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EBay Says It's Beefing Up Security

Executives at eBay Inc. (EBAY) are touting security as their top priority in 2007 after an internal survey showed that online scammers may be denting the company's reputation.

The San Jose-based online auction company began a program last year to safeguard members' identities by concealing their user names on expensive listings.

That measure could make it harder for con artists to contact losing bidders and goad them into "second chance offers," where customers wire cash to the scammers' accounts.

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Engineers also want to reduce counterfeit items and clamp down on scams between buyers and sellers from different countries, said William C. Cobb, president of eBay North America.

"It's no secret that online criminals who target sites like eBay and PayPal have grown in number and sophistication over time," Cobb said in comments posted Wednesday to an eBay forum. "Where we've historically put an emphasis on transparency and free choice, today the security threats are more complex, and we're more actively protecting our buyers from fraud."

Representatives are also sending nasty e-mails to sellers who charge egregious shipping and handling fees. EBay reduced the average shipping cost in the "cell phones" category by 25 percent since last summer, Cobb said.

The emphasis on security enhancements — billed as the most important initiative in the company's 12-year history — comes as senior eBay executives host the site's top 250 sellers at closed-door meetings this week in Burlingame.

Entrepreneurs attending the second annual E-Commerce Forum sold 7 million items worth $1.5 billion in 2006.

So-called "power sellers" have expressed concern — and have threatened to go to other sites — over concerns that eBay has been slow to combat fraud.

EBay says less than one-hundredth of one percent of the listings on its Web site are fraudulent. But even by that conservative measure, 58,300 auctions may have been fraudulent in one three-month period. More than 583 million items were listed in the third quarter of 2006.

More concerning, fraud disproportionately strikes high-end categories such as automobiles, electronics and jewelry. There's no reliable way to estimate how much is lost to con artists on eBay, where $12.64 billion in merchandise exchanged hands in the third quarter.

Spokesman Hani Durzy said Wednesday that the company is targeting all scammers — from petty thieves to organized crime syndicates.

"We're never going to completely stop the bad guys from using the Internet, but we do know that negative experiences are a major reason people leave eBay — and they pass along word of mouth to other people," Durzy said. "In 2007, you'll see a sea change in our approach to trust and safety."