eBay probed for fraud
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January 25, 1999: 8:11 p.m. ET
NYC Consumer Affairs investigates whether online auctions cheat bidders
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NEW YORK (CNNfn) - Internet darling eBay Inc. hit a stumbling block Monday, after published reports said the online auctioneer is being investigated for fraud by the New York City Department of Consumer Affairs.
According to the New York Post, the agency is looking into complaints from consumers who claim they were cheated by dealers using the San Jose, Calif.-based company's Internet auctions.
Multiple sales of supposedly one-of-a-kind sports memorabilia brought the case to the attention of New York authorities, the paper said.
The department will have to determine whether eBay (EBAY), which acts as a middleman, can be held legally responsible for those who use its Web site to buy and sell collectibles and other items. According to the Post, the department may consider eBay liable because it collects a commission on sales made on the site.
The paper also said the New York agency may be making purchases through eBay as part of its investigation.
eBay was not immediately available for comment, but in a recent press release, the company said it averages 27 complaints of fraud per million auctions. The company hosted about 9.5 million auctions in the third quarter.
In addition, on its Web site, the company lists a disclaimer, emphasizing its site is "only a venue."
"We have no control over the quality, safety or legality of the items advertised, the truth or accuracy of the listings, the ability of sellers to sell items or the ability of buyers to buy items," the user agreement states. "
In addition, note that there are risks of dealing with foreign nationals, underage persons or people acting under false pretense."
Just last week eBay announced it would offer free insurance for purchases between $25 and $200 and install a user-identification system to help ease concerns about online security.
Shares of eBay skyrocketed 20-3/4 to 217-1/2 Monday.
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