In 1998 alone, there were nearly 8,000 reports on Internet fraud. In the online auction market especially, cheating and misrepresentation are prevalent. Online auction fraud has increased to an alarming 68 percent of the total Internet fraud reported in 1998. The Federal Trade Commission even sought to bar a Lake Worth, FL, man from participating in online auctions again because he placed goods for sale on various auction sites but did not deliver them to auction winners. In the conventional marketplace, a set of social, economic and legal systems provides the basis for protecting business activities.
Fraud is punishable by law.
Nonpayment is remediable through small claims courts. Disagreements can be resolved by formal and informal arbitration. Unfortunately, the social, economic and legal system has not yet caught up with the growth of electronic commerce. In the auction market where numerous individuals participate in transactions, it is difficult to bind one identity to one trader. Most of the auction sites identify sellers or bidders by email addresses, which can be easily obtained from multiple sources without monetary cost.