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The package, which uses half of the DTI's annual budget for modernising local trading standards authorities, follows calls from trading standards officers for more government support in fighting online fraud.
The money will go towards improving co-ordination between the UK's 200 local trading standards departments as they attempt to form a strategy to combat online fraud.
It will also support a centralised Web site that will act as a single point of access for consumers to report rogue traders to trading standards departments.
The Trading Standards Institute issued a report last summer which warned that trading standards officers lacked skills and resources to tackle online fraud.
It called for more government support and the creation of a full-time post to oversee its transition into the Internet age.