eBay has deployed weapon against fraud

By Brian Bergstein The Associated press
Thursday June 06, 2002

SAN JOSE – Internet auction leader eBay Inc. is trying to fight fraud on the site with a new software program that scans for suspicious listings and alerts company investigators, chief executive Meg Whitman said Wednesday. 

The Fraud and Abuse Detection Engine, or FADE, quietly was deployed this spring to help the company crack down on con artists who misrepresent their merchandise or dupe buyers into paying for goods that never arrive, Whitman told investors at eBay’s annual shareholder meeting. 

Though Whitman said fraud makes up less than one-tenth of 1 percent of all transactions on eBay, the company worries that high-profile cons damage the site’s reputation. 

In the last two years, for example, authorities have arrested eBay users who sold a fake Richard Diebenkorn painting for $135,000 and a man who made thousands unloading baseball bats he claimed had been used by major league stars. 

FADE is programmed to raise alarms about listings with telltale signs of potential trouble. As an example, Whitman said a first-time seller in Romania offering a laptop computer starting at $1 would be a likely target. 

Once the system alerts eBay of a potential con artist, company staff examines the listing and the personal information the seller has provided. If the humans are as suspicious as the computer, eBay will call or e-mail the seller to verify certain information, Rob Chesnut, eBay’s deputy general counsel, said after the meeting. 

Chesnut said FADE already has helped prevent potential fraud, though he would not elaborate. He compared the program to systems used by credit card companies that monitor for suspicious spending patterns. 

During the sparsely attended shareholder meeting, which lasted less than an hour, Whitman reaffirmed earlier forecasts that San Jose-based eBay will earn 73 cents to 75 cents per share this year, though the consensus estimate on Wall Street is 76 cents. 

Separately Wednesday, a wireless-technology company called InPhonic Inc. launched a service that can alert eBay buyers on their cell phones when they’ve been outbid on an item and let them increase their bid by typing in a message on the keypad. 

There have been other wireless trading services for eBay users, but none has proven popular. 

Shares of eBay fell 14 cents to $55.01 in trading Wednesday on the Nasdaq Stock Market.