Online transportation marketplaces, still in their infancy, could be subject to an increased risk of abuse by shippers, carriers and intermediaries.
The new business landscape created by the Ocean Shipping Reform Act includes danger zones such as the breaching of confidentiality agreements between shippers and carriers that could be exploited with or without using the new technology.But some fear that the speed and automation that typify online transportation load-matching and rate negotiation could make it easier to break the rules.
Fraud in online auctions generally, whether they're for toys or truck space, is expected to grow, said Terry Willis, a detective in the Los Angeles/Orange County High Tech Task Force.
A recent typical case involved a man working out of the Van Nuys, Calif., area who bilked more than 100 eBay customers out of money for electronic equipment, such as computer and Palm Pilots, that never arrived.
Electronic commerce could make fraud easier in transportation, some say.
Among other concerns, online transportation marketplaces represent a centralized computer location housing a great deal of sensitive information. Hackers are one potential danger. Another is the possibility that shippers and NVOCCs will ''test the waters'' on rates from a wide range of carriers by offering phantom cargo.
All the major online transport market operators swear they're safeguarded against computer hacking.
But Charles Beard, managing director of the transportation e-solutions division at consulting firm KPMG, said the concern it can't be so easily dismissed.
''In the ubiquitous world of http (Internet computer language), you're connected to people you don't necessarily want to be connected to,'' said Beard. ''Any time you open a system up to a common phone line, you open it up to security breaches.'' Beard cited recent reports from the FBI that said so-called firewalls can sometimes fail. He recommended that Internet companies install intrusion detection software as well as a set of lock-down procedures to isolate an intruder if one is discovered.
Beard sees hacking as the biggest danger, and says the marketplace service providers have generally learned to screen their users well.
Still, it's hard to guarantee perfect behavior, as many services have found out.
Eyal Goldwerger, founder and chief executive of GoCargo.com, New York, agreed that there would be nothing to stop a carrier from asking a friendly shipper to reveal what prices it was being offered from the carrier's competitors. But, he pointed out, that could happen offline as well. ''The shipper still has to make a decision to give away confidential information,'' he said.
If such breaches of confidentiality occurred on a regular basis, it would hurt the credibility of the exchange and customers would take their business elsewhere. That why online auction firms such as eRateRequest, will bar shippers from the service if they're caught using the system without cargo to back it up. Since its launch last September, eRateRequest has canceled the memberships of 17 shippers and one intermediary for failing to comply with its rules.
Members of eRateRequest must agree to an extensive user agreement before they can begin making bids and offers. They get one chance to break it. After that, they're out.
The company was recently bought by NeoModal.com, which is developing a suite of services for ocean shippers and carriers that includes the eRateRequest marketplace.
An Internet company's model can affect how vulnerable it is to abuse. John Urban, president and chief executive of Tradiant, based in Alameda, Calif. said his system is less open to abuse because its marketplace doesn't operate on an auction basis. The site provides a way to facilitate contract negotiations, and its business model involves far less anonymity between the parties. Even so, it's necessary to check the credentials of members, especially shippers.
''As shippers and carriers come on there's an extensive customer verification research process through our customer service,'' he said. ''With the shippers, we check their past shipping activity and volumes through services like PIERS, and validate that they're a legitimate company. Plus, every shipper on the site has a profile which includes input from the shipper themselves and that we check.''
PIERS is the Port Import Export Reporting Service, part of the Journal of Commerce Group, which provides data on oceanborne trade moved in and out of the United States.
''We're not about to let a couple of Stanford students sign on and pretend to be a Fortune 500 company,'' said Urban.
Tradiant's system for allowing carriers to respond to requests for proposals doesn't allow anonymous bids, ''so the prospect of shippers receiving insincere bids just doesn't happen,'' he said.
While the vetting process can take a day or two, Tradiant doesn't see fraud as a big problem and doesn't want to hamper business between willing parties, although it does take the matter seriously.
Indeed, in researching misuse of transportation marketplaces, you find rumors, but no concrete stories. Pat Galbraith, at E-Transport, for instance, said he's heard of NVOCCs trying to drive down the rates they paid to carriers by spuriously offering lower rates themselves to shippers in anonymous marketplaces.
The Federal Maritime Commission's Bureau of Trade Analysis said it hasn't received any complaints of breach of confidentiality, formal or informal. However, Frank Schwarz, deputy director of the Bureau, said the FMC would be addressing the issue of potential abuses in its yearly report, due out next year.
So far, the companies interviewed, including Tradiant, GoCargo, E-Transport and eRateRequest all agreed that they didn't have much trouble with deliberately underhanded dealings.
''It's generally more curiosity than malice,'' said Urban.
''Early on, there were a lot of bogus people trying to register, but most of them were easy to catch,'' said Randy Paulson at eRateRequest.
Again, it was mostly the curious who tried to gain unauthorized access, he said. ''It doesn't happen much any more.''