Internet shoppers need greater online protection as well as clearer guidelines about their rights. particularly on auction sites such as eBay, according to a report published by the Office of Fair Trading (OFT) today.

The consumer affairs watchdog says the rapid growth of the internet shopping market, now worth £21.4 billion a year, is a success story that benefits both consumers and businesses, but that both could do more to make the most of the opportunities it provides.

Last year more than 20 million people shopped online with nearly a third of them spending more than £1,000. However, the report concludes that people are unsure of all their rights when they go online and adds that some websites are not aware of their obligations to buyers.

The OFT said consumer protection regulations met most of the challenges of online retailing but did not cater for new ways of trading, such as selling goods via mobile phones.

Auction sites such as eBay were particularly confusing for consumers. If you buy a product using the "Buy Now" option for example, and if the seller is a business and not an individual, you are fully protected under the Distance Selling Regulations - you can return the product within seven days, regardless of whether it was faulty or not, and get a full refund.

If, however, you buy the product in an auction you lose these rights as it is almost entirely up to the seller whether a refund is available.

The OFT says it will contact auction sites to encourage them to explain shoppers' rights more clearly.

EBay says its own buyer protection scheme means that if any goods fail to arrive, or are faulty, shoppers will be offered refunds of up to £500 if the transaction took place via its payment system PayPal. More than 90 per cent of goods are covered by this scheme.

The OFT will spend the next six months talking with consumer groups, firms and other public bodies to address the issues highlighted in the report.

John Fingleton, OFT Chief Executive, said: “If online shopping is to continue to flourish, the awareness and the protection of consumers' rights need to improve. The OFT is committed to working with businesses, consumer groups and other bodies to make sure that consumers can shop with confidence online.”

Consumer Direct, the Government-funded advice line, received almost 51,000 complaints about online traders last year.