Statement of Robert Chesnut, VP and Deputy General Counsel
Before the House Subcommittee on Crime
Committee on the Judiciary
Regarding Fighting Cyber Crime - Efforts of Private Businesses
June 14, 2001
Chairman and members of the Subcommittee:
name is Robert Chesnut, Vice President and Deputy General Counsel
of eBay, Inc. ("eBay"). eBay is the world=s first and largest online
trading community. It was founded in September 1995 and currently
has over 29 million registered users. Essentially, eBay=s business is to bring together
buyers and sellers from across the United States, and the world,
to facilitate trading of goods and services.
appreciate the opportunity to testify today about some of the
creative steps being taken by private industry to fight crime
online and the cooperative approach that we at eBay have found
with federal and state law enforcement officials. Finally, I
will conclude my testimony with a brief discussion of one problem
that eBay believes needs new federal legislation - a criminal
prohibition against email address harvesting for the purpose
of sending illegal spam. Such a prohibition, will eliminate
another area of cybercrime and make the Internet safer.
eBay=s Efforts to Eliminate Online Crime
I first came to eBay two and one-half years ago, I heard many
people marvel at what a tough task it must be to fight crime
on the Internet, and how the Internet presented so many challenges
to lawful business activity. But what I have come away with
from my work at eBay is that the Internet provides law enforcement
and private businesses so many opportunities to fight crime
with creative solutions, many of which could exist only because
of the Internet. Let me highlight some of the creative measures
we use at eBay that have had a significant impact in combating
unlawful activity on our website.
Forum@ gives users the opportunity
to share their experiences with other users - every user of
our service has a numerical feedback profile available for all
to see so that good sellers and buyers are rewarded for fair
dealing and bad ones are weeded out for failing to do the right
Our Verified Rights Owners= Program (VeRO) protects
intellectual property owners - it is a highly successful joint
effort between eBay and private rightsowners (more than 2,000)
as diverse as Adobe, the MPAA, Muhammad Ali and Bruce Springsteen
to identify pirated goods, take them off our site and report
repeat infringers to law enforcement.
Our education program teaches users about the law, and
explains in plain English why certain items (like prescription
drugs, alcohol and tobacco, items made from endangered species)
cannot be sold on eBay. This is a permanent part of our site
devoted solely to the law, and we have built it by creating
partnerships with state and federal agencies. We provide free
web space to government agencies right on our site to teach
users about key laws that might affect their ability to trade,
and many agencies, including the Customs Service, the Environmental
Protection Agency (EPA) and the Food and Drug Administration
(FDA) are using our services.
example: in early 2000, eBay approached the Consumer Product
Safety Commission (CPSC) and proposed a joint project to prevent
users from trading recalled goods on the Internet. Within weeks,
the CPSC had a free web page within the eBay site that linked
to the CPSC records on recalled products, and users in key categories
like baby items, power tools and sporting goods were encouraged
to check out their items on the CPSC website before buying or
listing them for sale on eBay.
result? Amazing -- In the first month, queries to the CPSC recall
database tripled, requiring the agency to add new servers to
handle the loadYand many consumers were educated
about recalled products, a positive outcome for the agency and
We have made large strides in improving methods of safe payment
for goods and services traded on our site. We encourage and
support third-party escrow services that allow buyers
to send money to the service receive the goods from the seller
and then release the funds to the seller. Escrow protects
both parties to the transaction. We have partnered with Wells
Fargo Bank in a service known as Billpoint. Billpointallows
users to pay for items with a credit card, even when the are
buying items from ordinary people who are not merchants and
that could otherwise not accept credit card payments. This
brings the protection of credit cards into person-to-person
trading on the Internet. Consumers who pay with a credit card
have nearly complete protection against fraud through charge
back rights provided by credit card issuers. Billpoint has
already paid significant dividends in the fight to protect consumers
on the Internet.
And when things do go wrong (and unfortunately they will go
wrong whenever ordinary people do business directly with each
other from remote points around the globe), we have devised
additional new strategies to assist them. One important element
is online mediation. eBay played a key role in the formation
of the online mediation industry and its leader Square Trade.
Square Trade helps consumers resolve disputes with each
other (even in different language from all over the world) with
the help of professional mediators online. This program is
subsidized by eBay so that users never have to pay more than
$15 to have a case mediated online. The response has been overwhelmingly
positive. It is cost efficient even for small disputes between
users anywhere, the legal system is not clogged with these
small matters, and users love an independent voice of reason
that is often crucial to resolving online disputes. Square
Trade handled over 60,000 disputes in 2000 and nearly 90% were
concluded with positive results for both parties.
Similar to the offline world, we have witnessed larger fraud
cases involving a number of victims. eBay has attacked the
problem with the creation of our Fraud Assistance Team.
The Teamdevotes themselves full-time to putting victims in touch
with the right law enforcement agency who can help them, from
Hong Kong to London to New York and California. We work with
law enforcement to get them key records in a matter of hours,
not days. We have created electronic victim=s complaint forms that can
be filled out online and emailed directly to an investigative
agent in a matter of hours. This is crucial to gathering evidence
from many victims around the globe. Law enforcement is so impressed
with the tools we place at their disposal that in the last month,
one federal prosecutor in Illinois stated that eBay=s
cooperation was Aphenomenal.@
The best he had ever seen from a private company. Another federal
prosecutor in Alabama told us last week that without our work
in putting a case together, the case would have never been prosecuted.
Most importantly, cases are getting prosecutedYdozens of Internet criminals
are going to jail, paying fines and returning money to victims
in state and federal cases across the country and around the
world. Each successful prosecution sends an important message
that the law does apply on the Internet and particularly on
And when all else fails, eBay provides a free insurance
to all its users through Lloyd=s of London - if a transaction goes bad, eBay
makes good on it, up to $200. It is automatic -- no premiums
or pre-registration. For eBay, it is a cost of doing business
and takes a lot of the sting out of bad experiences. How many
bad experiences occur on eBay? Less than 1/100th of 1 percent
of all listings on eBay result in an insurance claim payment,.
a record we would match with any other retailer anywhere in
the world any day of the week.
these creative strategies working? The latest statistics suggest
that these strategies are making a significant difference.
In 1999, the FTC received 13,091 complaints about online auction
fraud. Remember that not all of these complaints are actual
fraudYmany of these complaints were resolved
by the users after the complaint was filed, or were never fraud
in the first place... and not all involved eBay. During 1999,
eBay alone hosted 125 million listings of goods and services.
2000, eBay grew at a dramatic pace, hosting more than twice
as many listings - approximately 265 million. But the number
of FTC fraud complaints? They went down, to 10,872Ya remarkable drop, almost
20%, particularly when compared with the growth of the industry.
We are proud of these numbers, and we are committed to introducing
new measures to continue these positive trends in 2001 and beyond.
The Need for Anti-Harvesting Legislation
is worth noting that some forms of cybercrime could be reduced
if Congress were to adopt a criminal prohibition against the
automate harvesting of email address for the purpose of sending
illegal Spam. eBay users are increasingly receiving illegal
Spam, from people who obtained their email addresses illegitimately
from the eBay web site. These harvesters are building a growing
and lucrative business by attacking popular websites with automated
tools that suck in millions of e-mail addresses and spew them
out again for use by Spammers. This parasitic process undermines
public confidence in e-commerce, feeds public fears about threats
to privacy on the Internet and becomes a breeding ground for
anti-fraud activities, outlined above, are undermined when Spammers
convince eBay users to engage in transactions off the eBay site.
We believe that a cybercrime bill should include a provision,
amending the Computer Fraud and Abuse Act, 18 U.S.C. Section
1030, to outlaw the automated bulk harvesting of e-mail addresses
for the purpose of sending illegal spam. Such a provision will
guarantee additional protection to America=s online consumers.
Thank you. I am available
to answer any questions you may have.