments of a specific type, such as all the 

negatives.[100] eBay has repeatedly refused to provide this capability on the 

grounds that it wants users to see negative and neutral comments in 

context.[101]Therefore, it is likely that some users will rely only on the 

rating and perhaps view a few recent comments, without taking the time to scroll 

through many pages of comments.



{66}Even though most users with negative comments will not be suspended from 

eBay, the community possesses the ability to penalize users with negative 

comments. eBay allows sellers the right to cancel bids made by buyers with 

negative feedback. Additionally, eBay permits buyers the option to bypass 

auctions listed by a seller with negative feedback. Most eBay users strongly 

dislike getting even one negative feedback, even if they receive many positive 

comments to balance the effect.[102]



{67}Early in 2000, eBay instituted the code-based requirement that all feedback 

relate to a transaction between the parties. The feedback software forces all 

feedback leavers to enter the number of a closed, completed auction transaction 

involving their partner. The number is good for one feedback, and if a valid 

number is not entered, feedback cannot be left.[103] In this manner, eBay 

eliminates non-transactional feedback, which typically consists either of 

personal comments from friends and enemies (e.g. "You're a great person and a 

true friend!"), or comments based on commercial transactions outside of a 

completed eBay auction (e.g. "I have bought from this seller many times at his 

store and I recommend him"). Prior to this change, eBay offered a variety of 

rationalizations for non-transactional feedback, including that it helped to 

build a sense of community - people who were nice and helpful outside the 

context of a transaction could also earn rewards - and that it allowed customer 

support staff, who do not transact, to earn positive comments.[104]



{68}However, non-transactional feedback also posed serious problems. First, many 

users did not wish to base their transaction decisions upon feedback that did 

not address the potential partner's performance in a past eBay transaction.[105] 

Second, the ability to leave literally any comment on eBay encouraged 

harassment, often on non-transactional subjects such as political views or sex. 

Finally, non-transactional feedback encouraged "feedback padding," a scam 

procedure by which a user built up a false positive rating by soliciting 

comments (often worded to sound transactional, although no transaction took 

place) from relatives, friends, bogus accounts started by the same user, and 

other users who agreed in advance to exchange positive feedback without going 

through a transaction.[106] Under pressure from many users and faced with 

reports of feedback padding (including a highly publicized "feedback padding 

party" that involved exchanges of feedback "gifts" between approximately 140 

users in December 1999), eBay finally changed its code to force 

all-transactional feedback.[107]



{69}Originally, eBay policy also stated that the company would not remove any 

feedback. Presumably, many positive comments outweighed an isolated negative 

comment, and it would not pose a major issue. Receiving a negative comment 

provided an incentive for a repeat user to participate in several positive 

transactions to "bury" the negative, while at the same time generating revenue 

for eBay. As eBay grew, however, the non-removal policy caused concern as more 

users received harassing comments. At that time, allowing non-transactional 

feedback compounded the problem, causing some users to receive negative comments 

from non-transacting parties.[108] Several high-profile incidents of feedback 

harassment occurred in connection with heavily advertised auctions running as 

publicity stunts near the time of eBay's initial public offering.[109] Pressure 

from users forced eBay to establish guidelines and take an active role in 

removing feedback that crossed the line.[110]



{70}Under the new policy, eBay will only remove feedback in a few specific 

situations. According to eBay rules, feedback will be removed at a user's 

request under the following circumstances: if it has no connection to eBay 

transactions; advertises another auction service; contains links; contains 

vulgar or profane language or adult material; contains personal identifying 

information; claims (rightly or wrongly) that the user is being investigated; is 

proven by the feedback composer (not the target) to have been left for the wrong 

party; was left by a user who cannot be reached through his own contact 

information; or is found to be part of a multi-feedback harassment campaign by 

one user.[111] If none of these circumstances apply, eBay requires a court order 

to remove feedback.[112] For all of these situations, a user must e-mail a 

complaint to eBay's reporting system, as eBay does not check feedback.[113]



{71}Comments falling outside the above categories, including accusations of 

fraud or dishonesty, remain in the user's feedback file permanently and do not 

expire. For example, if Ann leaves a negative comment for Bob, his options 

include responding on a special response line, as well as leaving his own 

negative comment for Ann. Although users have asked for a way to indicate or 

"tag" these "retaliatory negatives," eBay has not implemented this feature. 

Thus, leaving a negative comment carries the expectation of receiving a negative 

comment in return.[114]



{72}All feedback is normally visible to the general public, including persons 

who are not registered with eBay. eBay allows users to exercise the option of 

making their feedback file private (viewable only by the user, who may then 

choose to send the comments to others), but this is discouraged both by the user 

community and by eBay. Private feedback results in the likelihood of provoking 

distrust and discouraging bids. Since most users use public feedback, the eBay 

community views a person utilizing private feedback as untrustworthy.[115] A 

user could overcome this negative perception through a well-known and honest 

reputation in the eBay community.[116] Some users attempt to diminish this 

problem by offering e-mail explaining why the feedback is private. But potential 

transaction partners, who manage to overcome their initial distrust from the 

lack of public feedback, must still go through the extra steps of sending e-mail 

and evaluating its explanation. The likelihood also exists that eBay, besides 

noting the negative effect of community distrust on sales, realizes that if all 

or most users made their feedback private, the feedback forum would lose much of 

its advertising and site stickiness value. Therefore, in an attempt to reduce 

the use of private feedback, eBay encourages its users with these words: 



  You will find that your Feedback Profile is a valuable asset at eBay, helping 

  you earn the trust and respect of fellow eBay participants. By making your 

  Feedback Profile private, you may be jeopardizing other eBay participants' 

  desire to conduct business with you. We strongly encourage you to consider 

  this carefully when making the decision to make your Feedback Profile 

  private.[117]



B. The Feedback System's Benefits and Drawbacks, From a User's Perspective



{73}The feedback system presents obvious benefits to eBay, the company. First, 

feedback advertises to the world that people transact on eBay. Hundreds or 

thousands of feedback comments suggest many repeat transactions, and spell 

success.[118] To the extent that most comments are positive, the world views 

eBay as a self-policing community, intolerant of fraud, and used by honest 

people. As discussed in the beginning of this paper, large feedback files also 

benefit eBay through site stickiness and code lock-in, thus keeping traffic on 

the site.



{74}But all of these benefits help the company, not the user. The individual 

user needs a different framework. Aside from receiving an initial, and possibly 

false, sense of security, the individual user does not benefit from the "big 

picture" that shows many past positive transactions. The user's main focus 

concerns the one transaction he wishes to make and the few past transactions, 

primarily those involving the user's potential partner, that might provide 

relevant cost-effective information about the current transaction. Therefore, 

feedback only assists the user if it both relates to the current transaction and 

provides accurate information at a reasonable cost. In addition, the public 

feedback system contains psychic components unrelated to transactional 

information, particularly since online auction users often bid for one-of-a-kind 

collectibles containing emotional value.[119] This section will first evaluate 

the benefits of the feedback system to users, followed by its drawbacks. 



1. The Benefits of the Feedback System to Users



{75}Users obtain two primary benefits from the feedback system. For most 

transactions, feedback offers an easier, more cost-effective mode of protection 

than other alternative forms of protection, such as credit checks. Second, 

positive feedback provides some psychological benefits, especially for repeat 

players.



a. Feedback is Less Costly and Easier to Use Than Credit Checks



{76}A comparison between feedback and the alternative forms of protection, 

credit reports and credit card checks, aids in evaluating feedback from the 

user's perspective. Both feedback and credit checks achieve the same purpose of 

providing assurance about a transaction partner's integrity. The lower costs, 

flexibility and informality, however, distinguish eBay's feedback reporting from 

credit reporting. For this reason, the informal procedures better suit the sale 

of lower-priced goods on eBay. If eBay did not utilize feedback reporting, the 

costs of reporting through normal channels might prevent the exchange of any 

information, resulting in a lack of trust and an unwillingness to enter into 

online auction transactions. Therefore, feedback produces the benefit of 

allowing low-cost information exchange which in turn, facilitates low-dollar 

transactions.[120]



{77}The first difference between feedback and credit checks is one of publicity 

and type of information. Feedback is public and can be viewed online at any 

time, by any person, for free. Although a certain amount of personal information 

is available to other registered eBay users (who, as described in part II, 

supra, can pull contact information to see the identity of a particular user 

name), the amount of personal information is limited to name, address, telephone 

number, and e-mail, and can be obtained for free.



{78}On the other hand, credit reports are private, and their owners are very 

concerned that there is no wide dissemination of the reports, especially online, 

because they contain large amounts of personal and financial information.[121] 

Obtaining a credit report also involves costs, both in paying fees to view a 

report or verify a credit card, and in following the established procedure for 

doing so.[122] Simply accepting payment by credit card, which ensures that the 

credit company will authorize the charge, requires a seller to have a merchant 

bank account and incur additional fees and risk.[123] Requiring a credit card 

for every transaction would also decrease the eBay user pool, because many users 

either do not have a credit card or do not feel comfortable giving card numbers 

to strangers on the Internet.[124]



{79}Based on this comparison, informal feedback is more suitable for eBay 

because transaction partners are unlikely to favor using credit cards or credit 

reports on a wide scale. For the average sale involving an inexpensive, used 

collectible, the cost to the user of disclosing private information would 

probably outweigh the benefit of the purchase. Even only mandating credit cards 

would exclude some users from the eBay pool, those who do not have or do not 

wish to use credit cards. Therefore, credit reports, and even credit cards, will 

not generally be a viable option for general user-to-user verification on eBay, 

although these methods may be appropriate for a few select transactions.[125]



{80}Feedback can be reported by any transaction partner (formerly any registered 

user), and although eBay has implemented more formal rules than it once applied, 

there are still only a few rules governing feedback postings. eBay and the user 

community might suggest that certain informal procedures be followed such as 

expressing a preference for feedback describing a transaction or attempting to 

work out a sale with a partner for some time before leaving a negative, but 

these procedures are not binding. A user can leave negative feedback for any 

transaction-related reason at any time after the transaction, although leaving a 

negative comment that is not well founded might make the leaver look worse than 

the target in the eyes of the community. Users can also report many forms of 

transaction-related conduct, including bad debts and other transaction issues 

such as rudeness and slow service.[126]



{81}By contrast, only certain entities can report bad debts to credit reporting 

agencies, and are required by law to follow strict procedures for trying to 

resolve the debt and for reporting it.[127] Furthermore, only bad debts can be 

reported. It is not possible to report to a credit agency that you were unhappy 

with a customer's attitude or a seller's inadequate shipping container.



{82}Based on the criteria of flexibility and cost, feedback is better suited to 

eBay than credit reporting. It would be difficult and costly for eBay to enforce 

strict reporting procedures on their thousands of small, individual mail-order 

transactions. Forcing a strict, costly procedure would result in less available 

information and possibly fewer transactions. Furthermore, credit reports and 

credit checks are primarily concerned with payment for goods and do not take 

service variables, such as payment method, communications, and shipment, into 

account. Because many eBay users are not full-time businesspeople, and are 

buying and selling informally rather than through a streamlined service process, 

they may have specific customer service expectations, and feedback allows 

customers to easily communicate about these expectations. 



b. Psychological and Quality Benefits of Feedback to Users



{83}Feedback also offers psychological benefits to its user. Feedback leavers 

are able to express their feelings in a public forumthey get a chance to vent, 

positively or negatively, for the world to see. Feedback also gives users the 

feeling, whether true or not, that they have some control over the transaction 

situation (i.e., by reading feedback comments, they can avoid getting "ripped 

off"), and over their transaction partner's behavior. According to a study by 

the Online Auction Users Association, 76 percent of sellers surveyed, and 86 

percent of buyers, listed the ability to rate the transacting party as the most 

important criteria in choosing an auction site.[128] This is important because 

the Internet is not a rich medium, and people cannot exert control in normal 

ways, like making judgments based on a person's physical appearance or 

expressing anger in person.[129]



{84}Feedback also helps improve service quality in borderline cases by 

telegraphing community expectations. For example, a user sees feedback praising 

others for fast payment and decides that she, too, will pay quickly. While a 

user bent on committing fraud is unlikely to find feedback a deterrent, a good 

user who just needs extra encouragement to improve, ship faster, communicate 

with partners better, or improve her listings to get higher bids may get that 

encouragement from feedback. This prevents a user from skimping on service 

online, when the transaction partner is separated by distance.[130] Telegraphing 

expectations through feedback is also important in the context of eBay 

specifically, because online auctions are a new business model and "newbies" 

must learn the norms of use.[131]



{85}Feedback provides a low-cost reward for users who meet the expectations of 

the community.[132] eBay also has some grounds for identifying the most 

committed users and rewarding them through publicity or incentive programs. (As 

discussed in the next section, the emotional downside to this is that users who 

receive an unfair comment have no recourse and are apt to feel very unhappy 

because so much importance is placed on maintaining a spotless reputation.[133]



{86}Finally, the presence of feedback helps build a trustworthy atmosphere, 

which is important not only to eBay's public image, but to the comfort level of 

its users. Many of the collectibles and unique goods sold on eBay have emotional 

connotations for the transaction partners, and many of eBay's users are not 

seasoned business professionals. The lack of anonymity and the friendly 

atmosphere engendered by glowingly positive feedback encourages users to feel 

comfortable.[134]



c. Conclusions Regarding Feedback's Benefits to Users



{87}The eBay feedback system benefits users by providing an inexpensive, 

flexible, easy-to-use means of getting information about a potential transaction 

partner. It also provides good intentioned users with psychological benefits, 

making them feel more comfortable and in control, and instructs new users on how 

best to behave. 



2. The Drawbacks of the Feedback System for Users



{88}Despite the financial and emotional benefits for some users, the eBay 

feedback system also has a number of drawbacks. First, it is ineffective at 

preventing fraud and other abuses, particularly given the ease with which a 

person can abuse the registration scheme. Second, it suffers from collective 

action problems, thus fostering a "good news only" reporting policy on the part 

of users and the posting of incomplete information. Third, it lacks some of the 

benefits of credit reporting, namely procedures for challenging unfair negative 

comments and portability to other similar venues. 



a. Feedback Does Not Prevent Fraud



{89}While the feedback system may inspire an improved level of customer service 

for "good" users, it is unlikely to prevent fraud if a user is determined to act 

badly. Obviously, a bad user is disinclined to care what the community thinks of 

him.[135] But in addition, the long-term nature of the system allows a user to 

register, commit fraud, and disappear with the profits before bad feedback 

appears in his file. Another method of committing fraud is to register and 

perform on a certain number of legitimate transactions in order to acquire good 

feedback, perhaps by buying or selling low dollar amount items, before 

committing fraud on big-ticket items.[136] Although some users may refuse to 

transact with new users having zero or low feedback, it is likely that with 10 

million users, some "suckers" will be found. There are also many ways of 

committing fraud, such as buying items on a stolen credit card and reselling 

them on eBay, that are unlikely to be detected by transaction partners, who will 

then leave positive feedback.



{90}A user may also commit fraud using the feedback system itself. "Feedback 

abuse" is committed when a user has friends with accounts pad her feedback with 

positive comments, or does so herself through multiple accounts all owned by her 

(which are technically forbidden). Although eBay's new insistence that a 

transaction number be entered to leave feedback makes padding harder, it is 

still possible to get transaction numbers by holding sham auctions and not 

actually completing the transactions. The only difference is that eBay will now 

receive fees for the sham auctions as well, but which are still relatively low 

for inexpensive items. After amassing a good feedback file based on the cheap 

items, the fraud perpetrator can pull off scams involving expensive items or 

simply enjoy the community benefits of having high feedback.



{91}An example of how easily fraud perpetrators can get around the feedback 

system is shown by the file of an eBay user named "kuchar1," the subject of a 

successful fraud probe by California law enforcement, featured in a recent 

article.[137] This user's behavior was clearly suspect. Despite listing an 

address in Union City, California, the seller asked users to wire payment for 

items to a bank in Latvia.[138] (After mailing payment, users then received 

notice that their items had been charged to a credit card account in their own 

name, forcing them to either pay a second time or return the merchandise.[139]) 

Yet even this seller managed to garner a feedback rating of +4, with six 

positive comments (five of which were left by unique users and linked to a 

completed transaction) and only one negative before being suspended.[140] 

Although many eBay users might be dissuaded from transacting by the single 

negative, it is likely that some would have decided to ignore it and been 

defrauded as a result.[141]



{92}Therefore, while feedback might give information about a transaction 

partner's habits, such as fast or slow payment or shipment, and might weed out 

some lazy or prank users, a user determined to commit fraud will not be deterred 

by the feedback scheme. Furthermore, since the eBay system encourages positive 

comments and discourages negatives (as discussed in the next section), a user 

might actually evade negative feedback for some time while engaging in 

undesirable practices.



b. The eBay System Encourages Positive Comments and Discourages Negatives



{93}The eBay system's code design and social norms can discourage users from 

posting honest negative comments. If Ann and Bob engage in a transaction, and 

Ann is dissatisfied, she may wish to post negative feedback for Bob. However, 

she faces a number of obstacles in doing so.



{94}When Ann goes to the eBay feedback page, she will see several warnings: that 

she is responsible for her own words; that eBay cannot take responsibility; that 

she should be careful about making libelous or slanderous comments; that she 

might need to contact her attorney; that once a comment is left it cannot be 

removed; and that she should try to work out her differences with Bob before 

leaving a negative.[142] Therefore, she is made aware that making a negative 

comment is very serious business and may have consequences. If Ann is not in the 

habit of leaving negatives, seeing warnings about attorneys in an unfamiliar 

context such as the Internet might scare her away from doing so.[143]



{95}Furthermore, if Bob already has overwhelmingly positive feedback, Ann is 

unlikely to want to leave a negative. Because most feedback left on eBay is 

glowingly positive and associated with one's reputation, negatives are highly 

disdained by the community, and most good users are upset about getting their 

first negative comment or even their first neutral.[144] Fear of doing the wrong 

thing in the eyes of the community (especially if Bob is a "popular" user with 

many positive comments) might cause Ann not to leave negative feedback. Along 

these lines, it is not uncommon for users contemplating leaving negative 

feedback to go to a discussion board, give the facts of a transaction, and ask 

the other board members if, in their opinion, the transaction partner deserves a 

negative. While this builds community to some extent, it might also create a 

collective action problem by causing genuinely dissatisfied persons to bury 

their feelings and go along with the group's decision.[145]



{96}Ann also knows that leaving a negative for Bob will, at the very least, 

probably earn her a retaliatory negative in return, and she may lack incentive 

to risk having her own feedback record tarnished. (Of course, if Bob has already 

left Ann a negative comment, she will have fewer qualms about responding in 

kind; also, if Bob has left Ann a positive comment, she may feel moral pressure 

not to "neg" him.) Given the strong desire of most users to avoid negative blots 

on their reputations, Ann will have to feel very strongly about the bad 

transaction, or else have nothing to lose - perhaps Ann is not a repeat player 

and only uses eBay once a year, or perhaps Bob has already left the first 

negative - before she will make a negative comment.



{97}Furthermore, if Ann is an experienced eBay user, she knows that her negative 

comment will be publicly posted and that not only Bob, the target, can get her 

contact information, but that anyone else can easily get it. There is even a 

link to obtain contact information at the bottom of the page for leaving 

feedback. Therefore, Ann knows that by leaving a negative feedback, she might be 

exposing herself to retaliation from Bob, or harassment from anyone else who 

does not like what she posts. She also knows (or will soon discover) that eBay 

is unlikely and unwilling to become embroiled in a dispute between Bob and 

herself, should things escalate. In fact, if Ann feels that Bob has violated the 

rules, she may need to investigate him by "netcopping" on her own or with other 

victims in order to present a complaint to eBay, and may hesitate to leave a 

negative for fear of tipping him off before the investigation is complete.[146]



{98}If Ann is not experienced, she may leave the negative for Bob this time, but 

should she get an angry response, she may think twice about leaving a negative 

in the future, or even about engaging in another transaction, since her early 

experience has not been positive. In addition, Ann will probably get a 

retaliatory negative on her new user record, which will make other users wary of 

transacting with her because, as a new user, she will have few positives to 

balance the negative.



{99}In all of the above cases, Ann is unlikely to leave a negative, even though 

she is dissatisfied, and therefore the feedback system has failed to communicate 

useful information. Ann is most likely to leave no comment at all. 

Alternatively, she might leave a "nasty neutral," which does not detract from 

Bob's feedback score, or even leave a weak positive, where Bob gets a positive 

point but the comment suggests that he could do better in the customer service 

area. This comment is likely to fall on deaf ears though, since many users will 

not look beyond the positive rating.[147]



{100}These problems stem from Ann, an individual or small business owner, being 

forced to report on Bob, non-anonymously, in a public forum with flexible rules. 

By contrast, in the case of credit reports, the reporting entities are usually 

impersonal, corporate bodies that are insulated from the target through 

procedure and bureaucracy. Credit reporters often have bad debts handled by an 

outside collection agency that, unlike Ann, is equipped to deal with angry 

targets. Credit reporting does not take place in a public forum and certainly 

not on the Internet with thousands of users watching. It is also not a 

communitarian activity and is based on strict parameters (e.g. a company can 

only report a bad debt uncollected after a certain number of days without 

collection), rather than personal discretion.[148]



{101}Even though Ann has not reported with absolute honesty, eBay, the firm, is 

likely to be happy with this outcome. If users coming upon the eBay site see 

many negative comments, they will be less likely to register and participate in 

transactions. eBay would also like to boast to stockholders, regulators and 

other outside bodies that the vast majority of transactions on eBay go well. 

eBay therefore has an incentive to promote a "good news only policy," 

encouraging positive feedback as much as possible, and attempting to subtly 

discourage negative feedback. As we have seen, eBay does this by applying 

pressure through warnings, by forcing feedback to remain in the public eye, by 

encouraging community members to hold their feedback in high regard, and by not 

protecting users from bad consequences resulting from a bad transaction or 

negative feedback. 



c. Unlike Credit Reports, eBay Feedback is Neither Appealable, Nor Portable



{102}Besides a less personal, more carefully controlled system of reporting, 

credit reports do have two additional advantages that eBay feedback currently 

lacks: clear and fair removal procedures, and portability.



{103}It is very difficult to remove negative feedback from one's eBay file. The 

removal procedure, although more formal than it used to be, is not crystal 

clear, due to the flexibility of the comment guidelines. In the end removal is 

dependent on eBay's willingness to act in a particular case, suggesting that 

parties with strong bargaining power (such as high-volume sellers and 

celebrities) will be favored over weaker parties (such as new users with low 

feedback). Also, if the feedback is transactional in nature, under the new 

rules, it is likely to stay even if it is blatantly unfair. Barring removal by 

eBay, feedback is never expunged, even if the feedback leaver is NARUed.[149] 

The user's only alternatives are to note an explanation for the comment in his 

feedback file, leave a retaliatory negative for the other party, and/or resort 

to getting an expensive court order against the feedback leaverespecially 

difficult because many eBay users are in different legal jurisdictions, 

separated by distance.[150] On the other hand, credit reporting agencies have 

formal, legal procedures for challenging a bad rating, and bad comments are also 

expunged automatically after a certain number of years.[151]



{104}eBay's prohibition on retraction is good in that angry feedback receivers 

cannot bully feedback leavers into erasing their comments. However, the area of 

feedback removal is one where feedback appears to be deficient to the credit 

reporting model. Although removal procedures are now more formal, eBay lacks the 

incentive and the resources to remove many feedback comments, particularly those 

of a transactional nature (since that would involve eBay in the transaction). 

Therefore, individual users still find it difficult to challenge negative 

feedback. Obviously, eBay would prefer that a user engage in many more good 

transactions in order to bury or overcome the bad comment, thus generating 

commissions for eBay. 



{105}One might argue that keeping negative feedback provides a more honest 

picture, or that the negative does not impact many critical areas of life like a 

negative credit report, making removal procedures less critical.[152] However, 

users have been encouraged by eBay to take feedback very seriously, and view 

feedback as their reputation, so it is only fair that eBay should allow users to 

challenge blots on that reputation through an established review process. 

Another issue is that eBay does not normally volunteer information about 

feedback that it removes, probably in hopes of preventing a flood of removal 

requests, so many users are unsure how to challenge comments or think there is 

no recourse. From eBay's standpoint, this confusion is good because it can 

easily avoid having to intervene.



{106}Regarding the transferability of feedback, eBay feedback is not portableit 

can normally only be used at eBay. eBay does not allow users to transfer their 

feedback or link eBay feedback to other sites for various reasons.[153] eBay 

states some of these reasons on its site as concerns that other sites will 

interpret feedback differently, or will facilitate "daisy-chaining" fraud, where 

a user links his feedback rating to another site and then links the same 

feedback rating from that site to eBay, thus doubling his rating number.[154] 

Obviously, a main reason, which is not stated, is eBay's unwillingness to allow 

Johnny-come-lately competitor sites to benefit from a feature that was meant to 

be helpful to eBay.



{107}Credit cards and credit reports, however, are portable, and can be used in 

many businesses and many areas of life. Unlike eBay feedback, credit reports 

come into play in many crucial life areas, such as obtaining a mortgage or an 

educational loan. The strict controls on credit reports partly reflect this 

centrality.[155]



{108}While eBay feedback is not central to life, and probably should not be 

portable to important areas such as mortgage approval, it can be central to how 

one behaves in e-commerce transactions and could certainly serve a good purpose 

if made portable on the web. Indeed, some users have already made attempts to 

"export" their eBay reputation by signing up to do business at multiple auction 

sites under the same user ID.[156] However, because not all users choose to 

visit multiple sites, confusion is possible since the same user ID on a 

different site does not necessarily represent the same person.



{109}From a regulatory rather than a business standpoint, there is no reason why 

eBay feedback should not be linked to or otherwise referenced from other 

e-commerce sites to show online reputation. Portable feedback would enhance the 

value of one's eBay reputation and encourage one to perform even better as an 

eBay transaction partner. Also, other auction sites have encouraged feedback 

files, and it is theoretically possible that a user could be building up a 

separate feedback file on five or six sites. This makes little sense from a 

regulatory standpoint, since no one site is building up a complete picture of 

the user's activities. (From a business standpoint, each site is attempting to 

encourage stickiness and code lock-in, as well as promoting their version of the 

feedback system as a competitive advantage.)



d. Conclusions Regarding Feedback's Drawbacks For Users



{110}Feedback has some benefits, but fraud prevention is not one of them. 

Therefore, the presence of large amounts of good feedback on eBay's site 

probably testifies to the inherent good intentions of most users, who want to 

engage in productive transactions for mutual gain,[157] rather than feedback's 

effectiveness as a fraud-stopper.



{111}Although credit reports are also powerless to stop some types of fraud, the 

penalties associated with a bad credit report, as well as the difficulty of 

obtaining clean credit, provide some deterrent effect. Feedback, however, 

carries relatively little penalty for a bad user because he can register under a 

new identity fairly easily, as discussed in Part II.



{112}Feedback unfairly penalizes good users by making appeal difficult and 

somewhat discretionary, and it passes up the opportunity to build trust in the 

wider e-commerce community by lacking portability to other auctions or contexts. 

The eBay system also encourages positive comments and discourages negative 

comments, thus providing a biased, positive feedback result to the company's 

advantage. The complexity and user discretion, inherent in the feedback process, 

also make the end result hard to interpret and unwieldy to change. In summation, 

while it is likely that feedback will persist, because users like it and enjoy 

some benefits, it is also clear that other means must be found to protect eBay 

users against fraud.



V. Beyond Feedback: Methods of Effectively Preventing Fraud



{113}As shown by the previous sections, eBay's current model of user 

registration and feedback provides a weak protection against fraud. The eBay 

feedback system appears deceptively simple and communitarian, but is actually 

quite complex. It is governed not only by the simple rules eBay sets forth for 

its use, but by a host of additional social norms and concerns, many of which 

are unwritten and known only to experienced users. Although one positive feature 

of the feedback system is educating newcomers about how to behave, the downside 

is that eBay community norms are not as simple as casual users would believe. 

The idea that transaction partners honestly rate each other, and that bad 

partners are summarily booted off eBay, never to return, is simply not true. 

Moreover, the idea of what constitutes a "bad" partner is so open to individual 

interpretation (and dependent on the willingness of the user to leave a 

negative) that it is difficult to establish clear standards. eBay's simple 

ratings scheme only works when comments exchanged are positive, clearly 

indicating that all went well on both sides and encouraging the users. It breaks 

down for discretionary negatives.



{114}eBay has attempted to address some of the feedback system's defects with 

alternative regulatory schemes. Although these schemes might produce desired 

results, they can add layers of confusion to the already confusing and 

discretionary message of feedback. One example of this problem is eBay's new 

non-paying bidder policy, meant to address the problem of deadbeat bidders.[158] 

Feedback was not functioning as an effective disciplinary tool to prevent this 

problem, forcing eBay to come up with an alternative plan to review each 

deadbeat bidder case separately, in order to avoid losing money.



{115}However, due to the large number of transactions, eBay is not able to 

effectively police all incidents of fraud on its own. At this time, eBay, as 

stated on its site, is actually relying primarily on third-party service 

providers to protect its clientele against fraud.[159] It also derives benefits 

from the potentially risky activities of private netcops.



A. Third-Party Service Providers



{116}Third-party service providers active on eBay can be divided into two 

groups. The first group includes those with whom eBay has chosen to officially 

partner and promote on its site. Businesses in the second group include those 

with whom eBay does not have an official partnership agreement, but which offer 

services helpful for fraud prevention.



1. eBay's Official Third Party Partners



{117}The first group of eBay's partners include Equifax Secure, Lloyds, 

i-Escrow.com and SquareTrade.com. Equifax provides credit verification for eBay, 

while Lloyds insures all eBay purchases up to $200 with a $25 deductible. 

Meanwhile, i-Escrow is an online escrow service that holds a buyer's money until 

the buyer notifies i-Escrow that the purchase has arrived safely. When this 

happens, i-Escrow pays the seller.[160] Finally, SquareTrade is a pilot 

mediation program. It is designed to resolve disputes over items that cost more 

than $100. (There is very little information on SquareTrade because it is a 

pilot program. SquareTrade will not be discussed further in this paper.)[161] 

eBay is also looking to partner with Visa, by making it the preferred payment 

method on eBay. Presumably, this would include inducements for users to pay with 

Visa.[162]



{118}As mentioned earlier in this paper, the major benefits of partnering with 

Equifax and Lloyd's are eBay's ability to spread responsibility and the 

potential risk of fraud by taking advantage of established areas of law 

governing credit and insurance. The Lloyd's program is relatively 

uncontroversial because it is free and generally does not question the 

reputation of the user filing a claim. However, other programs which require an 

opt-in, or a payment for services by the user, have run into trouble. eBay 

cannot continue to hold up positive feedback as denoting honesty, while 

simultaneously suggesting that users pay extra (either in money, or some other 

form like personal information) for fraud protection.



{119}When user verification (of the type done by Equifax, or by credit card 

companies) was originally discussed, many longtime eBay users balked at the 

thought of having their credit reports verified, or having personal credit card 

information turned over to eBay. These users felt that their online sales 

records, including feedback, represented their good reputation and that no 

further checks were necessary. eBay circumvented this issue by providing a 

"grandfather clause" to all existing users (and, in a controversial move, 

suspending some of the most vocal critics).[163]



{120}i-Escrow has presented even more serious problems because there is no way 

for eBay to exempt long-term users from the service. Many sellers view i-Escrow 

as an unnecessary administrative hassle and believe that if the seller has good 

feedback, the buyers need not, or need not want, to use i-Escrow. Consequently, 

users became upset when an eBay spokesperson publicly announced that sellers who 

refused to use i-Escrow were probably untrustworthy.[164] eBay has also 

discovered that i-Escrow prevents some forms of fraud, while encouraging new 

forms that need to be controlleda problem that might arise with other online 

partnerships as well.[165] Finally, because i-Escrow is a new business, rather 

than a "brick-and-mortar" business such as Equifax, or Lloyds, it is unclear 

whether eBay will be able to depend on an existing body of law for guidance.



{121}In short, the success of eBay's partnerships is partly constrained by the 

community feedback norms that eBay has promoted. Having emphasized feedback as a 

tool for promoting honesty, and having built a user base that strongly agrees, 

eBay must now find ways to sell new protective services to users without 

admitting that feedback is an unreliable form of protection. The only way around 

this problem is to design services that longtime users will value which enhance 

the transaction, perhaps by adding convenience. That way, the product can be 

marketed as a useful item without referring specifically to trust issues.



2. Third Parties Who Do Not Partner With eBay



{122}eBay also benefits from a number of third parties with whom it does not 

have official partnerships. Chief among these are online payment sites, such as 

PayPal.com, and offsite auction resource/discussion centers, such as 

AuctionWatch.com and Honesty.com, and the Online Auction Users Association 

("OAUA"), a nonprofit trade association. These businesses help eBay by providing 

channels for users to perform self-help relating to fraud. For example, using 

PayPal, a user can pay a middleman (an online banking service) with his credit 

card and ensure that his transaction partner receives cash. No personal 

information, such as credit card numbers, need be exchanged between the 

transacting parties. The seller does not have to assume the fees associated with 

taking credit cards and running credit checks, because the middleman assumes 

those fees. AuctionWatch, Honesty and the OAUA, through discussions, reports and 

online articles, educate users about community norms, areas of concern and 

methods of spotting and foiling bad transaction partners. These organizations 

also perform data gathering tasks and provide channels for passing controversial 

information to eBay without eBay having to undergo the humiliation of having 

users criticize its features and practices on its own site.[166]



{123}These services occasionally take actions that are at odds with eBay's 

business moves, or otherwise may cause some disruption.[167] However, by and 

large, these services are helpful to eBay. They provide private market solutions 

to fraud at little, or no cost to eBay. eBay is not placed in the position of 

publicly stating that its feedback procedures for fraud are ineffective because 

eBay does not need to promote these services to users.



B. Private Investigation and Netcopping



{124}Finally, eBay benefits from the efforts of private users, "netcops," who 

track down fraud on their own, or in concert with law enforcement.[168] Often 

these individuals will become involved after having been swindled themselves. 

They perform investigations that eBay does not have the money, resources, or 

incentives[169] to do so on its own. eBay encourages private netcopping in a 

number of ways. First, eBay makes contact information relatively easy to get, 

and a netcop's identity relatively easy to disguise. Second, eBay requires that 

a user complaining of another user's bad practices have evidence backing up his 

or her story. eBay is also very willing to act on well-documented complaints. 

Finally, eBay encourages netcopping by having engaged in explicit, or tacit 

cooperation agreements with netcops in the past.



{125}eBay benefits from using netcops primarily because netcops perform their 

services for free. If a netcop gathers enough reliable information on a fraud 

perpetrator, eBay does not need to spend money investigating any further. 

Netcopping is also relatively invisible and does not require eBay to announce 

the presence of fraud.



{126}However, eBay also runs some risks from encouraging netcopping activities. 

Chiefly, there is the possibility that the netcop may go too far in collecting 

and disseminating information about his or her targets. If that occurs, eBay 

will likely take action against the "good" netcop as well as the "bad" user, 

despite the netcop's past valuable services. If the netcop has a good reputation 

or standing in the community, then eBay will face public fallout from its 

decision to suspend the netcop. It will also lose an inexpensive source of 

controlling fraud by suspending the netcop.[170] If the netcop does not have 

standing in the community, the community may be outraged at the idea that a 

private user is being allowed to investigate other users, or file 

complaints.[171] Netcopping schemes also tend to favor persons with the 

necessary knowledge and resources to perform the task. Hence, it does not allow 

all users' interests to be evenly represented.[172]



{127}Commentators have suggested that the best way around the netcopping problem 

is to discourage netcops from acting on their own, and instead have them work in 

concert with, or be certified by, law enforcement professionals.[173] Since law 

enforcement professionals are unlikely to have the interest or resources to 

investigate small fraud complaints, consumer watchdog groups might also prove a 

good source for educating netcops. Additionally, working out agreements with 

eBay so that personal boundaries are not crossed in the course of an 

investigation would be helpful.



VI. A Proposed Scheme for Third Party Feedback Administration



{128}Many of the problems plaguing the current feedback system stem from the 

difficulties inherent in a private provider managing feedback. Private 

providers, such as eBay, have a limited amount of resources to put into feedback 

maintenance, which is not the core of their businesses. Providers have an 

incentive to remain passive in order to avoid liability. Allowing each auction 

site to have its own feedback system also limits the amount of available 

information, because feedback comments cannot be transferred to a different 

auction site.



{129}This section suggests a different model for feedback that will address 

these concerns. For the community to get the most regulatory benefit, feedback 

for all auction exchanges (and perhaps for other e-commerce activities) could be 

moved to a third party administrator. The third party administrator would be 

relatively judgment-proof and would enforce specific, standardized rules for 

leaving feedback and challenging feedback which is left. This scheme would allow 

feedback from other auction and e-commerce sites to be gathered into one place, 

so that users could not engage in regulatory arbitrage by simply moving to a 

fresh site after having exploited one.



{130}A third party administrator is necessary because if eBay's feedback was 

regularly exported to new arenas, users would probably demand that eBay provide 

even more formalized procedures for addressing negative comments, as they would 

have a greater impact on their online existence. However, eBay, a private 

business, probably would not want to spend more time and resources managing a 

free feedback system that benefits other businesses outside its website. 

Therefore, third party administration is desirable. With ten million user 

accounts already active on eBay, and other auction sites promoting their own 

feedback systems, it is doubtful that any community spirit would erode at this 

point from moving all feedback to a third party site.



{131}Funding for such a scheme could be done through individual user fees, or 

alternatively, by having online auction houses pay an annual fee to allow all 

their members to have access. It is likely that a centralized feedback regime 

would appeal to users who participate in multiple auction services and wish to 

combine their scores.



VI. Conclusion



{132}eBay states on its site, "We believe people are basically good."[174] For 

the vast majority of its users, that statement is true. Judging from the sheer 

volume of sales occurring on eBay, as well as the large number of positive 

feedback comments, the typical eBay user does not want to perpetuate fraud, but 

instead wants to honestly transact business in a manner that will benefit both 

parties involved. Given that most users have good intentions, eBay's feedback 

system serves an important purpose as a motivational, educational and 

inspirational tool, and is extremely important to many users.



{133}However, for the small percentage of users with fraudulent intentions, the 

feedback system, coupled with weak registration and a lack of anonymity does not 

prevent fraud, nor does it adequately protect users against such fraud. It does 

serve eBay's economic and regulatory needs of encouraging a large user base, 

while maintaining distance from transactions. But for real fraud protection, 

users must turn to private solutions. Although eBay wishes to avoid having fraud 

on its website, and also wishes to appear committed to fraud prevention, it must 

use extreme caution in promoting additional fraud protection services to avoid 

upsetting its community, which believes strongly perhaps too strongly in the 

feedback model.



{134}There are several ways in which this system could be improved. First of 

all, as discussed in the previous section, feedback could be made portable and 

handled for all auction sites by a disinterested third party, who would also 

administer an appeal's procedure. Although eBay (and other auction sites) would 

likely balk at losing a perceived source of competitive advantage, in reality 

this would free eBay from the "emperor's new clothes" problem of pretending that 

the feedback system deters fraud, while being faced with ever-increasing 

evidence that it does not. As it is, eBay finds it hard to promote additional 

private solutions for fear of contradicting its stance on feedback and angering 

its users. Allowing a third party to handle standardized feedback reporting 

would also ensure that users of all online auctions receive good, reasonably 

consistent information.



{135}Secondly, eBay should continue the practice of partnering with outside 

service providers, or permitting outside service providers who operate within a 

clear legal framework to work with eBay. These service providers can include 

brick-and-mortar private companies, law enforcement and consumer watchdog 

groups. Operating within a defined framework takes the burden off eBay to come 

up with regulatory models and it allows eBay to better shift liability. eBay 

might also identify those partners that many of its users already prefer, thus 

reducing the need to sell users on the service and risk upsetting users who 

believe the feedback system protects against fraud.



{136}On a broad level, the success of community policing models relies partly on 

the willingness of users to abandon or at least modify the model when it becomes 

ineffective. However, when the model is tied up with emotionally important 

concepts, such as persona and reputation, users will be loath to abandon it. 

Online communities which create such models in the future would do well to 

recognize these models' limitations early on and educate users before the 

models, like eBay's feedback system for fraud prevention, turn into ineffective 

800-lb. gorillas.



ENDNOTES



[*] J.D./ M.B.A. candidate, Georgetown University Law Center/ McDonough School 

of Business, 2001; M.S., George Washington University, 1994; B.S.E.E., Case 

Western Reserve University, 1985. I would like to thank Professor Julie Cohen 

for providing comments and direction, and the discussion communities of Auction 

Watch and Auction Patrol for offering enlightening common-sense insights. This 

Comment is dedicated to Derek de Prator, a fellow eBay user who played a role in 

the completion of this work.



[1] This paper focuses on online auctions for private retail goods. Online 

auctions for stock pose different regulatory problems, such as the feasibility 

of letting private stockholders bypass established markets such as NASDAQ to 

sell directly to each other. See Norman Sobol, Book Review: Intelligent Agents 

and Futures Shock: Regulatory Challenges of the Internet, 25 IOWA J. CORP. L. 

103 , 108 n.4 (1999) (reviewing HOWARD M. FRIEDMAN, SECURITIES REGULATION IN 

CYBERSPACE, at 15-14 (2d ed. 1998)). The online auction site eBay, the focus of 

this paper, prohibits auctions of stock and other securities on its site. See 

eBay-Stocks, Bonds, Securities and Related Certificates, at 

http://pages.ebay.com/help/community/png-stocks.html (last visited Mar. 9, 

2001).



[2] For a general discussion of online auction fraud practices, see James M. 

Snyder, Note, Online Auction Fraud: Are the Auction Houses Doing All They Should 

or Could to Stop Online Fraud?, 52 FED. COMM. L.J. 453, 457-59 (2000).



[3] See, e.g., id. at 455 (noting tremendous increases in online auction 

complaints to the FTC and watchdog groups, and involvement of National Consumers 

League); Heartland Better Business Bureau, News, Events & BBB Integrity Awards, 

available at http://www.heartlandbbb.org/NewsEvents/hot_topics.htm (last visited 

Mar. 9, 2001).



[4] See, e.g., infra notes 33-34 and accompanying text (discussing widely 

reported incidents of a 13-year-old placing fake bids on high dollar items, such 

as a classic car, and a fake bid on a charity auction sponsored by ABC's Today 

Show).



[5] Deadbeat bidders are a frequent topic of discussion on Auctionwatch.com, a 

well-known resource site for the eBay community. See, e.g., Posting of dnjbias, 

dnjbias@auctionwatch.com to http://www.auctionwatch.com/mesg/read.html (Jan. 26, 

2001) RE: Deadbeats on the Rise?, at http:// www.auctionwatch.com/ 

mesg/read.html?num=2&thread=164045 (noting incidents of deadbeats on items with 

average values of $25 and $15).



[6] This is in direct contrast to live auctions, which are normally regulated at 

the state level. Online auctions do not fit well into state regulatory schemes 

because the online auctioneer is an automated process, and is therefore not 

acting as the seller's agent in the traditional sense. See Richard A. White, 

Overcoming Regulatory Barriers to Successful E-Commerce, 570 PRAC. L. INST. 

COPYRIGHTS, TRADEMARKS And Literary Prop. Course Handbook Series, 703, 708 

(1999). Jurisdictional constraints when the auction buyer or seller lives 

outside the state hamper enforceability of state laws and may invoke commerce 

clause issues. See generally Dan L. Burk, Federalism in Cyberspace, 28 CONN. L. 

REV. 1095 (1996). State governments are vulnerable to a deluge of complaints 

from online auction users, including state citizens. See Amanda Strickland, N.C. 

Holds Off Controversial E-Auction Regs, THE BUS. J., Dec. 31, 1999, available at 

http://triangle.bcentral.com/triangle/stories/2000/01/03/story4.html (discussing 

how North Carolina auction sellers were joined by other sellers across the 

country, as well as the trade association Online Auction Users Association 

(OAUA), to defeat an attempt by North Carolina to force online auction sellers 

to obtain $250 auctioneers' licenses).



[7] See Lawrence Lessig, The Law of the Horse: What Cyberlaw Might Teach, 113 

HARV. L. REV. 500, 507-511 (1999) (describing four modalities of regulation in 

cyberspace as law, social norms, markets, and architecture or code). In this 

case, social norms and markets, which are relied upon by the feedback system, 

have failed to prevent fraud, so eBay must rely upon code and law.



[8] See id. In partnering with third parties, eBay relies upon external laws 

such as the Fair Credit Reporting Act that govern third parties' business 

activities but place little burden directly upon eBay's company.



[9] About eBay Company Overview, at 

http://pages.ebay.com/community/aboutebay/overview/index.html (last visited Mar. 

6, 2001).



[10] See eBay Category Overview, at 

http://listings.ebay.com/aw/listings/overview.html (last visited Mar. 6, 2001). 

The "practically anything on earth" designation has been limited by the fact 

that eBay prohibits or controls the sale of many items, including but not 

limited to alcohol and tobacco products, firearms, human parts and remains, TV 

descramblers, drug paraphernalia, live animals, copyrighted items, unwashed 

clothing, hate memorabilia, and a wide range of adult materials. See Is My Item 

Allowed on eBay? Prohibited, Questionable and Infringing Items, at 

http://pages.ebay.com/help/community/png-items.html (last visited Mar. 6, 2001).



[11] This folksy tale usually omits the fact that founder Pierre Omidyar was a 

Silicon Valley veteran who had already started one e-commerce site that was 

purchased by Microsoft. See Daniel Roth, Meg Muscles eBay Uptown, FORTUNE, July 

5, 1999, at 81.



[12] Competitors include major e-commerce firms such as Yahoo! and Amazon, as 

well as smaller imitators such as Gold's Auctions, Boxlot, Onsale, and Bidbay.



[13] It has been argued that eBay's profits stem mostly from its investment 

strategies and not from its operations. See Warren Gump, Fool on the Hill: An 

Investment Opinion eBay's Amazing Profits (last modified July 27, 1999), 

available at http://www.fool.com/EveningNews/foth/1999/foth990727.htm.



[14] See Roth, supra note 11; About eBay: Company Overview Benchmarks, at 

http://pages.ebay.com/community/aboutebay/overview/benchmarks.html (last visited 

Mar. 6, 2001).



[15] The number of categories fluctuates as eBay adds and removes categories 

based on user suggestions. See About e-Bay: Company Overview-Benchmarks, supra 

note 14.



[16] This description of how an auction works is partially based on the author's 

personal experience as a buyer in over two hundred eBay auctions since 1997.



[17] See eBay Registration, at 

http://cg4.ebay.com/aw-cgi/eBayISAPI.dll?SSLRegisterFromCountries&siteid=0&co_

partnerid=2&uUsingSSL=0 (last visited Apr. 1, 2000).



[18] See About eBay: Company Overview, at 

http://pages.ebay.com/community/aboutebay/overview/index.html (last visited 

Mar.6, 2001) (noting that individualsnot big businessesuse eBay to buy and sell 

items). See also Mark Leibovich, eBay, `Cyburbia's' New Subdivision, Stokes a 

Boom; With an Emphasis on Community, Internet Auction Site Struggles with 

Growth, WASH. POST, Jan. 31, 1999, at A1 (describing how many eBay sellers are 

individuals who discover that they can profit by selling their household 

knick-knacks or newspapers). 



[19] See eBay: New to Selling?, at 

http://pages.ebay.com/help/basics/n-selling.html (last visited Mar. 9, 2001); 

eBay: Are There Fees? at http://pages.ebay.com/help/basics/n-fees.html (last 

visited Mar. 9, 2001). 



[20] See eBay: New to Bidding?, at 

http://pages.ebay.com/help/basics/n-bidding.html (last visited Mar. 9, 2001).



[21] See eBay: New to Selling?, supra note 19. eBay permits several variations 

on this basic model, including the reserve price auction where the bids must 

reach a certain price level before the seller is obligated to sell; the Dutch 

auction where bidders bid for the right to purchase one or more items from an 

identical lot; and the private auction where bidders' identities are kept 

secret. See eBay: Frequently Asked Questions About Auction Types, at 

http://pages.ebay.com/help/basics/f-format.html (last visited Mar.9, 2001) 

(describing auction formats allowed by eBay). Some other variations not 

permitted by eBay, but permitted by some competitors, include the choice 

auction, where the bidder wins the right to choose an item from a lot, and the 

extended auction, where the auction time is extended for a certain number of 

minutes after a late bid to give others a chance to respond.



[22] See The Feedback Forum at 

http://pages.ebay.com/services/forum/feedback.html (last visited Mar. 9, 2000).



[23] See Robin Fields, Some E-Auction Users Get Less Than They Bargain For: 

Internet Fraud Has Escalated at Online Bidding Sites, Prompting Law Enforcement 

and Security Crackdowns, L.A. TIMES, Mar. 16, 2000, at A1 (quoting eBay 

spokesman Kevin Pursglove as saying "žif we don't do right by our community, 

then the issue of regulation arises.").



[24] See TAMAR FRANKEL, Trusting and Non-Trusting: Comparing Benefits, Cost and 

Risk (Boston Univ. Sch. of Law Working Paper Series, Law & Econ. Working Paper 

No. 99-12, 1999) (noting that "The starting point in trusting attitude is a 

presumption that the other person or institution is trustworthy, barring 

evidence that conflicts with trustworthiness"), available at 

http://www.bu.edu/law/faculty/papers (last visited January 30, 2001).



[25] See Roth, supra note 11.



[26] eBay's site contains numerous reassurances of honesty, including a link on 

the portal page entitled Why eBay is Safe that takes the viewer to a page 

describing the merits of the feedback forum, as well as other protective 

features such as insurance; a Better Business Bureau icon; and a Trust-E privacy 

icon, which most casual users are unlikely to understand, but which might 

provide psychic benefits through use of the words "trust" and "privacy". eBay, 

at http://www.ebay.com (last visited Mar. 9, 2001) (portal page); FRANKEL , 

supra note 24, at 18 (discussing how "market verifiers" such as Trust-E help 

establish trust by verification, but in so doing reduce trust to a "commodity" 

that can be bought). The eBay statement of community values also states the 

default trust rule, "We believe people are basically good," and eBay encourages 

"open and honest communication" among its members. eBay Help: Community 

Standards Community Values, at http://pages.ebay.com/help/community/values.html 

(last visited Mar. 6, 2001).



[27] See generally Richard S. Murphy, Property Rights in Personal Information: 

An Economic Defense of Privacy, 84 GEO. L.J. 2381 (1996) (analyzing economic 

value in privacy rights); Heather Green, A Little Privacy, Please, BUS. WEEK , 

Mar. 16, 1998, at 98 (noting that a Business Week/Harris poll found that a 

majority of 999 respondents polled listed privacy concerns as the main reason 

why they did not use the World Wide Web; of those who did use the Web, 78% said 

they would use it more if privacy were guaranteed).



[28] See, e.g., Stephen Hoare, Turning Hits Into a Smash, TIMES (London), Mar. 

24, 2000, available at 2000 WL 2877491 ("For a site to do business it has to be 

`sticky' people have to want to stay and discover what your website is offering 

rather than clicking off because they are bored or cannot navigate their way 

through the mass of information on offer.")



[29] See Peter S. Menell, An Analysis of the Scope of Copyright Protection For 

Application Programs, 41 STAN. L. REV. 1045, 1066-67 (1989) (discussing 

switching costs incurred by users who change software control interfaces): David 

J. Goldstone, A Funny Thing Happened on the Way to the Cyber-Forum: Public vs. 

Private in Cyberspace Speech, 69 U. COLO. L. REV. 1, 50-51 (1998) (noting code 

"lock-in" phenomenon causing a user to incur switching costs upon having to 

leave an established network, learn a new system, and adapt to a new 

architecture).



[30] See Goldstone, supra note 29, at 50-51 (describing lock-in phenomenon as it 

relates to e-mail forums). Based on Goldstone's analysis, costs of switching to 

other sites in this case could be broken down as (1) the costs of subscribing, 

learning about, and configuring a new system and (2) the cost of notifying the 

"installed base" of users with whom one normally communicates that one has 

changed systems. In this case, there is an additional cost (3), that of 

developing a new user base on the new system. Because auction sites are 

generally easy to use and similar to each other, the costs of (1) are small, 

leaving the costs of (2) and (3) to mainly determine whether a user stays on 

eBay or goes elsewhere. Id.



[31] Although eBay does not baldly state its preference, eBay subtly expresses 

its preference through incentives such as the PowerSellers Program, a special 

service and reward program for high volume sellers who are therefore frequent 

repeat players. See PowerSellers Program, at http://pages.ebay.com/services/ 

buyandsell/powersellers.html (last visited Mar. 6, 2001). There is no 

corresponding program for "power buyers."&nbsp See id.



[32] See Community: Suggestion - Feedback Revision Project, at 

http://pages.ebay.com/community/suggestion/feedbackresults.html (last visited 

Apr. 1, 2000)(discussing feedback changes that eBay will make in response to 

customer input) [hereinafter Feedback Revision Project]. A survey conducted by 

the Online Auction Users Association helped to drive this change. See generally 

ONLINE AUCTION USERS ASSOCIATION, Member Issues Report, Nov. 24, 1999 (available 

to members only; copy on file with author) [hereinafter OAUA REPORT].



[33] See Boy Bids Millions on Internet Auctions: The 13-Year-Old "Really Didn't 

Know This Was For Real," Said His Shocked Mother, CHI. SUN-TIMES, Apr. 30, 1999, 

at 38.



[34] See Leibovich, supra note 18.



[35] Guest was the second person in the U.S. to be convicted of online auction 

fraud and the first to be sentenced to prison. See Communications Media Center 

at New York Law School, at 

http://www.cmcnyls.edu/public/bulletins/ebycg14m.html.ssi (last visited Jan. 24, 

2001). As of March 2000, approximately 35 similar cases had been brought in 

state and federal jurisdictions. See Don Benson, Local Online Auction Fraud 

Conviction 2nd in Nation, BUS. PRESS , Aug. 2, 1999, at 1; Fields, supra note 

23.



[36] Trust and Safety: User Agreement "eBay is Only a Venue," at 

http://pages.ebay.com/help/community/png-user.html.(last visited Mar. 6, 2001); 

See also Leibovich, supra note 18 (quoting eBay's vice-president as saying 

"Pierre's [eBay founder's] philosophy is `make as few rules as possible and get 

out of the way'.").



[37] 129 F.3d 327 (4th Cir. 1997), cert. denied, 524 U.S. 937 (1998). The 

plaintiff, Zeran, brought an action for negligence against America Online 

("AOL") after AOL delayed removing defamatory messages posted anonymously to an 

AOL bulletin board. The messages, phony advertisements for offensive T-shirts 

regarding the Oklahoma City bombing, included Zeran's home phone number. Zeran 

subsequently received numerous harassment calls, including death threats, and 

required police protection after a radio station publicized the postings, which 

AOL did not remove promptly. Id. at 329.



[38] 992 F. Supp. 44 (D.D.C. 1998). The plaintiff, Sidney Blumenthal a former 

assistant to President Clinton, sued Internet journalist Matt Drudge and AOL 

after Drudge published a story alleging that Blumenthal had a spousal abuse 

past. Prior to the story, AOL and Drudge entered into a license agreement to 

make Drudge's online publication, The Drudge Report, available to AOL 

subscribers. See id. at 47-48. The case also aroused controversy due to Drudge's 

previous notoriety for breaking the story of President Clinton's affair with 

Monica Lewinsky.



[39] See Zeran, 129 F.3d at 335; Blumenthal, 992 F. Supp. at 53.



[40] See Blumenthal, 992 F. Supp. at 47.



[41] See 47 U.S.C. § 230 (1994 & Supp. IV 1998); Zeran, 129 F.3d at 331-35 

(discussing limitations of liability for online publishers under § 230); 

Blumenthal, 992 F. Supp. at 48-53.



[42] See Zeran, 129 F. Supp. at 333.



[43] In addition to the Court of Appeals for the Fourth Circuit and D.C. 

Circuits, the Court of Appeals for the Tenth Circuit in Ben Ezra, Weinstein Inc. 

v. America Online, 206 F.3d 980, 985-86 (10th Cir. 2000), held that § 230 

immunized AOL from suit after it published allegedly erroneous information about 

a company's publicly traded stock.



[44] See Michael J. Brady et al., The New World of the World Wide Web: Internet 

Liability Issues, 67 DEF. COUNS. J. 47, 55 (2000) (pointing out "[t]he extent, 

if any, to which an online service provider becomes liable for the tortious 

actions or contract violations of its subscribers remains unsettled."); Kimmel 

v. DeGasperi, No. Civ.A. 00-143, 2000 U.S. Dist. WL 420639, at *3 (E.D. Pa. Apr. 

7, 2000) (sustaining plaintiff's action against co-defendant eBay in action 

based on seller's refusal to complete sale of goods).



[45] AOL was also the defendant in a similar Tenth Circuit case. See note 42 

supra.



[46] See Dan Mitchell, Feds Hesitate to Regulate, CNET News.com (Feb. 24, 1999) 

at http://news.cnet.com/news/0-1007-201-339001-0.html?tag=st.ne.ni; Fields, 

supra note 23 (noting that politicians have hesitated to regulate "wildly 

successful" online auctions).



[47] The number of online auction fraud complaints, which presumably include 

complaints from sites other than eBay, has increased over 100 times since 1997, 

with the total number of complaints reaching 10,700 in 1999. See Fields, supra 

note 23. Although eBay points out that these numbers comprise a small percentage 

of the total transactions, with approximately one in 25,000 transactions being 

"troubled," the large number of complaints is hard to ignore. Id.

Furthermore, in a user survey performed by the trade association Online Auction 

Users Association, users asked to identify the top issues facing the industry 

put fraud at the top of the list, with 66.7% of users surveyed indicating 

concern. See OAUA Report, supra note 18, at 5. The likelihood also exists that 

some frauds are underreported to consumer agencies. For instance, deadbeat 

bidders do not need to be reported to consumer agencies since sellers can 

request a credit report from eBay and put the item up for sale again. Sellers 

use this route even though eBay recently started tracking the activities of 

deadbeat bidders for potential sanctions in response to seller complaints. See 

Non-Paying Bidder Policy, at http://pages.ebay.com/help/ community/npb.html 

(visited Mar. 6, 2001). Some frauds, like bid shilling, are also difficult for 

inexperienced users to detect and report. See Shilling, at 

http://www.auctionwatch.com/mesg/read.html?num=2&id=199484&thread=188447 

(visited Mar. 6, 2001) (discussing ways that users might spot a shilling seller, 

but cautioning that these methods do not always work).



[48] Although the Federal Trade Commission is launching a multi-agency effort 

against online auction fraud, some experts think that the problem may still 

burgeon dramatically. See Fields, supra note 23. In addition to fraud problems, 

eBay has also come under Justice Department scrutiny for alleged 

anti-competitive practices. See DOJ begins eBay watch: Is Web auctioneer 

anti-competitive, or trying to protect its business?, CNNfn (Feb. 4, 2000), at 

http://cnnfn.com/2000/02/04/technology/ebay.



[49] See Fields, supra note 23 (discussing failed North Carolina auctioneers' 

licensing effort); Posting of Steve, OAUA Launches Phone/Fax/Letter/Email 

Campaign to Fight Regulation NC, NH, TN. Help!, at 

http://www.auctionusers.org/forums/Forum10/HTML/000066.html (last updated 

Dec.15, 1999) (discussing North Carolina situation as well as similar regulation 

attempts by New Hampshire and Tennessee).



[50] Trust and Safety: User Agreement, supra note 36.



[51] See eBay ID Verify (discussing Equifax verification service), at 

http://pages.ebay.com/services/ buyandsell/idverify-login.html (last visited 

Mar. 6, 2001).



[52] See eBay Insurance Process, at 

http://pages.ebay.com/help/community/ins-process.html (last visited Mar. 6, 

2001).



[53] See eBay Escrow Overview, at 

http://pages.ebay.com/help/community/escrow.html (last visited Mar. 6, 2001).



[54] See Lessig, supra note 7, at 508 (discussing interplay of law, norms, 

markets and code).



[55]One of the most popular early netcops was Sandy List, a federal government 

employee who, under the user ID "Cyberyenta," devoted herself to tracking down 

shill bidders and was a popular contributor to eBay discussion boards. After she 

had been doing this for some months, eBay eventually barred her from the site 

after deciding that she had gone too far in collecting and disseminating 

information about users. See Leibovich, supra note 18. Many other eBay users 

engage in netcopping to some extent. See Shilling, supra note 47.



[56] Although this paper focuses on eBay's fraud prevention issues, it is 

important to realize that eBay has simultaneously been evolving and formalizing 

procedures in a number of other areas beyond the scope of this paper, in 

response to legal or economic stimuli. These areas include:

- Controlling sales of merchandise that violate copyright. eBay controls 

copyright violations through its VeRo program, which allows copyright owners to 

report potentially infringing auction items to eBay for investigation and 

removal from the web. See eBay's Verified Rights Owner (VeRo) Program: 

Protecting Intellectual Property, at 

http://pages.ebay.com/help/community/vero-program.html (last visited Mar. 6, 

2001). The program replaced an earlier program known as "Legal Buddies," which 

users had dubbed "Legal Bullies" due to its perceived overzealousness in 

pursuing individuals reselling their own legally purchased clothing and 

recordings. See What a Week! eBay Shut Down My Chanel Auction (discussing Legal 

Buddies and Vero programs), at 

http://www.auctionwatch.com/mesg/read.html?num=2&thread=22953&id=22953 (last 

modified July 18, 1999). In particular, an attempt during 1999 by the mother and 

copyright owner of deceased musician Jeff Buckley to remove Jeff Buckley 

merchandise from eBay sparked a civil liberties protest by activist users, who 

listed pieces of original art and poems named after or inspired by Jeff Buckley. 

This author personally witnessed the protest and bid on one of the items as a 

show of support. See Dennis Prince, NetCops: To Protect and Surf (describing 

Jeff Buckley infringement situation), at http://www.auctionwatch.com/awdaily/ 

features/netcops/3.html (last modified Oct. 18, 1999) [hereinafter Netcops].

- Limiting sales of dangerous or offensive merchandise such as human body 

organs, used underwear, firearms, adult materials, and racist and hate 

memorabilia. See eBay: Is My Item Allowed on eBay? Prohibited, Restricted and 

Infringing Items, at http://pages.ebay.com/help/community/png-items.html (last 

visited Mar. 6, 2001). One reason for the constraints is that, as eBay goes 

global, it must contend with jurisdictional prohibitions on goods that are 

allowed in the U.S. In some cases, entire categories may be prohibited from view 

in particular countries. See Ed Ritchie, The Law at eBay: AW Talks With eBay's 

Associate General Counsel, Rob Chesnut at 

http://www.auctionwatch.com/awdaily/dailynews/1-121599.html (last modified Dec. 

15, 1999).

- Developing policies for use of on-site discussion boards. See eBay: Board 

Usage Policy http://pages.ebay.com/help/community/png-board.html (last visited 

Mar. 6, 2001). Discussion board policies were developed after eBay, who 

previously had no clear policy on board use, suspended a group of users for 

comments on a "discuss new features" board (also known to users as the "do not 

fight" board due to the heated discussion) criticizing eBay's gun sales 

prohibitions, its customer service, and its embarrassing outage problems. See, 

e.g., Roth, supra note 11. eBay's heavy-handed management of its discussion 

boards led to the increased popularity of off-site eBay activist discussion 

communities such as Auctionwatch.com, where users can comment with somewhat less 

fear of eBay sanctions.

- Formalizing the interactions of eBay staff with users. For example, many 

members of the eBay community felt betrayed when Jim Griffith, a popular eBay 

advice giver under the handle "Uncle Griff," admitted that he had a second user 

identity as "Dale," a customer support person. See Who the Heck is "Skippy" and 

Where Did He Go?, at http://www.auctionwatch.com/mesg/read.html?num=2&id 

=27328&thread=27300 (last visited Mar. 6, 2001) (discussing users' discomfort 

with eBay staff personnel, including Griffith, having multiple online 

identities). eBay has also tried to rein in employees who go too far in policing 

users (an eBay support person who witnessed a dispute involving personal 

information on an offsite board sent an e-mail threatening the parties with 

suspension, even though they were not on the eBay site at the time) and provide 

more standardized support training. See EBAY HOW DARE YOU!!! PART 2, at 

http://www.auctionwatch.com/mesg/read.html?num=2&id=79696 &thread=79521 (last 

visited Mar. 6, 2001) (expressing user outrage over suspension warning based on 

offsite board incident); A Response From the VP of eBay's Customer Support, at 

http://www.auctionwatch.com/ mesg/read.html?num=2&id=81657&thread=81627 (last 

visited Mar. 6, 2001) (apologizing for e-mailed warning of suspension).



[57] See Julie E. Cohen, A Right to Read Anonymously: A Closer Look at 

"Copyright Management" in Cyberspace, 28 CONN. L. REV. 981, 995 (1996).



[58] Id. at 996-97.



[59] See Mark A. Lemley, The Law and Economics of Internet Norms, 73 CHI.-KENT 

L. REV. 1257, 1273 (1998) (discussing how buyer and seller interests are not 

aligned for purposes of norming); cf. Cohen, supra note 57 (suggesting that 

consensual private ordering works for small cyberspace groups with shared 

interests).



[60] eBay originally used the user's e-mail as an identifier. User ID's were 

introduced after attacks by `bot programs which harvested e-mail addresses for 

spammers. Many user ID's serve the purpose of advertising what the person likes 

to buy or sell.



[61] See ID Verify, supra note 51.



[62] See Why Does eBay Have Additional Requirements in Order to Sell?, at 

http://pages.ebay.com/help/sellerguide/selling-account.html (last visited Mar. 

6, 2001).



[63] A few buying activities do require entry of a credit card number. Buyers 

must enter a card number to preview or bid on adults-only materials, to place 

bids over $5000, and to bid on a few categories containing high-priced goods. 

See Restricted Access Auctions, at 

http://pages.ebay.com/help/basics/f-format.html#4 (last visited Mar. 6, 2001); 

CC Verification: Learn More eBay User Verification, at 

http://pages.ebay.com/help/basics/learn_more.html (last visited Mar. 6, 2001) 

(discussing Great Collections category, which features high-priced art and 

collectibles).



[64] Critics have noted that eBay is unlikely to be able to track all small free 

e-mail providers, and will likely monitor only the large companies such as 

Hotmail. See Dallas Middaugh, Registration Abuse: Online Auctions in an 

Imperfect World, at http://www.auctionwatch.com/awdaily/features/abuse/4.html 

(last modified Sept. 24, 1999). Interestingly, eBay's registration site lists 

America Online (AOL) as a trustworthy domain that does not require a credit 

card, even though commentators have noted that AOL accounts are prone to abuse 

because multiple identities on one AOL account are easy to obtain. See Peter 

Kollock, The Production of Trust in Online Markets,16 ADVANCES IN GROUP 

PROCESSES (forthcoming 2000) (noting AOL account multiple identity issue). This 

author recalls that the discussion board harasser, discussed infra at note 70, 

created multiple identities using an AOL account. However, the likelihood exists 

that eBay simply does not want to alienate the large pool of AOL users.



[65] eBay probably does not want to encourage multiple accounts, though I was 

unable to find any support for this policy on the eBay site. However, it is 

common knowledge among users that two non-interacting accounts are permissible 

and even desirable because negative comments you receive on one account will not 

affect your credibility on the other. See, e.g., Need Advice Quick!, at 

http://www.auctionwatch.com/mesg/read.html?num=2&id=165896&thread=165896 (last 

modified Mar. 26, 2000).



[66] See eBay: Not a Registered User, at 

http://pages.ebay.com/help/myinfo/user-not-registered.html (last visited Mar. 6, 

2001); eBay: Investigations, at 

http://pages.ebay.com/help/community/investigates.html (last visited Mar. 6, 

2001).



[67] See A. Michael Froomkin, The Internet as a Source of Regulatory Arbitrage, 

in BORDERS IN CYBERSPACE, INFORMATION POLICY AND THE GLOBAL INFORMATION 

INFRASTRUCTURE 129, 150 (Brian Kahin & Charles Nesson eds., 1997). Online 

auction users might engage in a form of regulatory arbitrage, not only by 

committing fraud against foreign transaction partners (common on eBay) but also 

by committing fraud against transaction parties located in distant states. 

Although federal remedies exist, enforcement of fraud sanctions against distant 

parties may be difficult, especially when the value of the item is low or the 

fraudulent behavior is not clear. Id.



[68] After registration information is provided, it is also not screened for 

continued validity, nor are update reminders sent. This author mistakenly had an 

incorrect telephone number in her profile for a number of months; it went 

undetected by eBay.



[69] See Middaugh, supra note 64, at 3. Because auction sites, motivated by 

economic concerns, also routinely minimize other detrimental information, such 

as the number of transactions gone bad, it is difficult to put credibility in 

their statements that registration abuse is not a problem. Id.



[70] See, e.g., Randy Barrett, Net Posses Saddle Up Against Cybercrooks, ZDNET 

INTERACTIVE WEEK (describing investigation of a fraudulent seller known as 

"kuchar1" who was found to be operating under different seller aliases), at 

http://www.zdnet.com/intweek/stories/news/0,4164,2375053,00.html (Oct. 18, 

1999). See also Michelle Dennehy, Someone to Watch Over Me: AW Investigates 

Privacy in Online Auctions, at 

http://www.auctionwatch.com/awdaily/dailynews/1-120199.html (last updated Dec. 

1, 1999) (describing incident of suspended seller who used multiple identities 

to commit fraud on eBay and then to harass users who reported her).



[71] eBay also notes that when deciding sanctions for persons whom eBay 

investigated, eBay takes the user's past record into account. A user who has 

been a money-earner for eBay may be likely to get off with a light penalty. See 

Auctionwatch: Investigations, available at 

http://www.auctionwatch.com/mesg/read.html?num= 2&thread=165462 &id=165462 (last 

visited Mar. 6, 2001).



[72] A KPMG survey found reported instances of credit card fraud had reached 

$1,126 million in 1998, up from $367,000 in 1994, suggesting that this type of 

fraud is both easy and common. See Lesley D. Hand, Fraud: What Every Practicing 

Attorney Needs to Know, 1133 PLI/ CORP 417, 437 (1999).



[73] It should be noted that in early 2001, while this paper was being submitted 

for publication, eBay changed its procedures for obtaining contact information. 

A registered user can now only obtain another registered user's e-mail address 

if the two are currently engaged in a transaction. In other words, a seller can 

obtain e-mail addresses of all his bidders, and a winning bidder can obtain the 

e-mail address of the seller. Other parties can contact each other through 

eBay's mail forwarding service, which forwards an e-mail without notifying the 

sender of the recipient's e- mail address. The recipient receives the sender's 

e-mail address and can then decide whether to respond directly. See Email 

Address and User ID History Request Form, at 

http://contact.ebay.com/aw-cgi/eBayISAPI.dll? (last visited Apr. 11, 2001). eBay 

made this change to limit the amount of unsolicited e-mail received by members, 

which includes not only harassing e-mail, but commercial spam, such as offers to 

sell a bidder the same item at a cheaper price. See Learn More, at 

ReturnUserEmail&requested=terminal_towerhttp://pages.ebay.com/help/Contact_form_learnmore 

(last visited Apr. 11, 2001). While this feature does make it more difficult to 

obtain a user's e- mail address, it should be noted that there are several easy 

ways around it. First, many users still publicize their e-mail addresses by 

using the address as a user ID or by listing the address on an auction page or 

linked web page, thus rendering the feature useless. Second, a potential 

harasser can still obtain a user's e-mail address by entering a transaction with 

him (which may never be completed if the main purpose is to get information) or 

by sending the target an innocuous, transaction-related question via the eBay 

forwarding service. For example, the harasser might ask the target a question 

about an item up for auction via the forwarding service, suggesting that he is 

considering bidding on it. The target will respond directly to the harasser, 

thus revealing his own e-mail address. Similarly, requests for contact 

information have also been limited to parties involved in a transaction with 

each other. See Find Members, at 

http://cgi3.ebay.com/aw-cgi/eBayISAPI.dll?MemberSearchShow (last visited Apr. 

11, 2001). Again, while this provides some additional privacy protection, the 

protection is questionable if the two parties have been involved in a 

transaction gone bad, or if the transaction was entered solely to get 

information. Originally, user's e-mail addresses were always publicly displayed. 

The password-entry requirement was implemented to defeat information-gathering 

`bots, which harvest e-mail addresses for spammers. This feature is now limited 

to transaction partners.



[74] Pulling contact information allows a user to see if the address to which he 

is mailing payment or an item matches the address of the legitimate transaction 

partner. eBay suggests that users pull contact information when they have a hard 

time reaching their partners by e-mail. See eBay: Contact Information Someone 

Requested My Contact Information, at 

http://webhelp.ebay.com/cgi-bin/eHNC/showdoc-ebay.tcl?docid=562&queryid=harassment 

(last visited Mar.6, 2001) [hereinafter Contact Info Request]. Contact 

information might also be pulled if one suspects that a person is 

misrepresenting himself in e-mail in an effort to confuse a legitimate seller or 

winning bidder into transacting with them. See Auctionwatch: Best Way to Deal 

With Unwanted Seller E-Mail?, at 

http://www.auctionwatch.com/mesg/read.html?num=2&thread=165462&id=165462 (last 

modified Mar. 25, 2000). This feature is now limited to transaction partners. 

See note 73, supra.



[75] User ID's might be considered pseudonyms in cases where the user does 

significant business under the same ID, hence building up a recognized 

reputation and online persona associated with that pseudonym. See David G. Post, 

Pooling Intellectual Capital: Thoughts on Anonymity, Pseudonymity, and Limited 

Liability in Cyberspace, 1996 U. CHI. LEGAL F. 139, 158-59 (1996) [hereinafter 

Pooling].



[76] eBay has shown concern over users' data privacy, particularly when 

commercial interests might be at stake. For example, it has taken steps to 

protect against outside commercial entities harvesting eBay user data, and its 

site features a privacy policy describing how user data is used, as well as 

Trust-E third party privacy certification. See Glenn R. Simpson, eBay Site was 

Raided by Rival, FTC Says, WALL S T . J., Jan. 7, 2000, at B6 (describing eBay's 

filing of a suit against a competing auction house that registered with eBay as 

a user, harvested user data and then spammed eBay users); see also eBay: Privacy 

Policy, at http://pages.ebay.com/help/community/png-priv.html (last visited Mar. 

6, 2001). eBay has also attempted, less successfully, to enforce sanctions 

against individual users who disseminate user data in offsite settings, such as 

discussion boards. In one case, a seller who had been suspended for deceptive 

practices on the basis of complaints by transaction partners proceeded to assume 

multiple cyberidentities and harass the users whom she blamed for the 

suspension. The frustrated targets eventually posted personal information about 

the harasser on an offsite discussion board; the information was only visible 

for a short time and the posters claimed it was a mistake. However, the 

suspended harasser complained to eBay, who threatened the targets with 

suspension, but later was forced to issue an apology after users protested. See 

Dennehy, supra note 70 (describing incident, eBay's threat and later apology). 

This incident is also supported by the personal recollection of author, who 

observed the harassment and corresponded by e-mail with one of the targets.



[77] This author recalls that during the harassment incident discussed in the 

previous footnote, several of the harassment targets were not transaction 

partners of the harasser, but persons she believed responsible for investigating 

her practices. Former netcop Sandy List has also gone on record with tales of 

harassment by users who were not her transaction partners. See Leibovich, supra 

note 18.



[78] The privacy policy states permitted uses as:



  (a) eBay-related communications that are not unsolicited commercial messages, 

  (b) using co-branded services offered through eBay (e.g. escrow, insurance, 

  shipping and fraud complaints), and (c) any other purpose that such user 

  expressly opts into after adequate disclosure of the purpose(s). In all cases, 

  you must give users an opportunity to remove themselves from your database and 

  a chance to review what information you have collected about them. In 

  addition, under no circumstances, except as defined in this Section, can you 

  disclose personally identifiable information about another user to any third 

  party without our consent and the consent of such other user after adequate 

  disclosure.



eBay: Privacy Policy, supra note 76. Certain parties, such as law enforcement 

officers, are exempt from the policy. See id. Elsewhere on the site, eBay states 

that the information may be used only for "matters regarding eBay." eBay: 

Contact Info Request, supra note 74.



[79] eBay: Contact Info Request, supra note 74.



[80] eBay: Privacy Policy, supra note 76.



[81] Users might also exchange business contact information, but since many 

users are individuals rather than businesses, some of the information they 

exchange is likely to be personal.



[82] Cf. Post, Pooling, supra note 75, at 159-60 (describing the added social 

benefit pseudonymity brings to cyberspace communication by facilitating more 

freedom of expression).



[83] See Lemley, supra note 59, at 1273 (stating that a bad user has no 

incentive to respect cyberspace norms of conduct).



[84] See generally Kollock, supra note 64 (discussing the importance of trust 

and reputation for online transactions).



[85] Id. (noting that consumer protection advisors usually caution against 

sending money to a P.O. box address and suggest that an honest user would 

provide a street address and working telephone number); Margaret Graham Tebo, 

Filling E-Carts with Caution, 86 ABA J., Jan. 2000, at 89 (advising online 

buyers to "beware of sites lacking a physical address for the company, or those 

that provide only a post office box.").



[86] Prior to the introduction of eBay User IDs in late 1997, eBay bidders and 

sellers used their e-mail addresses as their user ID's, and they were always 

visible to the general public.



[87] See, e.g., Kollock, supra note 64 at 19; Making the Personal Connection: 

On-Line Communities Can Allow People to Build Reputations and Trust and Foster 

Intimacy, Chi. Trib., Mar. 13, 2000, at 1 (interviewing Professor Amitai Etzioni 

about online communities, including eBay) [hereinafter Etzioni Interview].



[88] See Roth, supra note 11 (describing origin of the feedback system as 

customer request).



[89] See "The Feedback Forum: One of Your Most Valuable Tools," Feedback Forum, 

at http://pages.ebay.com/services/forum/feedback.html (last visited Mar. 6, 

2001).



[90] A new code feature, implemented in March 2000, allows the user to scroll 

through all of his recent transactions to leave feedback, thus minimizing the 

possibility that he will skip or forget one. See Find all transactions, at 

http://cgi2.ebay.com/aw-cgi/eBayISAPI.dll?LeaveFeedback Show (last visited Mar. 

6, 2001).



[91] Rewards include special PowerSeller services for sellers, which require 

users to maintain a 98% positive feedback level, see PowerSellers Program, supra 

note 31. Other benefits include star icons after a User ID based on the number 

of positive comments, and occasionally, public acclaim. Recently, a user known 

as Parrothead88 was publicly lauded on the eBay site (and privately by many 

community members) for being the first to achieve a 10,000 feedback rating. See 

First 10,000-Level Feedback Shooting Star Awarded, eBay Life, Jan. 2000, at 

http://pages.ebay.com/community/life/ebay-life-pA4.html (last visited Apr. 11, 

2001). Of course, an additional reward is the increased willingness of 

transaction partners to do business with someone who has high feedback.



[92] User interface pages for leaving feedback contain a highlighted warning 

explaining that "You are responsible for your own words" when leaving feedback. 

See e.g., Leave Feedback for an eBay User, at 

http://cgi2.ebay.com/aw-cgi/eBayISAPI.dll?LeaveFeedbackShow (visited Mar. 6, 

2001). Many other similar warnings are found throughout the site wherever 

feedback is discussed.



[93] See OAUA Report, supra note 32, at 5 (noting that OAUA members heavily 

support feedback related to a transaction, believing that this type of feedback 

is least likely to be "bogus"); see also Dennis Prince, Look Who's Talking: The 

Art of Feedback at 3, at http://www.auctionwatch.com/ 

awdaily/features/feedback/index.html (last modified Sept. 3, 1999) [hereinafter 

Look Who's Talking].



[94] See Prince, Look Who's Talking, supra note 93, at 4 (noting that neutrals 

are used for bad reports); Neutrals and Negatives, at 

http://www.auctionwatch.com/awdaily/features/feedback/4.html (last visited Mar. 

6, 2001) (expressing users' dissatisfactions with neutral comments).



[95] The user with a rating of 4 or below will be automatically made unable to 

place bids or list items, but is not automatically NARUed. In order to be 

NARUed, the user's rating must come to eBay's attention, frequently through 

notification from another user or law enforcement agent. See Help Basics, "Why 

are users who have a lot of negative feedback still allowed to trade on your 

site?," at http://webhelp.ebay.com/cgi-bin/eHNC/showdoc-ebay.tcl?docid=88347 

&queryid=what_happens_when_you_get_negative_feedback (last visited Mar. 5, 

2001).



[96] eBay justified this policy on the grounds that feedback is somewhat 

subjective and that in any significant number of transactions, there are likely 

to be a few disagreements. See Before the Auction: Understanding Feedback, at 

http://www.auctionwatch.com/awdaily/tipsandtactics/buy-feedback.html (last 

visited Feb. 6, 2001). However, experienced users tend to be upset by the 

presence of even a few negatives. See Kollock, supra note 64 at 22.



[97] See Non-Paying Bidder Policy, at 

http://pages.ebay.com/help/community/npb.html (last visited Mar. 6, 2001).



[98] See eBay: Non-Paying Bidder Policy Frequently Asked Questions, at 

http://pages.ebay.com/ help/basics/f-npb.html (last visited Mar. 6, 2001). 

Although eBay has stated it will review suspensions for non-paying bidders 

manually, it is unclear where they will find the administrative resources to 

check out many deadbeats. In response to the question, "If a user has 4 feedback 

comments for nonpayment, will they be suspended?," eBay responds somewhat 

cryptically, "No, feedback comments are separate from the non-paying bidder 

policy. eBay encourages you to leave appropriate feedback about your trading 

partners." Id.

This rule, while sounding odd since one would assume a seller would find it 

"appropriate" to leave a negative for a non-paying bidder, may reflect the fact 

that a bidder might have a good excuse, such as a family emergency, for not 

paying. It may also reflect eBay's wish to get rid of deadbeat bidders who cost 

eBay commission money, without waiting for their feedback to reach the 4 mark.



[99] See eBay: FAQ: Feedback, at 

http://pages.ebay.com/help/basics/f-feedback.html#1 (last visited Mar. 6, 2001) 

(noting that a high feedback rating does not necessarily mean the user has a 

stellar reputation).



[100] Some users have dealt with this problem by setting their computer to 

display a large number of feedback comments (i.e. more than 25) and using a 

search engine to find the word "complaint" indicating a negative feedback. 

However, because of the extra time and computer knowhow it takes to use this 

method, it is likely that most users do not bother.



[101] See Feedback Revision Project, supra note 32. Of course, scrolling through 

all the comments might require a user to stay on the site longera favorable 

outcome for eBay, see Hoare, supra note 28 - but more likely, a user will simply 

look at the most recent feedback. Kollock notes that some other online auction 

sites do not share eBay's concern, and allow users to quickly see the total 

numbers of each type of comment. See Kollock, supra note 64.



[102] See e.g., Kollock, supra note 64, at 4; Leibovich, supra note 18 

(describing how a user with 733 positive feedback comments still felt "really 

bothered" by his single negative, earned when he misplaced a buyer's item during 

a family crisis).



[103] See Feedback Revision Project, supra note 32.



[104] See e.g., Auctionwatch: Feedback Padding, at 

http://www.auctionwatch.com/mesg/read.html?num=2&thread=122903&id=122903 (last 

modified Jan. 25, 2000) (offering justifications for a feedback exchange "party" 

that took place at Christmas between regular members of an eBay bookseller's 

discussion board). While some users feel that persons who have been helpful have 

earned a positive feedback, other users only care about transaction performance 

and feel that awarding feedback on other grounds constitutes fraud. Id.



[105] Id. See also OAUA Report, supra note 32, at 5 (showing that members 

surveyed preferred transactional-only feedback).



[106] See Auctionwatch: Feedback Padding, supra note 104; New BB Feedback 

Padding ThreadYour Input?, at 

http://www.auctionwatch.com/mesg/read.html?num=2&thread=126873&id=126873 (last 

modified Jan. 26, 2000).



[107] Id.



[108] Harassers can include competitors, past customers, employees with a 

grudge, cyberstalkers, or random pranksters. In 1999, an eBay user with User ID 

"andy46477" briefly became a discussion board celebrity based on his prank 

leavings of humorous, suggestive and sarcastic non-transactional comments in 

random eBay users' files. While some community members thought Andy's comments 

were funny or artistic, others predictably found them less benign, and he was 

NARUed after being reported by an online auction user group known as the eBay 

Users' Protective Union (EUPU). Two hundred and twelve of his comments remain in 

various eBay user's files. See eBay Feedback Comments Left by andy46477, at 

http://cgi2.ebay.com/aw-cgi/eBayISAPI.dll? ViewFeedbackLeft&userid=andy46477 

(visited Mar. 6, 2001); Where's Andy?, at 

http://www.auctionwatch.com/mesg/read.html?num=2&id=14789&thread=14755 (last 

modified July 2, 1999).



[109] In addition to the Rosie O'Donnell feedback previously discussed, this 

author recalls another feedback controversy involving high-priced, 

well-publicized auctions of Mark McGwire and Sammy Sosa's home run baseballs 

near the time of the company's IPO. Some users objected strongly to what they 

felt was a commercialization of the eBay community and/or the sport of baseball. 

One user intended to leave disgruntled, non-transactional feedback for a 

baseball auctioneer, but accidentally left it for an innocent user with a 

similar ID, who had nothing to do with the baseball auctions. eBay's initial 

slowness in removing the undeserved negative comment provoked an angry response 

on eBay discussion boards from users unhappy with the perceived lack of customer 

support. (Because discussion in those days primarily took place on dynamic 

real-time eBay support boards, records of this controversy have been lost, 

although the author recalls the incident.).



[110] See eBay: Feedback Revision Project, supra note 32 (showing user pressure 

on eBay applied through trade organization).



[111] See eBay: Feedback Removal Policy, at 

http://pages.ebay.com/help/community/fbremove.html (visited Mar. 6, 2001).



[112] Id.



[113] Id. eBay also states on this site that "under federal law (the 

Communications Decency Act), eBay is not legally responsible for the remarks 

that users post on its site, even if those remarks are defamatory" and refers 

users to legal search sites such as Findlaw for more information. This appears 

to be an attempt to scare angry feedback receivers into assuming eBay is 

judgment-proof. As discussed supra in text accompanying notes 37-42 , the reach 

of defamation cases in the online auction context is unclear, and a non-attorney 

user is unlikely to understand information obtained on a legal web site. Id.



[114] In the past, the eBay system technology did not allow users to leave 

negative comments more than 60 days after a transaction. Users quickly figured 

out that leaving a negative comment at the very last second of the 60 day window 

protected them from retaliation. See Negative Feedback, at 

http://www.auctionwatch.com/mesg/read.html?num=2&id=154865&thread=150533 (last 

modified Mar. 4, 2000) (detailing retaliatory avoidance plan publicized by 

activist user "AirAmerica"). eBay subsequently changed the system to eliminate 

the window. See eBay: Feedback Revision Project, supra note 18.



[115] See Kollock, supra note 64 at 22 ("One can choose to make one's feedback 

profile private, but this is a huge disadvantage in a market that relies on 

these reputations.").



[116] The For All Kids Foundation, a children's charity sponsored by television 

personality Rosie O'Donnell and conducting business under the user ID 

"4allkids," provides an example of a user for whom reputation outweighs the 

problem of private feedback. Because of O'Donnell's reputation and promotion, as 

well as the charitable image of the seller, auctions by "4allkids" receive bids 

on a regular basis. This author recalls that before the privatization of 

"4allkids" feedback, the charity received positive and negative 

non-transactional, political comments, based on O'Donnell's public comments 

about gun control. This author further suspects that these comments, plus a wish 

to avoid further celebrity-based harassment, motivated the privatization of 

feedback.



[117] eBay: Make Your Feedback Profile Public or Private, at 

http://cgi2.ebay.com/aw-cgi/eBayISAPI. dll?FeedbackOption (last visited Mar. 6, 

2001).



[118] This assumes that most feedback on eBay results from the products of 

actual transactions, which is probably the case, although a significant number 

of comments may have stemmed from past non-transactional activities and/or 

fraud.



[119] See e.g., Barbara Giasone, E-Tailers Click On to New Marketing, Orange 

County Reg., Jan. 27, 2000, at 12 (discussing emotional motivations of antiques 

buyers); Update: Item Worth Only 20%, at 

http://www.auctionwatch.com/mesg/read.html?num=2&id=189923&thread=189920 (last 

visited Mar. 6, 2001) (discussing how sentimental value causes collectibles to 

sell at prices much higher than market valuation).



[120] See Is There Anything Good About Feedback?, at 

http://www.auctionwatch.com/mesg/read.html?num=2&id=166488&thread=163764 (last 

modified Mar. 26, 2000) (noting that feedback gives a user at least some 

information about his transaction partner); Kollock, supra note 64 at 4.



[121] See Cheryl B. Preston, Honor Among Bankers: Ethics in the Exchange of 

Commercial Credit Information and the Protection of Consumer Interests, 40 U. 

Kan. L. Rev. 943, 959-63 (1992) (describing risks of electronic data storage and 

individuals' desire to prevent dissemination).

[122] See Fair Credit Reporting Act, Charges for Certain Disclosures, 15 U.S.C. 

§ 1681(j) (1994 & Supp. IV 1998).



[123] See Andy Roe, Merchant Beware: AW's Investigation into Credit Card 

Merchant Accounts at 

http://www.auctionwatch.com/awdaily/features/beware/index.html (last visited 

Mar. 6, 2001) (describing auction sellers' risks and fees when choosing a 

merchant bank).



[124] See e.g., Rich Shopes, New Company Has Answer to Cyber-Shoppers' Fears, 

Sarasota (Fla.) Herald-Trib., May 12, 2000, at 1D (discussing consumers' fears 

of using their credit card numbers on the Internet).



[125] For example, a person buying a high-priced item, such as real estate or an 

automobile, would probably understand the need for a credit report and be 

willing to disseminate it.



[126] See e.g., Is There Anything Good About Feedback?, supra note 120 

(discussing types of information that can be communicated in feedback).



[127] See Fair Credit Reporting Act, Procedure in Case of Disputed Accuracy, 15 

U.S.C. § 1681(i) (1994 & Supp. IV 1998).



[128] See OAUA Report, supra note 32, at 4-5.



[129] See Marshall Scott Poole et al., Communication Media and Negotiation 

Processes, in Communication and Negotiation (Linda L. Putnam & Michael E. Roloff 

eds., 1992) (surveying literature analyzing media richness and discussing added 

communications difficulties that arise when communications are not performed 

face-to-face).



[130] Tebo, supra note 85 at 89.



[131] See Lemley, supra note 59 (discussing norms in the new context of 

cyberspace).



[132] See Auctionwatch: Is There Anything Good About Feedback?, supra note 120.



[133] See Kollock, supra note 64.



[134] Etzioni Interview, supra note 87.



[135] See Lemley, supra note 59, at 1273.



[136] The strategy of building up enough good feedback to lure bidders was used 

by Robert Guest who was convicted of online auction fraud. See supra note 35 and 

accompanying text.



[137] See Barrett, supra note 70 (describing investigation of "kuchar1").



[138] eBay View User Feedback For kuchar1, at 

http://cgi2.ebay.com/aw-cgi/eBayISAPI.dll? ViewFeedback&userid=kuchar1 (last 

visited Mar. 6, 2001) [hereinafter Feedback For kuchar1]; see Barrett, supra 

note 70.



[139] Id.



[140] See Feedback For kuchar1, supra note 138.



[141] See Etzioni Interview, supra note 87 (describing how Etzioni decided to 

discount one negative comment in the feedback of a seller who had 30 positives, 

a relatively low number for eBay, because "the seller seemed reliable." Although 

Etzioni's purchase went smoothly, that is not always the case when a user 

decides to give another the benefit of the doubt.)



[142] See eBay: Find All Transactions for an eBay User, at

http://cgi2.ebay.com/aw-cgi/eBayISAPI.dll?LeaveFeedbackShow (last visited Feb. 

2, 2001) (feedback posting page with long, highlighted warning about liability, 

etc.).



[143] eBay knows this, as evidenced by their web page claiming that they are not 

liable for defamatory comments and referring users to legal websites. See supra 

note 113.



[144] See Kollock, supra note 102.



[145] See Mancur Olson, The Logic of Collective Action: Public Goods and the 

Theory of Groups 163-64 (1971) (describing problems of group decisionmaking and 

free riding).



[146] See Prince, Netcops, supra note 56 at 3.



[147] If Ann chooses to leave no comment at all, unclear information is 

communicated. Since users are not obligated to leave feedback, they frequently 

forget to leave comments or leave them long after transactions are complete, and 

a user's transactions-to-feedback-left ratio is not readily apparent to the 

casual observer.



[148] See Fair Credit Reporting Act, Responsibilities of Furnishers of 

Information to Consumer Reporting Agencies, 15 U.S.C. § 1681(s-2) (1994 & Supp. 

IV 1998).



[149] Comments by NARUed users are tagged "Not A Registered User," but remain in 

the file. See Feedback FAQ, at 

http://pages.ebay.com/help/basics/f-feedback.html#7 (last visited Feb 2, 2001).



[150] For a general discussion of the jurisdictional difficulties in cyberlaw 

enforcement, see generally David R. Johnson & David Post, Law and Borders: The 

Rise of Law in Cyberspace, 48 Stan. L. Rev. 1367 (1996).



[151] See Fair Credit Reporting Act, Procedure in Case of Disputed Accuracy, 15 

U.S.C. § 1681(i) (1994 & Supp. IV 1998); Reporting of Requirements Relating to 

Information Contained in Consumer Reports Prohibited, 15 U.S.C. § 1681(c) (1994 

& Supp. IV 1998).



[152] Cf. James P. Nehf, A Legislative Framework For Reducing Fraud in the 

Credit Repair Industry, 70 N.C. L. Rev. 781, 783 (noting that a bad credit 

report can keep a person from obtaining a broad range of valuable services, 

particularly in today's credit-dominated economy). 



[153] In the past, eBay did allow users to perform a one-time transfer of the 

feedback rating number, but not the actual comments, to other auction sites, as 

this author did by transferring her eBay rating to Gold's Auctions. eBay's 

justification for not allowing comments to be transferred or linked was that it 

owned the comments. However, copyright law supports ownership of the comments by 

the comment writers (feedback leavers), who are also are responsible for their 

own words under defamation law.



[154] See eBay: Feedback Forum Integrity, at 

http://pages.ebay.com/help/basics/f-feedback1.html (last visited Feb. 2, 2001).



[155] See e.g., Nehf, supra note 151 at 783.



[156] For example, this author has signed up under the same User ID at eBay, 

Boxlot and Gold's Auctions, although most of her time is spent on eBay. Many 

other users, particularly sellers, attempt to do the same, so that transaction 

partners can easily find them without confusion.



[157] See Frankel, supra note 24, at 16 (noting that risk can be reduced through 

mutual self-interest).



[158] See text supra accompanying notes 97-98.



[159] See text supra accompanying note 50.



[160] See supra notes 51-53.



[161] See eBay: Dispute Resolution Overview, at 

http://pages.ebay.com/services/buyandsell/disputeres.html (last visited Mar. 6, 

2001) (describing SquareTrade pilot program).



[162] See Jim O'Brien, You've Got Money! Buyers and Sellers Find Convenience in 

Cash by E-Mail; Industry Trend or Event, Computer Shopper, July 1, 2000, at 89.



[163] Although no archived material is available, this author personally recalls 

that following eBay's IPO, several users known as members of "the Posse," who 

posted frequent comments decrying user verification on eBay discussion boards, 

were suspended, ostensibly for discussion board disruption activities.



[164] See Bernadette Smith, Online Shopping Can Be Safer When Precautions Are 

Taken, Knight-Ridder Trib. Bus. News, July 11, 1999, available at 1999 WL 

17356178 (quoting eBay spokesman Kevin Pursglove as saying, "If a seller refuses 

to use . . . [an escrow] service that should raise red flags about his 

reliability."). Pursglove's statement outraged many sellers with good feedback 

records who did not wish to use an escrow service for personal or economic 

reasons.



[165] Some sellers have found that fraudulent buyers will send payment to 

i-Escrow, receive the item, cannibalize it for parts, or otherwise use it, 

return it claiming that it was shipped defective and then get their money back 

from i-Escrow. See Sellers Beware i-Escrow!!!, at 

http://www.auctionwatch.com/mesg/read.html?num=2&thread=164635&id=164635 (last 

visited Mar. 6, 2001).



[166] AuctionWatch.com and Honesty.com also provide many other useful services, 

such as image hosting for sellers placing pictures in auction listings, and free 

counters to track how many people view a particular auction. See generally 

AuctionWatch.com Customer Service, at http://www.auctionwatch.com/service/ (last 

visited Jan. 30, 2001) (describing frequently asked questions about 

AuctionWatch's image hosting and counter features); Honesty.com - Image Hosting, 

at http://www.honesty.com/hosting/ (last visited Jan. 30, 2001) (describing 

Honesty.com's image hosting).



[167] A recent disruption occurred when PayPal ran a promotion to encourage new 

sign-ups. Each user could earn $5 for each additional user that she referred to 

PayPal. In order to get people to sign up, PayPal suggested that users complete 

an auction and then offer to pay, or accept payment, by PayPal. However, the 

users who tried this tactic to get transaction partners to sign up were 

perceived as acting coercively by other users. See generally PayPal - New 

Account Bonus/Refer-A- Friend Bonus, at 

http://www.paypal.com/cgi-bin/webscr?cmd=p/wel/ bonus-outside (last visited Jan. 

30, 2001) (discusses $5 bonus for signing up with PayPal and a $5 bonus for 

every referral to PayPal). In addition, sellers who refused to sign up with 

PayPal had to deal with deadbeat bidders, who had expected to receive their 

auction item at a $5 discount by convincing the seller to sign up with PayPal. 

When sellers refused to sign up, some buyers refused to honor their high bids. 

It is expected that this problem will end when the $5 promotion ends. See id.



[168] Netcops are becoming more common in online auction investigations. See 

Barrett, supra note 70 (quoting a Federal Trade Commission official as saying, 

"Oftentimes it's common for [fraud victims] to have done some digging 

themselves.").



[169] See Snyder, supra note 2, at 465 (stating that nothing but imposing 

liability will motivate online auction houses to take major steps to regulate 

fraud).



[170] Sandy List tracked fraudulent users under the name "CyberYenta." She 

frequently contributed to eBay support and discussion boards and is an example 

of a netcop who was well respected. She was suspended in 1998 after eBay became 

concerned about her activities. See Stephen Buel, Online Trader eBay Feeling 

Growing Pains, Knight-Ridder Trib. Bus. News, Dec. 29, 1998, available at 1998 

WL 25059648 (discussing the suspension of Sandy List). This author recalls that 

the suspension of List upset many of her acquaintances and briefly sparked a 

"Support-Cyber" campaign on eBay. Supporters displayed a special graphic on 

their auction and discussion posts in support of List.



[171] The mother of Jeff Buckley, whose overzealous reporting of users selling 

Jeff Buckley merchandise (or indeed, anything bearing the name of Jeff Buckley), 

is an example of a netcop who lacks standing in the community. Users were angry 

that eBay ended auctions based on her allegations of copyright infringement as a 

member of the "Legal Buddies" program. See discussion supra note 56.



[172] See Lemley, supra note 59, at 1284-86.



[173] Cf. Stevan D. Mitchell & Elizabeth A. Banker, Note: Private Intrusion 

Response, 11 HARV. J.L. & TECH. 699, 720-22 (1998) (discussing potential 

oversight mechanisms for training and overseeing computer security 

professionals).



[174] eBay Community Values, at http://pages.ebay.com/help/community/values.html 

(last visited Mar. 6, 2001).



Related Browsing



(1) http://www.internetnews.com/fina-news/article/0,,5_564411,00.html. Article, 

"eBay Beats the Street." Financial analysis and comparison of eBay and 

traditional stocks.



(2) http://www.soyouwanna.com/site/syws/ebay/ebay.html. Article, "So You Wanna 

Use eBay (and Not Get Ripped Off)." This site offers a fairly extensive overview 

of eBay, and the dangers it poses.



(3) http://www.zdnet.com/zdnn/stories/news/0,4586,2676115,00.html. Article, 

"Judge Dismisses eBay Fraud Case." This article provides an overview of recent 

class action case against eBay.



(4) http://www.ecommercetimes.com/success_stories/success-ebay.shtml. Article, 

"Ecommerce Success Story: eBay." Iinterview with Senior Director of 

Communications at eBay.



(5) http://www.businessweek.com/1999/99_22/b3631001.htm. Article, "eBay v. 

Amazon.com." Comparison of fixed price internet retailers v. auction based.



(6) http://www.zdnet.com/anchordesk/story/story_3108.html. Article, "How to Shop 

Online Actions Safely." Discusses scams, etc., how to avoid them.



(7) http://www.ftc.gov/bcp/conline/pubs/alerts/gonealrt.htm. FTC Consumer Alert, 

"Internet Auctions: Secrets of Success." Fair Trade Commission document 

detailing steps buyers and sellers should take to protect themselves.



(8) http://www.esmarts.com/auctions/. eSmarts: Auction Buying Guide. Provides a 

list and review of most popular auction sites, and tips for transactions



(9) http://www.fool.com/news/2001/yhoo010123.htm Article, "Yahoo Auctions: Down, 

But Not Out." The number of auctions on Yahoo!'s site has been cut almost in 

half since the company instituted listing fees. The move cleared out most of the 

spam and advertisements, however, and allows for a more meaningful comparison to 

eBay and other competitors.



(10) http://www.ftc.gov/bcp/conline/pubs/online/auctions.htm FTC "Internet 

Auctions: A Guide for Buyers and Sellers." General overview of internet 

auctions, processes, problems.



(11) http://www.agorics.com/new.html Article, "Going, Going, Gone! A Survey of 

Auction Types." A series of articles explaining different auction types and some 

of the issues important in determining whether to use auctions and, if so, which 

kind.



(12) http://www.wired.com/news/culture/0,1284,40153,00.html Article, 

"E-Auctions: No Grand Masters Yet." Article discussing partnerships of online 

auction companies and traditional auction houses.



(13) http://www.merchantfraudsquad.com/ Website established by a group of 

parties interested in e-commerce fraud prevention.



(14) http://law.utoledo.edu/lawreview/outarticle/finn2000.htm. Policies 

Underlying Congressional Approval of Criminal and Civil Immunity for Interactive 

Computer Service Providers Under Provisions of the Communications Decency Act of 

1996 _ Should e-Buyers Beware? Mary Kay Finn, Karen Lahey and David Redle .



(15) http://news.cnet.com/news/0,10000,0-1007-200-334943,00.html Paul Festa, 

Fraud Threatens Auction Sites. This article explains some common terms used in 

referring to online auction fraud and suggests building a system around 

blacklisting as a solution.



(16) http://www.wired.com/news/topstories/0,1287,17357,00.html Polly Sprenger, 

Ebay Cracks Down on Fraud. This 1999 article discusses the change of policy by 

Ebay to handle concerns of fraud.



(17) http://strategis.ic.gc.ca/SSG/mi06301e.html Julie King, Avoiding E-Commerce 

Fraud: New Sites Help Vulnerable Merchants.



(18) http://www.wilsonwork.com/wilsonweb/wct1/issue11.htm Web Commerce Today, 

Issue 11, on fraud prevention.



Copyright 2001 Richmond Journal of Law & Technology