While stories of individuals getting scammed on auction sites are legendary, they aren't only ones victimized. Large retailers and brand manufacturers are also victims when their stolen or counterfeit merchandise gets auctioned off.  Congress is now considering two bills to address this problem.

 

The reason this has become a growing issue is that criminals can net 70 percent of the value of stolen merchandise on an auction site versus the going 30 percent received on street corners, flea markets and pawn shops. So far as all the knock-off (counterfeit) goods being sold on auction sites, it's hard to put a dollar loss to it, but many believe it's substantial.

According to the International Anticounterfeting Coalition, counterfeiting costs U.S. businesses $200 to $250 billion a year. Counterfeiting and e-fencing pose safety risks to the public at -large as well. Outdated merchandise  or counterfiets which don't meet safety standards can potentially poison people, or cause bodily harm.

By their nature, auction sites provide an anonymous marketing environment to sell both stolen and counterfeit goods.

“By hiding behind the anonymity of the Internet, they can make more money with less risk of getting caught than selling to a stranger on a street corner who might turn out to be a police officer. This bill would lift that cloak and help law enforcement put on-line criminals where they belong – behind bars,” according to Joe LaRocca, the National Retail Federations Vice President of Loss Prevention.

To address this problem, a federal bill (H.R. 6713, the E-Fencing Enforcement Act of 2008) is being introduced by Representative Bobby Scott, chairman of the House Judiciary Committee’s Subcommittee on Crime, Terrorism and Homeland Security.

The bill will require on-line auction operators to maintain information about high-volume sellers and provide the information to a person with "standing" once a police report is filed. The definition of a person of standing would be a law enforcement officer or a representative from a company, who has an interest in the merchandise being illegally sold on an auction site.

This is the second bill introduced recently to combat organized retail crime, which costs retailers anywhere from $15 to 30 billion a year. On July 15th, H.R. 6491, the Organized Retail Crime Act of 2008, was introduced by Representative Brad Ellsworth, a former county sheriff, along Representative Jim Jordan, as the lead co-sponsor. The bill establishes that unless auction site owners can show specific steps to prove goods being sold were not being obtained by theft or fraud, they could be viewed as "facilitating" the activity. This bill will also require site operators to cooperate with the police and organizations with a stake in stopping the activity. In certain instances, it will also allow merchants to initiate civil actions over stolen merchandise being sold on an auction site.

In the past, auction operators have been criticized for not effectively cooperating with companies and law enforcement when they made an inquiry into suspected criminal activity on their sites. It has also been established that smaller (individual) victims and merchants often receive little to no assistance after being victimized in an Internet auction deal.

Having worked around financial crimes for a number of years, I noticed they seemed to be on the rise. One reason for this is technology, which grows more rapidly than laws designed to protect us from it. Although the blog is a resource to educate people on identity theft, it also strives to educate the common person on the rapidly growing problem of crimes enabled (made too easy) by technology and the Internet.

Keep reading for information and comments on this article, and add some feedback of your own!

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