Sellers are penalised.
If they say the item is lost or damaged for example, they get a defect on their selling account.
Obviously check their feedback before bidding but really there is no definitive way of knowing whether a seller might behave in this way.
Leaving negative feedback for such transactions is more effective than reporting the seller - you will never know what action, if any, Ebay take.
Keep feedback short and factual - 'Disappointed the seller cancelled the sale' would be appropriate.
"There are two ways to be fooled. One is to believe what isn't true; the other is to refuse to believe what is true.”
Søren Kierkegaard, Danish philosopher (1813 - 1855)