Big Brother is watching you on eBay - and documenting

Haaretz ^ | February 21, 2003 | Yuval Dror

[I Believe It's Not Butter]

eBay, ever anxious to up profits, bends over backward to provide data to law enforcement officials

"I don't know another Web site that has a privacy policy as flexible as eBay's," says Joseph Sullivan. A little bit later, Sullivan explains what he means by the term "flexible." Sullivan is director of the "law enforcement and compliance" department at eBay.com, the largest retailer in the world.

Sullivan was speaking to senior representatives of numerous law-enforcement agencies in the United States on the occasion of "Cyber Crime 2003," a conference that was held last week in Connecticut. His lecture was closed to reporters, and for good reason. Haaretz has obtained a recording of the lecture, in which Sullivan tells the audience that eBay is willing to hand over everything it knows about visitors to its Web site that might be of interest to an investigator. All they have to do is ask. "There's no need for a court order," Sullivan said, and related how the company has half a dozen investigators under contract, who scrutinize "suspicious users" and "suspicious behavior." The spirit of cooperation is a function of the patriotism that has surged in the wake of September 11.

eBay is the world's largest auction site. Some 62 million registered users buy and sell a variety of merchandise through the site, which charges commissions for every item sold. Sullivan claims that 150,000 Internet users earn their livelihood from the site, some having left their old jobs to become buyers or sellers on eBay.

The sales method on the site is simple: An individual registers as a user, types in his particulars, and affirms that he accepts the user conditions and the site's privacy policy. Whenever an item is sold, the buyer fills out an evaluation form, telling other users about the treatment he received, whether the merchandise was sent on time, etc. Other eBay users can then avoid buying from sellers who have received poor grades.

Sullivan says eBay has recorded and documented every iota of data that has come through the Web site since it first went online in 1995. Every time someone makes a bid, sells an item, writes about someone else, even when the company cancels a sale for whatever reason - it documents all of the pertinent information.

One would think that preserving privacy of the users, whose moves are so meticulously recorded, would be keenly observed at eBay, whose good name in the Internet community is one of its prime assets. But in the U.S. of the post 9/11 and pre-Gulf War II era, helping the "security forces" is considered a supreme act of patriotism.

Who needs a subpoena?

"We don't make you show a subpoena, except in exceptional cases," Sullivan told his listeners. "When someone uses our site and clicks on the `I Agree' button, it is as if he agrees to let us submit all of his data to the legal authorities. Which means that if you are a law-enforcement officer, all you have to do is send us a fax with a request for information, and ask about the person behind the seller's identity number, and we will provide you with his name, address, sales history and other details - all without having to produce a court order. We want law enforcement people to spend time on our site," he adds. He says he receives about 200 such requests a month, most of them unofficial requests in the form of an email or fax.

The meaning is clear. One fax to eBay from a lawman - police investigator, NSA, FBI or CIA employee, National Park ranger - and eBay sends back the user's full name, email address, home address, mailing address, home telephone number, name of company where seller is employed and user nickname. What's more, eBay will send the history of items he has browsed, feedbacks received, bids he has made, prices he has paid, and even messages sent in the site's various discussion groups.

Attorney Nimrod Kozlovski, author of "The Computer and the Legal Process" (in Hebrew), heard the lecture, and could not believe his ears. "The consent given in the user contract should be seen as `coerced consent,' in the absence of any opportunity to exercise free choice, with no real alternative but to agree. This is most certainly not conscious consent."

Kozlovski is part of the Information Society Project group at Yale Law School, in which he and his colleagues consider the effects of the new media on the structure of society. American law does not authorize searches of a person's home or body, he says, except in exceptional cases such as when the court authorizes a search, or when the individual gives his consent to a search.

"In the case before us, the Web site signs the user to a document that says it can do whatever it wants with his information. The eBay contract signed by the user concedes his or her rights to protection from the government; in essence, as soon as the contract is signed, eBay can invite the government to do whatever it wants with the information, he says.

A brief visit to the company's Web site reveals that the "user contract" that visitors are supposed to read before agreeing to the conditions is 4,023 words long. One paragraph makes reference to the site's "privacy policy." The user has to click on a link and is diverted to another document that is some 3,750 words long. It then takes another 2,390 words to reach the section about which Sullivan told the legal authorities: The user's privacy is solely up to eBay.

"The users are asked to read and agree to the site policy before they can make use of it," eBay spokesman Kevin Pursglove told Haaretz. "We provide a link to our privacy policy on every single page of our site, and provide summaries of this policy, all so that users will be familiar with our policy."

We will work for you

Nevertheless, eBay does not make do with simply sharing its data with the legal authorities. Sullivan says the company employs six investigators, all of whom have experience in police investigations. Their job is "to track down suspicious people and suspicious behavior." To that end, they scan for patterns that are atypical - different from "normal patterns." For example, if a person sold baseball tickets for two months and suddenly switches to selling a car, the eBay system will "wave a red flag" and signal the seller as someone behaving unusually. Who asks eBay to do it? No one. eBay volunteers.

eBay goes even further. In his lecture, Sullivan spoke about how he helped investigators locate a user who had been suspected of selling stolen cars through the site. "We tried to buy the car from the thief and in that way incriminate him. But the bad guy was smart. He saw there wasn't a single feedback in the history of the person who was making the purchase. He told us he didn't want to make a deal with us."

Sullivan explained that the incident taught the company a lesson, and that since then it has used pseudo buyers for which it constructs comprehensive simulated histories, including simulated feedbacks, all for the sake of incriminating those suspected of theft. "eBay is not willing to tolerate acts of fraud carried out on its site," explains Pursglove. "We believe that one of the ways to fight fraud is to cooperate with the legal authorities at the various levels.

Sullivan is even more forthcoming. Aware of how hard the police work, he decided to help as much as possible. "Tell us what you want to ask the bad guys. We'll send them a form, signed by us, and ask them your questions. We will send their answers directly to your e-mail." Essentially, by engaging in what seems like impersonation, eBay is exploiting its relationship with customers to pass on information to law enforcement authorities. Why? "We take various steps in order to fight fraud and provide a safe buying environment for our numerous users," says Pursglove.

"In order to prevent misuse of authority, the law ensures that authorized impersonation will only be used with persons suspected of carrying out illegal activity," says Pursglove. But eBay's practice is to impersonate people on a regular basis, for law-enforcement objectives. However, "there need not be a proven connection or well-founded suspicion of a crime having been performed," claims Kozlovski.

In July 2002, eBay bought PayPal, Inc. for $1.45 billion. PayPal, which offers the most popular means of payment on eBay, provides clearing services for the execution of online transactions. It enables Internet users to open accounts on the company site, transferring money from their credit card or bank account. When carrying out a transaction, the seller receives a certificate with which money can be withdrawn from the buyer's account in cash. The system obviates the need to reveal personal financial data.

When Paypal was acquired, the company reported 16 million users, as well as 3 million business accounts and 28,000 new visitors to the site each day. About 60 percent of PayPal's income derives from commissions received from users buying goods on eBay. About 70 percent of eBay buyers use PayPal.

Two years earlier, eBay bought Half.com, a site that specializes in sales of CDs and books. Sullivan explained that these acquisitions help eBay to provide lawmen with a full picture. "Every book or CD comes with a bar code. So we know who bought what. The acquisition of PayPal helps us to locate people more precisely. In the old days, we had to trace IP addresses (unique address given to computers linked to the Internet), to locate the buyer, but now Paypal supplies us with the money trail.

PayPal has about 20 million customers, which means that we have 20 millions files on its users," Sullivan proudly relates. "If you contact me, I will hook you up with the Paypal people. They will help you get the information you're looking for," he tells his listeners. "In order to give you details about credit card transactions, I have to see a court order. I suggest that you get one, if that's what you're looking for." It isn't certain that visitors to the site are aware of the thick hints eBay gives the lawmen.

"By buying PayPal, eBay is merging the information about the goods trail with the money trail," explains Kozlovski. "Thus, in spite of the protective mechanisms of the law against disclosure of details on transactions, eBay is in a position to analyze the full set of data and `advise' investigators when it might be `worthwhile' for them to ask for a subpoena to disclose the details of a financial transaction. Essentially, this bypasses the rules on non-disclosure of details of financial transactions and the confidentiality of the banker-client relationship."

Kozlovski mentions how special investigator Kenneth Starr issued a court order that ordered the bookstore where Monica Lewinsky bought her books to report to him the names of the books she bought. "Then, there was a huge fuss. Now you don't need a special order - eBay does the work for the investigators."

Kozlovski feels that eBay's practice should be seen as part of a worrisome trend in the West to curtail protection of individual rights. In communist regimes, he says, the state would assign watchers to follow every citizen, who would pass incriminating information on to the authorities. Now the state doesn't have to do a thing. People come to it of their own free will. This is also the case for eBay, which exploits its stature in the market to have users accept contracts that strip them of their privacy. Perhaps the regime is different, but the outcome is most assuredly the same.

A million new items a day

eBay has no operations in Israel. But in the U.S., Europe and even the Far East, the name eBay is uttered in the same breath with names like Yahoo, Google and Amazon. The company created an electronic business arena where sellers offer their wares and buyers purchase them. eBay's trick is that both the sellers and the buyers are ordinary citizens. On eBay, you can find people selling used chewing gum (and there are buyers), torn soccer balls, 18th century forks, sunflower seeds and luxury cars (in 2002 alone, some 3,000 cars were sold on the site, at a total of $30 million.)

eBay is one of the few Internet companies that shows huge profits quarter after quarter. The company completed the fourth quarter of 2002 with revenues of $414 million and net profits of $87 million. The company had overall income in 2002 of $1.2 billion, and net profits of $250 million. It is traded on Nasdaq at a company value of $23.4 billion - three times that of Amazon, twice that of Yahoo and eight times that of the Israeli security behemoth, Checkpoint.

At any given moment, eBay is conducting some 12 million auctions, divided into about 18,000 different categories. About two million new items are offered for sale every day, and 62 million registered users scour the site to find them. These users have given eBay the monopoly on online auctions in America. Companies such as Yahoo and Amazon tried to get into the auction market, but were forced to give up. An estimated 150,000 people earn their livelihoods solely from buying and selling items by Internet. The company maintains local sites in Britain, Germany, Italy, South Korea, Ireland, Australia, Spain, Singapore and Sweden.

eBay is a monster that churns out money 24 hours a day, 365 days a year - for itself and for its millions of users.

[Positive]

"I say.. the IRS has no law enforcement ability. It is a quasi regulatory agency. It has no law enforcement powers."

I think you're right, maybe you know, isn't the Secret Service the "law enforcement" arm of the Treasury Department in addition to providing security for the President and Klinton?

[stuartcr]

Good point.

[Nick Danger]

Well I'm done for...they'll know about my buying "loose" (as opposed to mint in package) Star Wars action figures.

Me too. I like those old IBM "clickety-clack" keyboards. They don't make them anymore, so eBay is where I go to get them.

This is definitely a "pick your battles" moment for me, and after carefully considering it, I've decided that I don't care if they know about my keyboards. Nor do I think they have time to worry about my keyboards. There is in fact great privacy in being one database record among 30 million.

People who worry about this stuff should shop in person and pay cash. Frankly, I want eBay to be out there announcing that they are law enforcement's right arm, because if they don't, eBay will turn into a nest of thieves offering items that will never ship, that won't be as advertised, and so on. That will wreck the whole thing. It's better that they are loud and scary about their cooperation with the cops.

All life is tradeoffs. On eBay, I worry more about thieves than I do about government agents finding out that I bought Office 2000 at a great price after Office XP came out.

[boris]

"I like those old IBM "clickety-clack" keyboards. They don't make them anymore, so eBay is where I go to get them."

Oh yesssss...

I loved the feel, and everyone knows God intended the function keys to be on the left side of the keyboard.

All of a sudden IBM forgot everything it had learned about ergonomics. For a while you could buy Northgate keyboards, which (IMHO) were the very finest ever made. Alas.

--Boris

[Queen Jadis]

Funny...AND informative.

[Positive]

Nice of you to say.

[Dont Mention the War]

To find all articles tagged or indexed using FReepBay, click below:
	click here >>>	FReepBay	<<< click here
(To view all FR Bump Lists, click here)

[Dont Mention the War]

uBid, for one. Yahoo auctions.

And Amazon, and a whole host of other sites. The problem is that eBay controls about 80% of the entire online auction market. If you go to Yahoo or Amazon or somewhere else, your chances of making a successful sale are much lower, and if you do get bids you're likely not to get as many, and thus not make as much money.

Actually, I think it's even worse than that. I have a bot monitoring Amazon's auctions site for a certain keyword, and I have, honestly, seen a *lot* of the same items continually advertised for over THREE YEARS without a single bid. And they're not bizarre obscurities; they're normal items that I know would sell during a single 4-6 day listing on eBay.

In short, if you want any real chance of selling your item and getting a decent profit on it, you have no real choice except eBay.

In any case, I think this policy is eventually going to come around and bite eBay on the ass. Wait until they get hit with a $50 million dollar suit for handing over someone's credit card numbers to a 16-year-old who forged a fax with his local PD's "letterhead" on it. (How long would that take to mock up, five minutes?)

[serinde]

"In short, if you want any real chance of selling your item and getting a decent profit on it, you have no real choice except eBay."

I agree. Also, if you want to BUY anything, you have a much better chance of finding the wanted item on ebay. I've checked out some of the other auction sites, but they usually don't have anything of interest to me.

[savedbygrace]

Thank you. That's what thought, but I was hopeful that the alternatives were effective. I'm sure a lot of stuff sells through those other channels, but much, much more through ebay.

[browardchad]

All life is tradeoffs. On eBay, I worry more about thieves than I do about government agents finding out that I bought Office 2000 at a great price after Office XP came out.

LOL -- I feel the same way. There's no mention in the article about why E-Bay retains all the sales info -- so they can keep profiles on sellers or buyers, accessible to both. I check out sellers' profiles before I buy, and I appreciate the fact that they keep my profile on file, though it may be quite a few months between purchases.

[Traffic_Can]

and besides, the IRS gots guns..