Publication: Sydney Morning Herald - 94-2000
Back to Editorials
Napster's awakening – SMH 2001
As the aftershock of piracy via Napster
court action reverberates through the recording
tangle of MP3 and IP laws still begs
Meanwhile person-to-person file sharing
represents a big threat to the revenue
streams of the
global music business.
Napster has built a system that allows
users who log
onto its servers to obtain infringing
files that are stored on the computers
of other users
who are connected to the Napster system
at the same
time. The company also provides advanced
capabilities, as well as direct
hyperlinks to the MP3
files housed on its users' computers.
The RIAA, (Recording Industry
Association' of America)
which represents the likes of Seagram
Universal Music, Bertelsmann AG's BMG,
Sony Music and Time Warner's Warner
Music Group and
EMI, first sued Napster for copyright
December and has since sought a
against the MP3 download service.
While Napster contends that file-sharing
non-commercial use is fair and legal,
the music and
film industries have mounted a crusade
technologies, claiming they promote
undermine their livelihoods. The RIAA?s continuing
case against Napster hinges on trying to
service is complicit in breaking US
Napster's existing claims, that it's
users are sharing
music without charging for it, so are
protected by the
US Home Recordings Act, and that Napster
responsible for how what its users do
service, a protection granted by the
Millennium Copyright Act, have both been
US District Court Judge, Marilyn Patel..
Still, the Appeals court has given the
RIAA until 8
September to respond to the new Napster
which point it will presumably set a new
date for the
trial. At the same hearing, Napster
asked the US 9th
Circuit Court of Appeals to completely
injunction granted against it by the US
under Judge Patel.
Napster's brief, filed with the Appeals Court, claims
Judge Patel made a number of legal
errors in coming to
her decision to force Napster to block
the exchange of
all copyrighted songs from its MP3
"The trial court, in its ruling,
misinterpreted the standards for
vicarious infringement," Napster
Schiller said after the brief had been
[the brief] does that is new and substantial
it goes into detail about where the
courts are in
error." The appeals court
overturned that judgement on
the grounds that the case was a
- "issues of first
impression", in legal speak.
Napster had 5.8 million visitors for the
week when it
was supposed to close down recently,
Ratings estimating that 3 percent of all
the site in the final hours before its
aborted July 28 shut down, a lesson in
Regardless, the significance of Napster
is huge in
terms of the future of the online music
sector set to balloon to $5.4 billion by
according to Net-oriented market
Sony Pictures Entertainment US senior VP
underscored the importance of all things
he told attendees at the Americas
Information Systems 2000, "Sony is
going to take
aggressive steps to stop this. We will
technology that transcends the
individual user. We
will firewall Napster at source, we will block it at
your cable company, we will block it at
company, we will block it at your [ISP].
firewall it at your PC. ?These strategies," Heckler
told conference attendees, "are
pursued because there is simply too much
Brandishing more mustachioed angst than
a truckload of
guitar solos, Lars Ulrich, cofounder and
the heavy metal band Metallica, a key
lobbyist, was keen to express his
opposition at a
recent US Senate Judiciary Committee
"Music on the Internet: Is There an
Downloading?" "Just like a
carpenter who crafts a
table gets to decide whether to keep it,
sell it, or
give it away, shouldn't we have the same
On the local front action is speaking
words. In an effort to combat the
Australian Internet music e-tailer ChaosMusic has made
a commitment to remunerate Australian
holders through a 15 percent levy
generated from the
advertising revenue of its FreeTracks search tool.
Rob Appel hopes the use of its tool
will set a precedent for other
Australian operators in
the music industry.
"We're recognizing in practical terms that file
swapping is going on and that this is a
opportunity to commercialize it. We see
this as a
starting point and we've suggested to
other Web sites
that it might be appropriate for them to
some of their advertising revenue back
Motivated by the threat of music files
downloaded online, Chaos suggests that
Percent of the advertising revenue
generated out of
each individual search be distributed to
Australian copyright holder by way of a
collection body. Chaos is currently
aside whilst a body through which the
distributed is identified.
Meanwhile, another Australian Digital
MP3.com.au is investigating methods to
artists' rights. The first is the
provision of online
technology that allows individuals to
own CD online. The CD is then
manufactured and shipped
out by MP3 and artists will receive a
split of the proceeds.
MP3.com.au also claims its Digital
technology will protect the distribution
of music over
The technology will be used to set
limits on the amount of times a track
can be played.
According to MP3.com.au CEO Dominic Carosa, although
the music file can be swapped between
onto can't be accessed until a license
Music mogul Glenn Wheatley is also incensed
Napster MP3 debate, suggesting an answer
technology that will allow consumers to ?pay for play?
to MP3-formatted music downloaded from
While unwilling to divulge the
intricacies of his
technology start-up, Talisman
?secure payment technology,? Wheatley says he has been
working with clients who have content to
transactions over the Internet. ?The technology that
is available now will enable music to be
from record companies to consumers via
everyone will get paid down the line,? he said.
Beyond the music industry, digital
downloads and the
mire of copyright holds major
electronic publishing as a whole. In
an attempt to
avoid the wrangle with legal copyright,
Technologies Corporation has had three
announcements in recent weeks. A signing
America?s AOL, a launch with Universal Music?s
?bluematter? site; and a licensing agreement with
Philips Digital Networks.
These moves will see InterTrust?s Digital Rights
Management software an integral part of
with InterTrust enabling legitimate access to and
purchase of online music, e-books, video
or any form
of digital content. America Online have also signed an
agreement with InterTrust to provide security for the
copyright-protected material it intends
to sell. AOL
will integrate InterTrust's digital rights management
system into its Winamp music player, music will be
?wrapped? in InterTrust's DigiBox containers
''unwrapped'' and piped through the Winamp player.
InterTrust's DRM service will be incorporated in AOL's
6.0 software, expected out by the end of
Talal Shamoon, senior VP media at InterTrust,
music will be the first downloadable
available, but expects ''very rapid''
video, e-books and other copyrighted
content on AOL
over the next year. ''We're already
beginning to see
an MP3-like phenomenon in video,'' says Shamoon.
''Video has always
watched the music industry closely
and tried not to make the same mistakes. Publishing is
ready to blow open as well. In the next
we'll see e-books becoming huge.''
Over at Intel, the onslaught of peer to
has morphed into the development of a peer to peer
networking strategy. According to Pat Gelsinger,
Intel's chief technology officer,
"the idea is that
we've been, over the past five years,
network infrastructure in a dramatic
way. The spark of
this is Napster, but underneath it is
Gelsinger calls the network a Virtual Private Web
which can consist of employees at a
members, a group of friends or anyone
interests or goals. Users in the private
be able to share spare systems
resources, such as
storage, or use the system to exchange
expects friends and families to set up
Webs in order to, among other things,
communication and to share files, which
anything, from pictures to vacation
With all the fuss about Napster, its been easy to
pass up similar offerings. Lets not forget the likes
of Scour.com, a site currently being
sued by the
Recording Industry Association of
actually goes beyond Napster by allowing
search not only for MP3 files, but for
other audio and
Scour, like Napster, relies on a central
co-ordinate the search processes. This
vulnerable to attack, as witnessed by
the two RIAA
lawsuits. A program called Gnutella
Gnutella runs its searches like a chain
user asks two other users, each of those
others, and so on. As there exists no nucleus to
Gnutella, it would seem highly unlikely
service could be shut down.
One step beyond, FreeNet,
an open source file-sharing
system builds on the shoulders of
Gnutella. FreeNet is
the brainchild of 23-year-old Irish
Clarke, who designed it as an
undergraduate at the
University of Edinburgh
. Clarke is to soon visit Los
Angeles to start work at Uprizer, a "technology
accelerator" company he founded that
technology from FreeNet".
FreeNet transforms a user's PC into a "node", a
connection point on a PC to store
content (any file) is uploaded into the
system, it is
distributed or "tunnelled"
among other computers,
automatically stored in nodes near the
request the content. FreeNet's key innovation lies in
its anonymity. As the nodes keep no logs
searches, it ends up being almost impossible to trace
the routing of a file and in turn trace
or prevent the
content being shared.
"Forcing people to pay
for sharing information is an invasion
of freedom," he
says. "Just because you spend money
something doesn't mean you have the
right to charge
people for the results of your
Australian on-line retail is booming,
with a plethora
of outlets proving their worth during
The performance of major players such as
Jumbomall,Telstra,Fairfax, Nine MSN, Dstore,
house, ChaosMusic during the Christmas season proved
that Australian consumers are no longer
the stigma of on-line transactions,
the range and convenience offered by the
In tune with the wider reach of the Web
as an everyday
communications tool, on-line shopping is
no longer the exclusive bastion
of catalogue or "unique"
Competitive pricing has also played a
key role in the
growth of on line shopping. Specialist
sites such as
amazon.com (books), ChaosMusic (CDs) and
dvdplanet.com.au (audio equipment)
typify the ability
of on-line retailers to offer a compared
range of products at better prices.
which has been selling CDs online for 4
years saw sales for the fourth quarter
of 1999 total
$820,000 in online orders, compared to
$37,000 for the
same period a year earlier (a 2000
Testament to the growth of the on-line
sector, a range of conventional shopfront retailers
are now defecting to on-line ranks ,
with the likes
of Yahoo having signed up 12 "old
world" retailers to
retailers include, Amcal, Gowings, Theo's Liquor
Markets ,* Britannica, Orrefors Kosta Boda(Royal
Scandinavia), MaxiMusic,JV Marine,The
Magazine Store (Murdoch Magazines), Vox (Chandlers/
Billy Guyatts / Archie
Martin), Sock Shop, Hot Games, and
Of the 12 companies, seven had no
before joining Yahoo.
"This year's Christmas sales were
more than a one-off
phenomenon," said Tony
Faure, general manager, Yahoo! Australia
& NZ. "This
is just the start of an upward online
by Australians. The more products and
retailers we can offer in one easy location, the more
consumers will be inclined to use the
net and Yahoo!
Australia & NZ Shopping for their
Asked about the key challenges faced in
shopping sites over
thechristmas season, David Gold,
head of DSTORE highlighted the process
brand personality and differentiating
competitors. "There was a lot of
clutter from Internet
companies pre-Christmas and it was critical to achieve
cut-through quickly in a manner that
Over at Yahoo, markeing head Anna Featherstone said
the main challenge was trying to convey
that the site
integrated shopping experience, rather than just
a bunch of links. "We are lucky in
that we already
have the brand name and the traffic and
the trust, so
we didn't have to spend a stack building
As an incentive over competitors,Dstore we gave away
several thousand dollars worth of gift
through the Austereo radio network, which was a great
success. We also gave our first`1000
spend $50 or more at dstore a free Pokemon Pikachu
Plush normally they cost $34.95. We
thought it was
important to offer new online shoppers
an incentive to
make their first purchase.
Yahoo's summer strategy saw a guerilla
campaign in Sydney and Melbourne using
of models sunning themselves on city
underneath inflatable palm trees.
"The idea of this
was to get across the consumer message
that "We've got
time because we
Featherstone. As part of the promotion
Yahoo also gave
away four $1,000 shopping sprees on
Yahoo! Australia &
Jumbomall's marketing head Wes Scott said the biggest
challenge to marketing over Christmas
was the ensuing
clutter burdening both Internet
and traditional shopping outlets.
"It was also a hurdle defying the
bad press associated
with the readiness of the site and its
cope with the Christmas rush. We also
had to ensure
the Jumbomall product was ready and our merchants were
geared up for the rush".
In terms of incentives, Scott cited the Jumbodollars
loyalty scheme. "This operates much
like airline Fly
Buy points, whereby shoppers collect Jumbodollars
after each purchase in a 'Retail' Jumbostore. These
Jumbodollars are then redeemable in Jumbomall 'Retail'
stores". Scott said the process
also allowed an avenue
for the collection of a percentage from Jumbomall
advances help cast a wider Web
Monday, January 15, 2001
FROM MUSIC and arts through to the
teleconferencing is booming - and with
of broadband and
increased consumption of streaming
continued growth looks
According to US-based audience
November, 2000, saw more than one-third,
or 36 per
cent, of the 95 million
active US Web surfers using streaming
media, a 28
per cent increase over the
The International Webcasting Association
that 250 million users
will view webcasts annually by 2002,
showing that the market
for streaming media content will grow
million in 2000 to US$2.5
billion by 2004, an increase of 3200 per
In the US, large media events such as
presidential election, the Super
Bowl and the Olympics, which were previously
to TV and radio, have
primarily spurred this 65per cent
increase to almost
35 million people
accessing streaming media content, up
At the recent US Streaming Media West
conference, held in December,
Yahoo!'s chief and cofounder, Jerry
the value of streaming
technology and webcasting.
"Broadband is here today, it is here
Meanwhile, Yahoo! and Disney have struck
broadband relationship, seeing
Yahoo! News webcast video from ABC News,
Tonight and Good Morning
There have been several one-off events,
the strange combination of
Yahoo! and Swatch teaming up to beam out
show of watch-wearing
models from the Great Wall of China.
Australia has also had a host of webcast
varied reputation over the years, though
is indisputable, with SpikeRadio now offering 10
streams of music targeted
at a global youth audience and assorted
and video services.
According to Nick Abrahams, the head of
technologies behind today's webcast
Dynamic Visual Media, a
desktop player using Flash animation,
enabling user participation via
real-time polls and
online submissions and
chats and Digital Lockers that enable
digital libraries to be
streamed to assorted devices.
Asked about his predictions for future
interactivity as being the key.
"The return path made available by the
gives users an ability to
buy, chat and interact with the subjects
webcast and with other
audience members. For example, the
audience can now
interact with the
players and coaches in sporting matches.
killer app will be when
the user can give friendly advice directly
Abrahams said audio would continue to
"The establishment of the new MPEG-4
standard will also mean
users will be able to play any format
file with a single player,
bringing many video-related services to
Legislation will also create
"The Copyright Office just ordered that
broadcasters must pay
royalties when they put their streams
out over the
Web, whereas they do not
have to pay royalties for music
terrestrially. Those companies
with legitimate business plans will
survive and will
no longer have to
compete with companies stealing other
Collaborating and conferencing online is
becoming a priority for
Yesterday's workhorse teleconferencing
which cost tens of thousands
of dollars, used Integrated Services
(ISDN) lines. That
picture started to change three or four
with the dawn of the Web
and the spread of its Internet Protocol
Today, most companies have an internal
that can run an emerging
class of low-cost IP cameras, video
software, with the majority of
them containing vital components such as
desktop sharing, chat, whiteboarding, and file
According to John Mitchell, the head of
consultancy John Mitchell and
big-budget approach is an
illusion and a potential problem when it
"The newest generation of equipment has
stirred up the
videoconferencing industry as a whole,
without the need for major investment,''
picture - webcasting - 2001
From music and arts through to the corporate arena,webcasting and
teleconferencing is booming, and with the upswing of broadband and increased
consumption of streaming media, this continued growth looks certain.
According to US based audience measurement firm Nielsen NetRatings, November
2000 saw more than one-third, or 36 percent, of
the 95 million active U.S. Web
surfers using streaming media, measuring a 28 percent increase over the
Further data from assorted industry analysts confirms the strength of the
streaming technology. DataMonitor says video/audio
accounts for 2% of Internet traffic today and is
projected to rise to 6% in
2003. The Gartner Group
say more than 50% of all web sites will offer
streaming media content by 2001 and Forrester Research join the chant with a
projection that 34% of Internet users will have broadband access by 2002, up
from 6% in 1999, translating to a potential broadband audience of 108 million
The International Webcasting Association estimate that 250 million users will
view webcasts annually by 2002, with reports showing that the market for
streaming media content will grow from US$78 million in 2000 to US$2.5 billion
by 2004, a growth of 3200%
In the US, large media events such as the presidential election, the Super
Bowl and the Olympics – previously limited to TV and radio have primarily
spurred this 65 percent increase to almost 35 million people accessing
streaming-media content from 21 million.
Nielsen claims the growth in streaming-media consumers has been largely
propelled by women. Although there are still more male streaming-media users
that female – 19 million men vs. 16 million women in November – the number of
women using streaming media grew 77 percent in a year, up from 9 million in
November 1999. Similarly, the number of kids and
teens accessing streaming
media in November surged 65 percent year-over-year, and usage by seniors over
the age of 65 increased by 95 percent. At the recent US conference, Streaming Media West 2000, held on December 13,
2000, Yahoo’s Chief and Co-Founder Jerry Yang reinforced the value of
streaming technology and webcasting ." broadband is here today, it is here
now," he declared. Meanwhile,Yahoo!
and Disney have struck up a broadband
relationship, seeing Yahoo! News webcast video
from ABC News, World News
Tonight and Good Morning America. There have also
been a series of one-time
events, including the strange combination of Yahoo! and Swatch teaming up to
beam out a fashion show of watch-wearing models from the Great Wall of China.
Down on the farm there have been a host of webcast offerings. SpikeRadio have
had a varied reputation over the years, though their lengthy webcasting
experience is undisputable, with SpikeRadio now
offering 10 streams of music
targeted at a global youth audience and assorted online audio and video
Current technology providing a platform for Australian broadband includes
cable modems and DSL lines, with cable having an
advantage on DSL due to its
existing infrastructure. Many would argue that the Internet is too small a
pipeline to handle the demands of TV-like video, despite the ambitious
approach of Asynchronous Transfer Mode and
frame-relay WANs. Future mechanisms
showing promise for delivery include wireless WAN technology, heavily
dependent on throughput and even laser beams used as carriers, technology
currently being developed by Terabeam Networks and Lucent Technologies.
H.323 is another worldwide key standard currently emerging that hopes to
ensure conference-capable desktops will talk to one another. The technology
tells any IP device (including network routers and gateways) how to compress
and transmit audio and video over a network not designed for it.
According to Nick Abrahams, head of LA based Spikeradio,
behind today’s webcast miracles include Dynamic Visual Media, a desktop player
using Flash animation, Interactive Webcast Applications, enabling user
participation via real-time polls and online submissions and chats and Digital
Lockers that enable songs from digital libraries to be streamed to assorted
Asked about his predictions for future webcasting, Abrahams cited
interactivity as being the key. “The return path made available by the
Internet gives users an ability to buy, chat and interact with the subjects of
the webcast and with other audience members. For example, the audience can now
interact with the players and coaches in sporting matches. The real killer app
will be when the user can give friendly advice directly to the referee”.
Abrahams said audio will continue to dominate until broadband attains
sufficient penetration. “The establishment of the new MPEG-4 compression
standard will also mean users will be able to play any format audio/video file
with a single player, bringing many video related services to the market”.
“Legalization will also create opportunity, “ Abrahams added. “The Copyright
Office just ordered that terrestrial broadcasters must pay royalties when they
put their streams out over the web, whereas they do not have to pay royalties
for music broadcast terrestrially. Those companies with legitimate business
plans will survive and will no longer have to compete with companies stealing
other people’s copyright”.
Collaborating and conferencing online is now becoming a priority for
businesses rather than a luxury, though it was not too long ago that it was
too expensive and too complicated for the ordinary user to pursue the art of
broadcasting live on the Internet. Webconferencing promises steamlined
communications and improved collaboration. Areas such as online shopping have
been revolutionised with the transformation of GIF
images into full-motion,
full-screen video clips.
Yesterday’s workhorse teleconferencing systems that cost tens of thousands of
dollars, used Integrated Services Digital Network (ISDN) lines. That picture
started to change three or four years ago with the dawn of the Web and the
spread of its Internet Protocol (IP).
Today’s cheap and effective web conferencing and collaboration tools enable
the technology with only an Internet connection. Today most companies have an
internal IP network that can run an emerging class of low-cost IP cameras,
video cards and software, with the majority of them containing vital
components such as videoconferencing, application, desktop sharing, chat,
whiteboarding, and file transfer.
According to John Mitchell, head of Sydney based teleconferencing
John Mitchell and Associates, the big budget approach
is an illusion and a
potential problem when it comes to teleconferencing. “Businesses often make
the mistake of failing to undertake adequate needs analysis and in turn
understand their real needs. I am often cautioning clients about failing to
properly surmise their needs before they puchase equipment. Expensive, high
end equipment isn’t a necessity in order to achieve competent results. The
newest generation of equipment has radically stirred up the videoconferencing
industry as a whole, with strong technology available without the need for
Caveat emptor -- buyer
believe the hype, the Internet will revolutionise the way we consume, shop and conduct business in the future. While many people
are happy to purchase goods and services online, the stories of shady
characters, fly-by-nighters and unscrupulous operators using the Internet to
manipulate unsuspecting consumers is – rightly – stopping a lot of people from
using the full potential of the Internet.
should always be applied when purchasing, online or otherwise. But when you
don’t have a bricks and mortar shopfront, or a person's face to speak to, how
can you tell the "real McCoy" from a shonky set-up? We look at the
scams going around, tell you how to spot one, and
where to go to keep abreast of online fraudsters.
in its reach as a communications medium, the Net creates enormous possibilities
– not only for e-commerce, but also for Internet crime. There is huge scope for
a barrage of frauds, scams, intrusions and piracy, including chain letters,
bogus billings and non-existing investment plans.
more than 15,000 computer networks linked in more than 175 countries, the Web
is in use by upwards of 170,000 companies as a business tool, with about 100
million electronic messages sent each year.
US, the National Consumers League has said it receives more than 100 complaints
related to Web scams each month, dealing with amounts ranging from $US10 to
$US10 000. The 10 most frequent fraud reports involve undelivered Internet and
online services; damaged, defective, misrepresented or undelivered merchandise;
auction sales; pyramid schemes and multilevel marketing; misrepresented
cyberspace business opportunities and franchises; work-at-home schemes; prizes
and sweepstakes; credit card offers, books and other self-help guides; and
such schemes have come to the attention of US authorities including the FBI
(Federal Bureau of Investigation). One Internet-based chain letter collected
more than $US 6 million before intervention by US federal authorities. In
another scheme given publicity by the National Consumer League of the US,
promoters undertook to design Web sites or provide other services, then failed to deliver once the fee had been paid.
attempt to combat dubious Web activity, the International Marketing Supervision
Network (IMSN) instigated an annual global Internet sweep in 1997. The Internet
sweep days are co-ordinated by the Australian Competition and Consumer
Commission (ACCC) and involve around 70 consumer affairs enforcement agencies
from 30 countries.
the sweep day targeted "get rich quick" schemes and in 1998 the focus
was on Web sites promoting "miracle cures" and misleading health
claims. Once suspicious sites are identified, the operators are e-mailed a
message advising them that their activities could be in breech of the law.
sweep results identified over 1100 suspicious Web sites in 1997 and 1400 in
1998. The results of the third sweep day (1999), which was coordinated by the
ACCC in conjunction with the IMSN, are not yet available. The 1999 sweep day
assessed e-commerce Web sites, with participants in the sweep day examining
sites within a particular industry (e.g., books, travel, CD's, clothing). The
Australian agencies which participated in the 1999 sweep included the National Office of the Information Economy (www.noie.gov.au),
the ACT Consumer Affairs Bureau (www.consumer.act.gov.au),
the Victorian Office of Fair Trading
and Business Affairs (www.justice.vic.gov.au/oftba), the NSW Department of Fair Trading (www.fairtrading.nsw.gov.au),
and the WA Ministry of Fair Trading (www.fairtrading.wa.gov.au).
ACCC, the issue of Internet fraud protection is essentially the same as other
areas of consumer fraud.
scams regarding the sale of goods and services that existed prior to the
Internet have been reborn via the medium, and this could be pyramid selling,
chain letters, or dubious advertisements," said Lin Enright,
director of public relations for the ACCC. "Basically, we are faced with
the simple challenge of protecting consumers through the proliferation of
e-business and enforcing the Trade Practices Act."
think that Internet scams are set in motion only overseas. Enright cites the recent example of a local ISP called Freenet 2000 that incorporated an income generation scheme via a pyramid referral
facility was designed to recruit new people to the service. The ACCC felt that
this was in contravention of the Trade Practices Act and therefore decided to
Paul Childs, media manager at the Department of Fair Trading, believes most of
the scams currently on the Web originate outside Australia. He says the biggest
problem would be spam, the Internet's version of junk mail. It is similar to
the unsolicited mail received in the post every day, and most of the spam comes
from North America.
recent scam related to a lottery, whereby people were advised by e-mail that
they had won money, but in order to collect it they must send $30 to an
overseas address. They certainly don’t put this money into sweepstakes; I think
it actually buys someone a nice cigar or a dinner on the other side of the
world," Childs said.
comes to the Web and e-commerce, Enright says users
should first ensure they can find the physical location of the seller.
should make sure they have a street address and the telephone number of the
person they are buying from, and make sure they are secure. They should also
check the type of guarantees and warranties that are available."
said the Department of Fair Trading is constantly warning consumers about the
pitfalls of purchasing online.
Internet is a whole new way of shopping. With conventional purchasing, you can
simply arrive at a shop or at a counter and request a refund. It isn’t that
simple with the Internet, with a site located in North America or Thailand.
we talk to overseas law enforcement bodies about scams on the Web, and recently
[the Department of Fair Trading] had discussions with the Mounties [Canada's federal law enforcement body] about Web scams. We recently took
action against a local operator selling CD’s via the Internet. People buying
CD’s from the company were being billed twice for their purchases. We are still
in the process of acting against this company."
Cyberbanking has added a new dimension
to Internet scams, providing the potential for Web-based financial institution
fraud. According to ACCC statistics, 88 000 Australian Internet users were
regular users of online banking in 1998, a number that grew to
approximately 145 000 last year.
recent years, a range of cyberbanking fraud cases was
uncovered by the US FBI. As far back as 1994, a group of people in Russia
gained unauthorised access to Citibank’s Cash Management System. As a result,
more than $US10 million was wire transferred to pre-established accounts
throughout the world, with cash moved from accounts as far away as Argentina
and Indonesia to bank accounts in San Francisco, Finland, Russia, Switzerland,
Germany and Israel. In the end, all monies were recovered with the exception of
$US400 000 taken before monitoring began.
practices differ internationally. Locally , the Code
of Banking Practice relating to online banking in Australia can be accessed on
the Australian Bankers' Association Web site at www.bankers.asn.au. Last year,
the Australian Securities and Investment Commission (ASIC) announced the
formation of a working group to ensure that consumers using electronic banking
had access to adequate consumer protection.
of the Internet to market fraudulent investment schemes is becoming epidemic, a
scheme exemplified by Netware International. The scam involved a multi-level
operation believed to have approximately 2,500 members throughout the US.
Netware provided false, fraudulent and misleading representations in order to
solicit funds from new and existing members. The company’s promotional
information indicated that Netware was forming a private bank with full
services and deposits insured by the National Union Fire Insurance Company of
Pittsburgh, Pennsylvania, US.
information also indicated that the bank was expected to earn a profit of 25
per cent per year, and that members who sold two or
more memberships would share in the bank's profits. The US National Union Fire
Insurance Company denied any affiliation with Netware, and a resulting investigation
has seen nearly $US1 million seized to date.
year, the Australian Securities and Investment Commission (ASIC -- www.asic.gov.au) clearly illustrated
how easy it was to fool online investors with its Millennium Bug insurance
site, which persuaded 233 Australians to part with more than $4 million.
Australian regulator of the securities and futures markets, the ASIC is
responsible for consumer protection in the financial services sector. In order
to educate consumers about investing on the Internet, ASIC designed and
developed the Millennium Bug Insurance cyberscam on
April 1 1999.
scam site (www.smbi.com.au) offered
a fake investment scheme in an effort to highlight the willingness of people to
invest in companies about which they know nothing. The ASIC’s April Fools Day joke succeeded in convincing more than 1400
people to seek further investment information.
ASIC Web site also includes “Internet Safety Checks” that highlight basic
checks that can be made by consumers before investing in Internet-based
schemes. These include checks to ascertain whether a company exists and whether
or not it has issued a prospectus.
ASIC electronic enforcement unit also houses programs to trawl through various
Australian sites and locate offers and information related to shonky investment
offerings. Continuing to highlight cyberscams, ASIC
also launched the “Gull Awards”. Located on the its Web site, the Gull Awards feature precautionary tales of investment scams and
how to avoid them.
to Irene O'Brien, ASIC's national media advisor, “The most common scams
currently on the Web involve people asking for sums of money and promising to
bring phenomenal returns, up to around 200 per cent.
from our point of view, people should treat the offers they see on the Internet
the same way they would if someone walked up to them on the street and verbally
announced they could double or triple their money. You would want further
information, and conduct further research. There is no way that you’d hand over
your money there and then.”
Fraud Watch and the National Fraud Information Centre facilitate the efforts of
law enforcement agencies by providing a one-stop reporting centre for consumers
to Internet Fraud Watch, which is operated by the US National Consumers League,
complaints have increased 600 per cent since 1997. Online auction complaints
were the number one subject of fraud complaints in 1998. Auctions were also
first in 1997, with 26 per cent of the total frauds reported, but the figure
increased to an alarming 68 per cent in 1998.
people are online, and more people are getting scammed," said Susan Grant,
Director of the Internet Fraud Watch. "Consumers need to remember that con
artists are everywhere -- even in cyberspace."
majority of fraudulent payments -- a whopping 93 per cent -- were made
"offline" by cheque or money order sent to the company.
"Requesting cash is a clear sign of fraud," says Grant. "Pay the
safest way. If possible, pay by credit card because you can dispute the charges
if there is a problem."
Internet ScamBusters (http://email@example.com)
rates the top five scams.
Cramming -- Consumers are billed for optional
services (such as voice mail or paging) they never ordered.
Slamming -- Slamming is the practice whereby
long distance phone companies switch your phone service to their company
without your permission.
Advance Fee Loans -- Many companies offer
empty promises for personal or business loans, and require payment of fees in
advance. They never get you the loan and your fees are down the drain.
Sweepstakes -- Phoney prize awards
that require payment of fees first -- and then the "prizes" never
Work-at-home scams -- These "business
opportunities" include kits sold to stuff envelopes, make jewellery, or
perform other work-at-home jobs, with false promises of huge profits.
Australian Consumers' Association (ACA) -- Choice online (www.choice.com.au) recommend addressing several key areas before
purchasing online. Before you order, ask:
Who am I dealing with?
about the trader should be clear. You should have either e-mail or phone
contact details, and be able to check on the trader's reliability.
How much is it going to cost me?
price should be clearly displayed and include all costs -- look for information
about delivery charges, taxes and currency conversion.
What am I buying?
should be able to easily identify the product. This is especially important
online because you often can't see the goods themselves.
there stock available?
availability should be clearly displayed.
What delivery methods are available? Are there different options for
delivery methods and prices? Will they deliver to my country?
should be provided with information about options and prices for different
How do I know when I've confirmed my
be a clearly defined ordering process for you to follow.
How can I pay for my purchase?
options available should be clearly displayed. Expect the majority to accept
credit cards, with some stores accepting non-Internet payment, debit card or
Cash On Delivery.
What personal information are they
asking for? What will they do with it?
handy hints for buying online:
information needed for purchase should be requested. If you're asked for
personal information, there should be an explanation of how the information
will be used, and to whom it will be given.
conduct business with an anonymous user. Get the person's real name, business
name (if applicable), address and phone number. Verify this information before
buying. And don't send your payment to a post office box.
more cautious if the seller uses a free e-mail service, such as Hotmail, Yahoo,
etc. Most people who use these free services are honest; however, most problems
occur when a free service is used. After all, with a free e-mail service, it is
very easy for the seller to keep his or her real identity and information
copies of all of the e-mails and other documents involved in
the transaction. Then, if you discover that an item is counterfeit, you have
documentation to help you deal with the problem.
common sense and trust your intuition. If you have a funny feeling about an
item, don't buy it. You're very likely right that it is counterfeit.
Consumers' Association (ACA) - Choice online
and Consumer Rights Council (FCRC)
Business Bureau (BBB)
Trade Commission Bureau of Consumer Protection
of US and International Consumer Agencies
International home page
Written by Craig Stephens