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Fraudulent e-shopping sites on the rise, says ombudsman

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 19 May 2021

The Consumer Goods and Services Ombud (CGSO) has warned of an increase in fraudulent online shopping sites in SA, with hundreds of consumer complaints lodged.

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SA’s e-commerce sales reached a tipping point in 2020, growing by 66% from 2018, as a result of the COVID-19-induced lockdown, which saw more consumers taking to online shopping channels and delivery services.

However, this has created a lucrative opportunity for criminals, with an increase in online shopping scams involving the latest modus operandi, where criminals pretend to be legitimate online sellers, or use fake adverts on a genuine retailer site.

The CGSO, which is responsible under the Consumer Protection Act for dealing with consumer complaints in the retail sector, and the Ecommerce Forum South Africa (ECFSA) have expressed their concern to ITWeb regarding the growing number of complaints filed about rogue online traders and charlatans.

“A lot of shopping sites offer goods at lower prices that are too good to be true; as a result, consumers are easily lured by the fraudulent sites,” says Ouma Ramaru, media liaison, training and outreach manager for CGSO.

“This trend is growing tremendously, and can be attributed to the fear of going directly to stores and possibly getting infected with COVID-19; people would rather shop online to avoid any human interaction.”

While online shopping fraud has been around as long as the Internet, more fly-by-night fraudsters are setting up online sites which advertise goods at ridiculously low prices, extract as much money as they can from customers, and then vanish – only to appear with a new name elsewhere.

The CGSO says of the many consumer complaints it received, about 200 were lodged against fraudulent online shop Mr Shopper, which has since closed down amid over 40 police cases opened against the site.

Mr Shopper, which setup its Web site last year, has reportedly closed shop and disappeared, with many consumers not receiving their goods or refunds.

“The supplier [Mr Shopper] advertises products online and when consumers make payments, the supplier indicates they are out of stock. When consumers request refunds, the supplier delays in making refunds and sometimes they don’t respond at all,” saysRamaru.

The CGSO has listed three other online shopping sites that have received a high number of consumer complaints; however, their illegitimacy cannot be confirmed, as investigations are under way with the National Consumer Commission.

Built on trust

The Ecommerce Forum South Africa, which works closely with the CGSO, says in 2020, the number of complaints received about online shopping exceeded the number of complaints the forum received about the telecommunications sector, for the first time ever.

“We are greatly concerned by the increase in complaints since last year. Trust is the key to the e-commerce sector. Without consumer (or business) trust, online shopping will not prosper, and therefore tackling this issue of rogue traders is a top priority for EFSA,” says Lauretta Ngakane, head of communications, EFSA.

However, not all the complaints are due to rogue traders – some e-shops received complaints because their supplies ran out due to global supply disruption, or delayed logistics.

“We are planning to publish a guide for consumers to assist them to identify the issues and protect against scammers. We will be working on this with the CGSO and also with Sabric, the banks’ anti-fraud body,” she notes.

EFSA says it has a trust mark which verifies all the requirements of the laws and good practice of the sector are in place. The forum also uses a law firm to check all its members are good traders and to ensure compliance.

“We are presently researching what our e-commerce colleagues are doing to tackle this problem in the rest of the world, because this is not just a SA phenomenon. We are also encouraging government to adopt suitable regulations to ensure cyber security and protect against cyber crimes,” addsNgakane.

Jonathan Smit, MD of payment platform PayFast, disagrees that rogue online traders are on the increase in SA.

“We do not believe there is a growing number of consumers falling victim to fraudulent shopping sites in South Africa, but rather that since the e-commerce sector is growing rapidly, more retailers are opening up and more consumers are shopping online. The number of fraudulent online merchants is limited and can quickly be identified and stopped.”