Retailers Fight E-Fencing
THE INTERNET is becoming the venue of choice for criminals who want to fence stolen goods. The reason is simple: Electronic fencing, or e-fencing, is “a much lower risk and higher reward way of selling the stolen merchandise,” says National Retail Federation’s (NRF) Vice President of Loss Prevention Joseph LaRocca.
Fencers who use the Internet to market their goods can get 70 to 80 cents on the dollar compared to what the merchandise sells for at retail, whereas street sellers tend to receive only 30 cents on the dollar, explains LaRocca. Additionally, there is no direct way for law enforcement to find the identity of an online seller or follow that person to locate and identify the supplier.
The numbers show the trend. In the National Retail Federation’s (NRF) 2007 organized retail crime survey, 71 percent of the surveyed retailers had identified or recovered stolen goods online. That’s 10 percent more than had identified or recovered stolen goods from a physical fence location (61 percent).
The issue took center stage at a recent congressional hearing. Retailers told elected officials that they need more help from the federal government and online auction sites like eBay to stop the practice.
During the hearing, eBay Inc. Senior Vice President Robert Chestnut took issue with the premise that the company’s site is a place fencers can feel at home. Chestnut said that eBay is “the dumbest way for a criminal to sell stolen property” as the site maintains extensive sales data and works with law enforcement on investigations, and requires that new sellers register using credit cards.
The retailers want eBay to be more forthcoming with seller information to aid in investigations. But Chestnut told Congress that his company is concerned about the privacy of sellers. For that reason, eBay currently provides identification information to retailers only if they have obtained subpoenas. Alternatively, it will give the information directly to law enforcement officers who request it via e-mail or telephone. That’s not enough for some retailers, who say that it’s not always easy to get law enforcement involved in a case.
“Law enforcement typically won’t deal with us on that type of thing, because unless we bring them a completed case, well laid out, they simply don’t have time to address it,” said Karl Langhorst, CPP, at the hearing.
Langhorst, who is director of loss prevention at Randall’s/Tom Thumb of Texas, a Safeway-owned supermarket chain, referred to electronic fencing as a “free for all.” He explained that retailers simply want online sites to have to provide the same information expected of similar brick and mortar operations, where serial numbers are needed for goods such as iPods and electronics and where sellers of health and beauty care products often have to account for where they got their product.
Brad Brekke of Target Corp., who was speaking on behalf of the Coalition Against Organized Retail Crime, joined in urging Congress to require that online auction sites adopt rules used in the physical retail world, such as the mandatory use of serial numbers where applicable.
The proposals advocated by retailers are similar to laws regulating pawnshops, said Brekke. He also suggested that Internet auction sites that fail to perform due diligence on sellers might be treated like financial institutions that fail to prevent money laundering.
LaRocca argues that the approach is reasonable. “This is not asking everybody on eBay as an example, to provide proof of ownership or acquisition,” says LaRocca. “This is zeroed in at those people [who] sell hundreds, even thousands, of the same item over and over again.”
LaRocca adds that while new laws might provide a “legislative backbone” against efencing, “the truth is that legislation really is not the only way to approach this.” Industry leaders, like eBay, could establish the right best practices without waiting for regulations, he says.
For its part, eBay points out that it does have a fraud investigation team that works with law enforcement officials on the state and local level. Chestnut cites more than 2,000 global eBay employees working to fight online fraud.
LaRocca says eBay can do more. “It’s really about a global fix and eBay, being the largest auction site or online marketplace out there, they are in a great position to be a superhero in this fight.”