Is that bid for real? Online fraud hard to detect

By Purva Patel

Published 10:39 p.m., Friday, March 9, 2012

An employee at a local online auction site used faked bids to drive up prices, the company's CEO in Harris County testified in state district court.

While on the stand last month in a case he brought and has since settled against different employees, Dave Dawson, CEO of Houston-based Asset-Nation, acknowledged that last March a former employee was found making fraudulent bids via a deceased person who was registered as a site user.

The employee and his boss were fired, and the winning bidders in the affected auctions were notified and compensated at the end of 2011, he said.

Shill bidding, using fake bids to drive up prices, can be particularly hard to detect when conducted via online auction sites. While it's difficult to gauge how pervasive the practice is, some sellers and auctioneers have been charged criminally.

In New Hampshire, an auctioneer was prosecuted recently for placing a fake bid on a painting to bolster the price. In the United Kingdom, a seller on eBay was prosecuted for bidding in his own auctions under fake names.

In Texas, online auction sites aren't required to be licensed, although live auctioneers are. Experts said fake online bidding usually doesn't come to light unless it is disclosed by the company.

"It's very difficult to find online," said Hannes Combest, CEO of the National Association of Auctioneers, which is pushing for states to regulate and require licensing of online auctioneers to better hold the businesses accountable.

Employees can bid

Combest said that in some cases employees can bid as long as it is disclosed to buyers. She suggested buyers pay attention to terms and conditions of any auction, whether live or online.

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