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September 15, 1998

AUCTION UNIVERSE RE-LAUNCHES WITH ANTI-FRAUD GUARANTEE

By CBR Staff Writer

With the Federal Trade Commission (FTC) getting serious about tracking down internet users that commit fraud on the rapidly expanding number of web-based auction services, Auction Universe feels that it is a good time to re-launch its service, this time with guaranteed transactions and user’s insurance. Auction Universe, which is owned by Los Angeles-based Times Mirror Co was originally launched last November. The company has partnered with numerous local newspapers across the US to provide local branded services as an extension to the classified ads offered on many of the newspaper sites. There are also deals with specialized content magazines, which provide articles for the Auction Universe site. On the whole, there was not much to differentiate that service from the likes of eBay Inc or Onsale Inc. But today Auction Universe launches its BidSafe system, which it hopes will set it apart from the other auction sites. BidSafe is a money-back guarantee from Auction Universe for all payments made using Visa, MasterCard or Discover. It guarantees that both the sellers get their money and that the buyers get their goods or their money back. Sellers have to accept a buyer’s bid within 40 days. The company has also introduced shipping, fraud and damage insurance underwritten by Pacific Insurance Co Ltd offering up to $3,000 cover. But these guarantees do not come free. BidSafe is available for a $20 annual subscription, but that also includes the BidBucks system that enables regular users to get a 1% monthly rebate on their purchases. Auction Universe rival eBay Inc recently said in a filing that had received a letter from an unnamed state attorney general informing the company that it was investigating whether or not its legal disclaimers – informing users that it will not get involved in the transactions in the form of offering a guarantee – are adequate. Auction Universe chief executive Larry Schwartz says that kind of approach makes for a very unfriendly trading environment. eBay is currently in a quiet period prior to its initial public offering and therefore cannot say anything, while Onsale has handed over the front end of its person-to-person auction business to Yahoo! Inc as of this week (see separate story) and Yahoo didn’t get back to us by press time to say whether or not it was planning to offer guarantees. Schwartz claims there is a tremendous amount of fraud happening on other auction sites, though only a couple of cases have emerged so far. Auction Universe makes its money mainly through revenue-sharing schemes with its newspaper partners, most of which are not Times Mirror publications. Sellers are charged on average 75 cents per listing, the BidSafe charge is shared, as are advertising revenues and it also takes a 2.5% commission on each sale. Schwartz reckons that only a company backed by the muscle of a company such as Times Mirror could offer such a guarantee. The FTC is due to post a guide to the laws pertaining to people who advertise or sell on the net called Rules of the Road on its web site any day now (http://www.ftc.gov). http://www.auctionuniverse.com

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