After the highest bidder on eBay offered Jordan Allison £600 for his mobile phone he dutifully packaged it up and sent it off by registered post. However, although Royal Mail’s website showed it had been signed for, the buyer claimed it hadn’t arrived. When Allison sent proof of delivery the buyer said he had received the parcel after all, but instead of a phone it contained an unlikely cargo: beetroot.

“I had proof – the weight of package and photos – that I hadn’t sent beetroot,” says Allison, who is from Irvine in Ayrshire. “But the buyer opened a case against me on eBay. I called eBay and asked if I needed to do anything. It said I would be contacted. A month later I received an email, not from eBay but from PayPal, to say £600 had been removed from my account.”

What had happened is an experience grimly familiar to many eBay sellers. The company had found in the buyer’s favour without asking for any evidence, according to Allison. Not only did the buyer receive a full refund, but the seller has been left with no phone. After The Observer intervened, eBay agreed to refund Allison, although it insists there was no evidence of fraud.

Critics claim the auction website’s measures to protect buyers from dodgy transactions have left sellers at the mercy of fraudsters who can manipulate the system to effectively steal goods.

The buyer sent back an envelope containing a T-shirt, so he got himself a £258 pair of trainers plus a £258 refund Robert Barr

Under eBay’s Money Back Guarantee, a buyer can ask eBay to intervene if their purchase doesn’t arrive or isn’t as described, and the seller doesn’t offer resolution within a week. However, unscrupulous buyers can ignore any contact and raise a dispute with eBay’s resolution service, which sometimes authorises a refund without any evidence from the seller being considered. The latter has no recourse under PayPal’s seller protection scheme since this is invalidated when a buyer claims directly through eBay. Although eBay’s own rules require buyers to send disputed items back, refunds are in many cases released before this happens – or after damaged or substitute goods have been returned.

Robert Barr of Hedon, Yorkshire, was told that a £258 pair of trainers he had sold were damaged. He asked the buyer to send photographs so he could check whether they had come to grief while in transit. The buyer declined and Barr was informed by eBay that it had refunded the £258 and the buyer had returned the goods. “What the buyer had actually done was send an envelope containing a T-shirt, so he got himself a £258 pair of trainers plus a £258 refund off me,” says Barr. “I explained to eBay that I had been a victim of fraud, but it told me the decision was final. The buyer since deleted his account.”

Ebay claims its 1,500-strong resolution team has tools to monitor and flag up suspect behaviour. However, in Barr’s case it was only when the Observer intervened that eBay revisited the case and discovered the buyer had a history of manipulating the system. It has now refunded Barr. It says the complaint was originally handled “in line with eBay Money Back Guarantee guidelines” which advise buyers to provide a tracking number to show that a disputed item has been returned. It’s a system open to fraud since the tracking number doesn’t show what was in the parcel and eBay doesn’t ask.

In the case of Raman Singh, a top-rated eBay trader, a tracking order was deemed sufficient proof of the buyer’s integrity, even though the parcel was returned to the address of an accomplice. Singh, of Woodford Green, Essex, sold a brand new Microsoft Surface Pro 4 for £1,124.99. When the buyer claimed it didn’t work, Singh offered to send a courier to collect it, or a prepaid shipping label. Instead the buyer said he’d return it free of charge, and then opened a dispute with eBay. The parcel never reached Singh and, on calling the delivery firm, he discovered it had been “returned” to a different name and address that could not be disclosed. Despite sending eBay copies of the webchats with the buyer and delivery firm, it ruled in the buyer’s favour and issued a refund.

When Singh appealed he was told in an ill-written email that eBay takes tracking orders as proof of delivery and that the refund was issued before he had received the item because “we need to resolve the case of the buyer once escalated”. Again, when the Observer took up the case eBay discovered the buyer’s history showed a pattern of abuse and suspended his account and refunded Singh.

There is a small group who abuse a system built on honesty … it does need to become more intuitive Ebay's response

Ebay has always been candid about the fact that its apparent bias towards buyers is to keep them spending. For this reason, while buyers can leave negative feedback against a seller, sellers are only allowed to comment positively about buyers, in case, according to its website, “unfair feedback” causes buyers to “decrease their shopping on eBay”. Sellers, meanwhile, are not allowed to know the identity of any comment writer so that “buyers feel comfortable about leaving feedback”. The seller’s only recourse, if a comment unjustifiably tarnishes their status, is to report a buyer privately to eBay and any negative comments are only removed if eBay receives multiple complaints about an individual.

Most controversially of all, any case opened by a buyer shows as a defect on the seller’s record, even if the seller has resolved the dispute. Why? According to eBay’s website, buyers are put off shopping if they have to contact a seller about a transaction. The fact dishonest buyers can use this system to manipulate sellers and damage reputations appears to be of secondary importance if eBay’s profits are at stake, for it states baldly on its website: “As part of our new seller standards, we’re counting any activities we’ve found decrease a buyer’s likelihood to come back and shop with us again as defects”.

For the past three years the Observer has reported eBay stories of sellers who, thanks to the Money Back Guarantee, have been defrauded by buyers, and of traders whose livelihoods have been threatened when their top-rated status was destroyed by unjustified feedback and “defects”. Finally, it seems, eBay realises the balance is skewed. “There is something wrong,” admits a spokesperson. “There is a small group of people who abuse the system which was built on the premise that most people are honest. It does need to become more intuitive.”

In January the company launched a pilot programme: if a buyer sends back a damaged or substituted item, the seller does not have to send an instant refund – instead they can ask eBay to intervene. “Under the current system, if something goes wrong within 30 days of the purchase, the buyer and seller between them have one week from the date of the buyer raising a case to work things out,” says a spokesperson. “Under the pilot system, if a seller requests it, we get involved immediately and have that conversation instead. We’ve also introduced a simpler system for the person who makes that decision – and photographic evidence is front and centre.”

Jordan Allison, who sold his phone on eBay, but the buyer claimed the package contained beetroot, and got a refund. Composite: alamy/handout

This tardy innovation comes too late for Colin Smart of Montacute, Somerset, whose photographs of a damaged iMac returned by a buyer were ignored by eBay. “The buyer requested delivery by a certain day since he needed the machine immediately,” says Smart. “It wasn’t until three weeks after receiving it that he claimed it wouldn’t start up and that Apple had quoted £500 for a repair.”

The fact the Apple store in question had no record of quoting for an iMac with that serial number, and that the buyer turned out to be a computer repair company, seemed of no interest to eBay. When the iMac was returned Smart said it had been stripped of its parts. He sent eBay photos of the damage, but the case was closed in the buyer’s favour and Smart lost £625. He got the money back after the Observer took up his cause, but his experience and that of so many other sellers begs the question: just how impartial will eBay’s pilot programme prove to be when the company lives in such dread of losing a buyer, however damning the evidence against them?