EcommerceBytes-NewsFlash, Number 1132 - October 19, 2005     0 of 5

Editorial: Is eBay's New Payment Policy about Safety or Competition?

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Major eBay policy changes are often greeted with skepticism from its users. When eBay limited communication between buyers and sellers to its own email-messaging system due to "trust and safety" concerns, some believed it had more to do with eBay's concerns over off-eBay transactions than with safety.

Last week's announcement that eBay was banning sellers from listing online payment services in their listings unless specifically allowed by the auction site was a case in point (http://auctionbytes.com/cab/abn/y05/m10/i17/s01). eBay's own PayPal payment service is on the approved list along with credit cards, bank transfers and checks and money orders. Some AuctionBytes readers believe the new policy may be a preemptive way for eBay to ban sellers from accepting any payment service that may be forthcoming from Google.

But, as in other controversial policies, eBay cites member-safety and fraud concerns as the reasons for the decision. And as always, it's hard to argue with the idea of making the site safer. (eBay continues to claim PayPal is safe - the new Safe Payments policy says PayPal "offers buyers and sellers industry leading protection against fraud, chargebacks and theft of financial data." What it fails to mention is that both buyers and sellers are vulnerable against trading partners that exploit loopholes in PayPal protection policies.)

While eBay maintains that transactions are between buyers and sellers, and does not get involved in disputes or fraudulent transactions, it is now limiting payment services that sellers can accept. An AuctionBytes reader wrote, "Does dictating payment forms cross over the line if eBay is just a venue?" eBay has used the "just a venue" principle to limit its liability for fraud that takes place on its marketplace.

Even if eBay were to allow sellers to offer a Google payment service, it still controls access to those sellers. eBay has banned competitors from exhibiting at its annual conference; would it really allow Google to set up a booth in Las Vegas next year, perhaps next to PayPal's booth? And it's extremely unlikely eBay would integrate a Google payment service into its site as it has with its own PayPal service.

eBay is entering territory that makes it more vulnerable to accusations of antitrust behavior with its new Safe Payments policy, especially given the fact that its PayPal unit is acquiring Verisign's payment processing business (http://auctionbytes.com/cab/abn/y05/m10/i11/s02). One competing online-auction site wrote to AuctionBytes of the acquisition, "My company uses Verisign and ALL my customers run their payments to us through Verisign. So now eBay in one fell swoop picks up all my customers names, and they get to see what our transaction value is."

It's hard to imagine the Department of Justice envisioned these moves when it allowed eBay to acquire PayPal in 2002 (http://www.auctionbytes.com/cab/abn/y02/m08/i20/s01).

Other journalists and bloggers are picking up the vibes. MarketWatch's Bambi Francisco's column on Tuesday was titled, "Will Skype help drive the eBay monopoly" (http://digbig.com/4faey). And Om Malik's blog post on Tuesday mentions "eBay's unilateral decision to use PayPal as its only payments processor" as an area of concern in today's open source, Web 2.0 environment (http://digbig.com/4fagj). Malik also points to a blog post by Yannick Laclau, who is openly skeptical of eBay's motivations in creating the Safe Payments policy (http://digbig.com/4fagk).

eBay acknowledges that its users are vulnerable to fraud - when convenient. For many years it has told the press that confirmed cases of fraud are only a small fraction of 1 percent. Unfortunately, many reporters fail to follow-up and ask eBay how it derives that number, which under-reports the incidences of fraud involving its users.

eBay is masterful at implementing policy that on the surface seem to be guided by concern for user safety, but ultimately serves to make their platform more proprietary. Scammers on eBay have utilized wire-transfer payments for many years, yet it's taken eBay this long to ban the payment method from its site. Could it be that this is a Bobby Fischer-like move in an ongoing game of chess between the major ecommerce players?

As long as the game doesn't turn into Monopoly.


About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.


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