PayPal can pursue a joint venture with Amazon or Alibaba after its breakup with eBay later this year, without having to get approval from eBay, according to eBay CEO John Donahoe in an interview with the Wall Street Journal. PayPal updated its Form 10 filing on April 9th and provided more details, including naming new executive officers and more details about the composition of the two boards.
The CEO framed the issue as if it had been eBay holding back PayPal from working with Amazon. The latter had jettisoned the Bill Me Later service from its marketplace after PayPal had acquired it. But given the 6-year operating agreement that will exist between eBay and PayPal, there’s nothing to suggest Amazon would have a change of heart about working with the online payment services post-breakup. We reached out to Amazon for comment but were unable to reach a spokesperson by press time.
Donahoe also told the Wall Street Journal eBay will be free to bring other payment alternatives onto eBay. But that statement is troubling – when eBay banned certain methods of payment on its site, it did so citing member-safety and fraud concerns, not as a way to ensure PayPal’s dominance on the site. Regulators had examined the merger of eBay and PayPal under the Hart-Scott-Rodino Act in 2002, but they did not (and were not required to) reveal details of their anti-competitive analysis when they let the deal go through.
Here’s a kicker in the post-breakup operating agreement between eBay and PayPal pointed out by the Wall Street Journal:
“eBay has agreed to ensure that roughly 80% of gross merchandise sales on its online marketplace are routed through PayPal for the next five years, as they are today. If PayPal’s share dips below that level, eBay will have to pay its former subsidiary restitution. For its part, PayPal has agreed to pay eBay a commission if its percentage of sales on the marketplace rise above that mark.”
Following the breakup with eBay later this year, current PayPal president will add the title of CEO to his name. In its filing with the SEC on Thursday, PayPal also named three other top executives:
- James J. Barrese: Chief Technology Officer and Senior Vice President, Payment Services;
- Hill Ferguson: Senior Vice President, Consumer;
- William J. Ready (age 35): Senior Vice President, Merchant and Next Generation Commerce.
PayPal also revealed that the founder of eBay Pierre Omidyar will become a director on the boards of both eBay and PayPal. Also on the board of PayPal will be Daniel H. Schulman and John Donahoe.
See more information in the eBay announcement.
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