Mary M. Calkins


Online auctions for goods are currently a popular and lucrative form of e-commerce, but present special problems of trust and fraud prevention, because most deals involve buyers and sellers who do not know each other and are separated by distance. Online auctions for goods have been largely unregulated by formal laws. For that reason, trust-building and fraud prevention have primarily been accomplished through creative private regulatory models implemented by the auction houses themselves. This Comment examines one popular model, a registration and feedback system pioneered by the leading online auction company, eBay. Under this system, a user builds a public online reputation over time by engaging in a number of transactions and receiving public feedback from his transaction partners. By checking a potential transaction partner's feedback file, a user can theoretically receive information about that party's honesty and trustworthiness, and make an informed decision about transacting with that person. However, as this Comment will show, the growth of the user community has rendered this "community policing" model increasingly unreliable and unable to prevent bad behavior, although the model still has some psychological benefits. Therefore, eBay cannot rely on feedback systems to reliably prevent fraud, and must implement other forms of regulation (some of which are discussed in this Comment) or face being externally regulated by government entities.