Jewelry merchant on eBay fined $400,000

NEW YORK (Reuters) - A jewelry company on eBay Inc. that allegedly bid on its own auctions to illegally drive up prices by as much as 20 percent agreed to pay $400,000 in restitution and penalties, the New York state attorney general’s office said on Saturday.

Ezra Dweck and employees of his company, EMH Group, placed more than 232,000 such bids worth some $5 million over about a one-year period, Attorney General Andrew Cuomo’s office said.

Dweck and EMH Group have also been banned from the online auction industry for four years under the terms of the settlement agreed to by the parties, Cuomo’s office said.

A lawyer for Dweck and EMH said they had resolved the matter “only to avoid an interminable, costly battle with the AG’s office.”

“EMH and Mr. Dweck did not intentionally encourage any fraudulent bidding,” the lawyer said. “A buyback program, which was vetted by two attorneys, was created to give winning bidders an incentive to sell back to EMH certain items.”

EBay brought the case to the attention of the attorney general’s office and helped in the investigation over several months. The world’s largest online auction company has been trying to demonstrate to buyers and sellers that it is making aggressive moves to halt fraud on its sites.

The announcement of the settlement comes ahead of next week’s annual eBay Live conference, when thousands of the company’s top sellers gather for a three-day convention in Boston. Executives are expected to highlight various ways the company is cracking down on illegitimate sales practices.

An eBay spokeswoman said the timing of the release of the information was decided by Cuomo’s office.

“We do not tolerate criminal activity and proactively assist law enforcement to prosecute any individual who may try to defraud our users,” spokeswoman Nichola Sharpe said.

Dweck, who sold jewelry on his eBay store called Jewelry by Ezra, often offered shoppers “no reserve” auctions, which do not have a minimum price, the attorney general’s office said. But Dweck ensured his employees knew of which auctions to bid at along with a predetermined price, it said.

“This scam highlights the growing vulnerability of online auction shoppers,” Cuomo said. “Consumers should not have to surf with sharks.”