The Observer

ONE OF THE more interesting news items of last week was the report that Tiffany and Company, the celebrated New York jeweller, is suing eBay, the online auction company, for 'facilitating the sale of counterfeit goods' over the internet. It turns out that undercover agents working for the company secretly bought 200 'Tiffany' items in eBay auctions and found that three out of four were counterfeited. The case will go to trial in the

US

later this year links of london sale .

The key to eBay's astonishing growth is that other people did the work, while it took a cut from everything they did. EBay merely provided a place in cyberspace in which people could buy and sell items. Within the limits of taste, decency and the law, it was not terribly interested in what people traded - caveat emptor and all that - though every so often it had to intervene when a particularly scandalous auction was discovered by the mass media. Examples that spring to mind are transplant-ready organs and tickets for last year's Live8 concert in

Hyde Park

. But in the main, eBay is a hands-off venture Bookworm Charm.

From the beginning, of course, trust - or lack of it - has been the ghost at this particular feast. After all, the overwhelming majority of those millions of buyers and sellers are total strangers. There's a celebrated New Yorker cartoon which captures the situation nicely. It shows two dogs in front of a computer, one saying to the other: 'On the internet, nobody knows you're a dog.' Yet on eBay, one dog is purporting to be offering something for sale, while another is purporting to be willing to buy it Classic 18ct Gold Maple Leaf Charm.

Trust is a willingness to rely on the actions of others, to be dependent upon them, and thus be vulnerable to their actions. Without trust, e-commerce would have been impossible. Ditto the growth of eBay. The company tackled the problem by adapting an idea that had evolved in the early days of trading on the internet in the pre-web days. This was the notion that an individual could acquire a public 'reputation' on the basis of how people rated his/her performance as a trading partner. EBay's adap tation requires both vendor and buyer to rate one another after completion of a transaction. After a time, both build up publicly visible reputations which prospective trading partners can consult before deciding whether to proceed with a bid or a sale Star of David Charm.

The system has now been running for years and my impression is that it works pretty well - though I recently had a conversation with a senior British police officer who hinted darkly that it is capable of subversion. In the meantime, the point worth noting is that the reputation system apparently hasn't been particularly good at dealing with Tiffany's problem. And if the court finds in the jew eller's favour, the implications for eBay could be dire: imagine the costs of policing all those auctions. All of a sudden, the overheads of the operation would balloon to a level beyond imagining.