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eBay Flies Solo on July 17th, Ties to PayPal Remain

eBay’s jettisoning of PayPal will be complete by July 17th, it announced on Friday, at which point the Marketplaces business will have to stand on its own. But sellers can likely expect no major changes when it comes to how eBay handles online payments. That’s because under 5-year operating agreements between the soon-to-be-separate companies, eBay will be penalized if the percent of GMV paid for through PayPal falls under its current level – so it’s likely to keep favoring PayPal in its Accepted Payments policy that restricts which payment methods sellers can advertise.

However, the same can’t be said of PayPal, which informed eBay sellers over the weekend of changes to its terms that have some worried about “double jeopardy” when it comes to customer claims.

PayPal told sellers in an email on Sunday, “The only change you should experience is that you’ll now contact eBay and PayPal separately regarding your respective accounts.” However, it also said, “One major change that will happen after separation is buyers will now have the opportunity to raise a claim with PayPal after they have opened a claim with eBay. They can do this before a decision has been made by eBay or if they are not happy with a decision made on an eBay claim.” See more on this in today’s Newsflash.

While PayPal is free to forge agreements with eBay rivals, eBay must ensure that 80% of GMV is paid via PayPal, otherwise it will have to pay PayPal “restitution.”

In fact, eBay has an incentive to get shoppers to increase their use of PayPal on its site – if the percentage of GMV paid via PayPal goes above 80%, eBay will earn a bonus from PayPal.

As Fortune has pointed out, PayPal is forbidden from creating its own marketplace for physical goods, while eBay is forbidden from building a payments system. “One caveat is if PayPal is acquired by an eBay e-commerce competitor. In such a case, eBay would be able to dive into payments after giving PayPal 15 to 21 months advanced notice.”

eBay explained the shareholder ramifications of the breakup in Friday’s announcement, and eBay CEO John Donahoe blogged about news. He will be stepping down as CEO of eBay as soon as the split is finalized and will become Chairman of the Board for PayPal – he will no longer serve on the eBay board. eBay published more on the steps to separation in March.

Dan Schulman will take over as CEO of PayPal, while Devin Wenig will take over as CEO of the new, smaller eBay consisting of Marketplaces. Wenig, who joined eBay in September 2011 from Thomson Reuters Markets, has already been signaling some changes sellers can expect to see under his helm.

For example, Wenig said in early May that eBay’s feedback system “needs a relook.” “With a median feedback score of 99.7, we probably can build a slightly better system. I’m going to say more about that in due course, but I would say that we’re looking very carefully at buyer abuse of sellers, and irrational feedback, and feedback that is not tied to quantitative measures. And that will be an important part of how we look at revising whatever system we put in place as we roll out toward the end of this year and next year.”

And he has talked about turning eBay into a “discovery-based marketplace” where value-oriented shoppers stumble upon and buy items they might not have known about, or thought about buying.

Some believe eBay will be sold to another company after the breakup; eBay has said it would sell eBay Enterprise prior to the split, but it didn’t mention it in Friday’s announcement.

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Ina Steiner
Ina Steiner
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). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.