EcommerceBytes-NewsFlash, Number 1531 - May 04, 2007     2 of 6

eBay's Payment Policies Spark Two Antitrust Lawsuits

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Two antitrust lawsuits were filed against eBay in April 2007 and have been assigned to the same judge because they are related, according to court filings. The plaintiffs in both parties have complained of eBay's practices with regard to its online payment service PayPal. The same judge had presided over a PayPal-related class-action lawsuit that was filed in 2002.

AuctionBytes previously reported on the recent antitrust lawsuit filed by Michael Malone on April 4, 2007 (http://www.auctionbytes.com/cab/abn/y07/m04/i06/s01). Malone's lawsuit alleges that eBay "utilizes its nationwide monopoly of the on-line auction market to monopolize the available forms of payment that sellers can use on eBay."

eBay restricts which payment methods its sellers advertise in listings and bans sellers from accepting cash, wire transfer services like Western Union, as well as several competing products, including Google Checkout. And in January of this year, eBay eliminated buyer-protection for non-PayPal transactions, while doubling coverage for qualified transactions in which PayPal is used (http://www.auctionbytes.com/cab/abn/y07/m01/i10/s01).

The second class-action complaint was filed by Ann Farmer and Todd Van Pelt on April 23, 2007. That lawsuit alleges that eBay possesses monopoly power in the online auction market, estimating it controls over 90 percent of the market in part due to the "network effect."

The complaint goes on to cite eBay's alleged anti-competitive activities, saying the company acquires its competitors; forces sellers to use PayPal; and blocks competitor Google from online auctions. It alleges that, as a result, actual and potential competition has been restrained and that eBay sellers who accept PayPal "have paid or are likely to pay artificially inflated and supra competitive fees."

The Justice Department gave the green light to eBay's acquisition of PayPal in 2002, despite the fact that PayPal itself had complained to the government about eBay's practices after the auction marketplace had acquired the BillPoint payment service.

Both antitrust lawsuits are assigned to Judge Fogel in the US District Court, Northern District of California. Judge Fogel had ruled in 2002 - before eBay acquired PayPal - that PayPal's mandatory arbitration policy was unfair to customers. He also refused to dismiss a class-action lawsuit against PayPal filed by thousands of its customers. PayPal settled the case in 2004.

Update 5/4/07: On Monday, the two cases were consolidated: "The Court finds that Malone v. eBay Inc., Case No. 07-01882-JF and Farmer, et al. v. Ebay, Inc., Case No. C-07-02209 are related actions and such cases are hereby consolidated into Malone v. eBay Inc., Case No. 07-01882-JF, and are referred to herein as the Consolidated Action."

Related Stories:

"eBay/PayPal Acquisition Decision Expected Today"
http://www.auctionbytes.com/cab/abn/y02/m08/i19/s01

"Dept. of Justice Clears the Way for eBay's Acquisition of PayPal"
http://www.auctionbytes.com/cab/abn/y02/m08/i20/s01

"PayPal Arbitration Policy Is Unfair, Judge Rules"
http://www.auctionbytes.com/cab/abn/y02/m09/i09/s02

"PayPal Sends Users Notice of Class-Action Lawsuit Settlement"
http://www.auctionbytes.com/cab/abn/y04/m07/i30/s01


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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