EBay Shares Surge as Firm Resolves Fraud Probe
Dominant Internet auctioneer EBay Inc. escaped unscathed from the first of two investigations into its business practices, increasing investor hopes that the second probe would also end painlessly.
The New York City Department of Consumer Affairs had been looking into allegations that the San Jose-based company was profiting from the sale of fake sports memorabilia. EBay avoided fines and other penalties by merely pledging that it is “exploring the possibility” of using outside authenticators in some areas.
Investors bid EBay shares up $21.75, or more than 14%, to a near-record $171.75 in heavy Nasdaq trading.
Shonna Keogan, a spokeswoman for the city, said that at least two autographs by baseball great Christy Mathewson were determined by police to be forged, including one that fraud investigators bought for $699.
During the probe, EBay barred 12 sellers until it adopted verification plans, Keogan said.
“EBay’s continued commitment to taking quick action against those who attempt to use its online auctions to defraud consumers has resolved our outstanding concerns,” Consumer Affairs Commissioner Jules Polonetsky said.
EBay has said little about the second inquiry, citing an order from an unspecified court.
In late January, the company complied with a subpoena for records in that case, turning documents over to a federal agency that was, likewise, unspecified publicly.
The company’s most recent filing with the Securities and Exchange Commission concedes that EBay could face criminal charges in that case, which includes inquiries into its practices. But people familiar with the company say it is being tight-lipped about the investigation to avoid tipping off the primary targets of the inquiry.
EBay and its new competitors, including the auction arms of Amazon.com and Yahoo Inc., are in uncharted legal territory. EBay says it cannot police each transaction to ensure that goods are delivered and are legal. About 1.8 million items are currently listed for sale.
EBay has banned the sale of guns and promised to investigate “credible information” about fraud on its site.
This week, the company said it would use Collectors Universe and other third parties to authenticate products in some categories, at the option and expense of the seller.
