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EcommerceBytes-NewsFlash, Number 2759 - March 13, 2012 - ISSN 1539-5065    2 of 3

Update: PayPal Responds to Internet Censorship Concerns

By Kenneth Corbin
March 13, 2012

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PayPal has found itself at the center of a heated debate over online censorship after demanding that e-book publishers remove from their marketplaces titles with objectionable themes of rape, bestiality, incest and underage sexual activity.

PayPal, the primary payment services provider for independent online publishers such as Smashwords, has attempted to clarify its position, explaining that the decision to lean on e-book merchants is consistent with a longstanding usage policy and was motivated by the risks associated with trafficking in erotica that runs afoul of the terms of service of its financial services partners, seeking to tamp down allegations of censorship.

"PayPal is a payments company. The right to use PayPal's service is not the same as the right to speak," Anuj Nayar, PayPal's director of communications, wrote in a post on PayPal's corporate blog.

"Unlike many other online payment providers, PayPal does allow its service to be used for the sale of erotic books," Nayar said. "We believe that the Internet empowers authors in a way that is positive and points to an even brighter future for writers, artists and creators the world over, but we draw the line at certain adult content that is extreme or potentially illegal."

PayPal began approaching e-book publishers in February with what Smashwords has described as an ultimatum, insisting that the companies remove erotica titles containing objectionable content or see their accounts deactivated. Other affected companies include BookStrand.com, All Romance eBooks and eXcessica.

In the time since, PayPal has been in talks with the e-book publishers, and Nayar noted that the company has not severed its ties with any of them as it attempts to reach a solution. Smashwords, which has been among the most vocal about the imbroglio, has said that PayPal's enforcement team has been helpful and that talks have been productive, though it acknowledges that there is no clear and simple path forward.

Smashwords founder Mark Coker has also pointed out that PayPal is within its legal rights to bar payment services to marketplaces trading in content that violates its policies, and that, moreover, the crackdown on objectionable erotica comes at the behest of credit card companies, credit unions and other financial partners. Nevertheless, he is urging PayPal to relax its position, arguing that the company is unfairly targeting writers of erotica while the policy, carried to its logical extent, would also ban the sale of controversial mainstream literature such as Vladimir Nabokov's Lolita.

"There's no easy solution. Legally, PayPal and the credit card companies probably have the right to decide how their services are used. Unfortunately, since they're the moneyrunners, they control the oxygen that feeds digital commerce," Coker wrote in an email to Smashwords authors and publishers.

"Regardless (of) one's opinions about these objectionable topics, we view this attempted censorship as a bad precedent. Fiction is fantasy. It's not real," he said.

But PayPal disputes that point. Not only do e-books about subjects like rape and bestiality often contain objectionable images, they can fall into a dubious genre that is not entirely fictive, according to Nayar.

"This type of content also sometimes intentionally blurs the line between fiction and non-fiction. Both these factors are problematic from a legal and risk perspective," he said.

For Smashwords, which is trying to gin up grass-roots support to pressure PayPal and its financial partners to stand down, the solution is not as simple as switching to a different payment provider, as some users have suggested. Coker explained that PayPal has worked well for his marketplace, and that there is no reason to assume that the same credit card companies that are pressing the issue wouldn't turn their attention to an alternative payment service if there was a widespread flight from PayPal.

In the meantime, the controversy has drawn widespread attention of some digital rights groups and online activists who agree with Coker's slippery-slope argument that censorship of legal content in any form is unacceptable.

Organizers at Change.org have launched an online petition calling for PayPal to reverse course, and the Electronic Frontier Foundation, the National Coalition Against Censorship and the American Booksellers Foundation for Free Expression have denounced the policy. These critics have castigated PayPal for seeking to impose its moral standards on the online publishers, in the process adding its name to the long list of institutions that have sought to ban various works of literature that contain objectionable content.

PayPal insists that the issue has nothing to do with its own moral standards, but that facilitating the sale of books on rape, bestiality and other offensive subjects is harmful to its brand and exposes the firm to unacceptable compliance and regulatory risks. The company does not seem inclined to give much ground.

"We always welcome your feedback," Nayal said, "but please know that we'll continue to keep this policy in place as long as it protects our interests as a business."

Update from the editor, 3/13/12: PayPal issued an update on Tuesday stating it would focus its policy only on e-books that contain potentially illegal images and would focus on individual books, not on entire "classes" of books. "We are working with e-book publishers on a process that will provide any affected site operator or author the opportunity to respond to and challenge a notice that an e-book violates the policy," PayPal stated in the blog post. The company also said it had not shut down the PayPal account of any of the e-book publishers involved in the matter, and wrote, "Our primary interest in this matter has always been to come to a mutually agreeable solution that allows freedom of expression, while still ensuring PayPal is used in ways that fully comply with applicable laws and our policies."

About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.

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