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Mon Jan 9 2012 09:11:04

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

By: Ina Steiner

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According to allegations in the antitrust Smith v eBay lawsuit, "While eBay lists purported alternative payment methods, eBay has through its intentional action made it so PayPal is the only viable option for sellers." There are also two other lawsuits against PayPal over antitrust issues - so what's going on?

eBay sellers claim they are forced to pay an additional 3% commission fee plus 30 cents per transaction because eBay forces them to use its PayPal online payment service and have banned other forms of payment. (See today's Newsflash story for more details.)

Smith's lawsuit summarizes eBay's actions that increasingly limited sellers ability to accept any service other than PayPal:

- eBay's 2005 acquisition of Verisign - EcommerceBytes news story;

- eBay's 2006 ban on Google Checkout - EcommerceBytes news story;

- eBay's 2007 elimination of buyer protection for non-PayPal transactions - EcommerceBytes news story;

- eBay's 2008 ban on checks, money orders and any other non-electronic payment method - EcommerceBytes news story;

- eBay's 2008 acquisition of Bill Me Later - EcommerceBytes news story.

One thing that is a bit puzzling in the judge's ruling last week (in which he granted in part and denied in part eBay's motion to dismiss) is this statement: "the Court concludes that Plaintiffs have failed to allege facts showing that the alleged tie caused harm to competitors in the tied product market. Because Plaintiffs may be able to allege such facts, the Court shall grant them one final opportunity to amend."

Not being a lawyer, I can only surmise that this means the plaintiffs did not show how PayPal competitors have been hurt by these policies. But the plaintiffs clearly mention eBay's ban on Google Checkout - it seems obvious to me this greatly harmed Google! (Google even submitted a complaint to the Australian government when eBay Australia tried to go PayPal-only.)

It also seems obvious that eBay's policy of not extending buyer protection to the few overseas payment methods eBay.com does allow on its site hurts those providers.

Without going back and reading the three lawsuits again, I believe the plaintiffs may have forgotten one of the harms that eBay's Accepted Payments policy has on their business: loss of sales from buyers who don't have or won't use PayPal.

In September 2008, I interviewed syndicated columnist and antiques expert Harry Rinker (who had hosted a television show).  "I will be damned to hell if I am going to allow eBay to dictate how I should pay for my purchases," he had written in his column. "My checks are good, none bounced. I am taking my business elsewhere."

While antiques shoppers have several alternatives to eBay - Ruby Lane, TIAS and UK auction site eBid.net, for example, there clearly is no alternative to eBay available to small sellers that get them the volume of sales that eBay does.

Over the past 5 years or so, have you been impacted by eBay's Accepted Payments policy? And is this a matter for the courts? And can you think of a legal argument against eBay's policy of collecting fees on shipping costs?




Comments (40) | Permalink

Readers Comments

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

This user has validated their user name. by: Anonymous Annie

Mon Jan 9 10:26:33 2012

Back in the day, I had many regular customers who ONLY paid with checks or money orders. When eBay/PP's policies prohibited sellers from accepting checks and money orders... those customers simply disappeared... resulting in a loss of business for me.

Over time, the hostile and anti-seller policies of eBay/PP motivated me to drop them from my web site in favor of a legitimate merchant account. So... in this regard, the actions of eBay/PP had a positive impact on my sales, but it probably wasn't something that eBay/PP had intended or anticipated.

From time to time, a customer at my web site will comment ''Oh, I see you don't take PP'' or ''Why don't you accept PP?'' ... but these comments and questions are little more than observations and idle curiosity. No customer has ever complained about it, nor have any indicated that they actually ''prefer'' PayPal.

It's true (technically speaking)that eBay/PP allow me to use my merchant account to accept payment on eBay. But, OMG, they make it such a complex and convoluted process to set everything up, I'm sure many sellers just think fokit and give up.

I was persistent, and after several phone calls to eBay CS, I managed to get half of my listings converted so that customers' payments would go through my merchant account... but even THEN it ended up being a nightmare for my customers!

I haven't checked it recently, but back then, when using a third-party merchant account, customers were directed to a very non-standard checkout procedure. For regular eBayers, this alternate checkout mode was unnecessarily confusing... which resulted in more complaints (to ME, not to eBay) more abandoned sales, fewer return customers, and ultimately fewer sales.

Clearly this was their intent. Yes, they do ''allow'' third-party merchant accounts... but they definitely discourage it with unnecessarily complex and clunky procedures.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

This user has validated their user name. by: permacrisis

Mon Jan 9 12:58:23 2012

The first indication that ebay would bring the brunt of their force to bear in regards to owning PayPal was when they began pulling listings which stated, "I take PayPal balance, but please, no credit or debit cards."

Man, the summer of 2006 they yanked those listings toot sweet. In some ways that policy was even worse than the current one- they shoved it in your face with random, spotty enforcement and poofed listings-- no MC019, no nothing.

The ensuing 2008 paper payments ban chased a LOT of businesses off ebay as buyers, and I know that for a fact, as I sold a ton of Business & Industrial-- payable by that gold standard of payment methods- the Company Check.

No business in their right mind would link their serious corporate checking account to something as wacky as PayPal, not even back then. And so, off into the blue yonder went some of the best buyers on the net.

And they were generous bidders too, because they had BUDGETS to work from, bought that stuff all the time, and knew exactly what my stuff went for at MSRP.

I remember receiving "Seller On-Ramp" circulars from Ebay for the Business & Industrial sellers, extolling the advantages of this type buyer. Begging me to list more, more, more as recently as 2007. So someone in the company 'got it'.

They lost a lot of GMV with that one, I am damn sure beyond a doubt. That took a big hit.

Many of these buyers have turned to Craigslist, the braver ones to smaller sites, where they are all more than happy to cut me...
a company check.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

by: John

Mon Jan 9 13:27:37 2012

We never could figure out eBay ludicrous policy of removing paper payments.

Our business was with paper payments. We had a  50% repeat buyer status at the time we stopped selling.

Our repeat buyers realized we never held items until payment cleared, and we would follow that same policy with new buyers, who started buying from us on a repeat basis.

As soon as we received their payment we shipped the item.

They lost us as a business and lost us as a buyer several months later.

We no longer trust eBay as a business, and we would never think of using pp as a payment option.


Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

by: me

Mon Jan 9 13:49:50 2012

I lost about 10% of my buyers with the end of cash & checks. These were the best repeat buyers I had. Even though I made it a point to tell all of them that I would still gladly accept their checks, MO's & cash, within 2 months none of them were buying from me anymore. Several told me that eBay made them feel like 2nd class citizens by not allowing the wording that cash, checks, & money orders would be accepted.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

This user has validated their user name. by: Ming the Merciless

Mon Jan 9 15:07:21 2012

Here's another harmful effect: Sellers can't file to get an FVF back on a non PayPal transaction.

Google didn't file this lawsuit. Apparently an aggrieved seller or sellers did so like Ina I find his.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

This user has validated their user name. by: Ming the Merciless

Mon Jan 9 15:19:13 2012

Sounds to me like the judge is telling plaintiffs to expand the scope of the lawsuit. To do so, however, would likely require the cooperation of Google, and Google might not want to get involved.

Or perhaps the court misses the cental argument which is that sellers have been harmed.

Ebafia has used essentially same tactic to coerce sellers to fold shipping, insurance, and handling costs into the item price in order to collect a higher FVF.

FVFs are for the 'final value' of the item sold exclusive of the the shipping which is why ebafia used coercive methods to acheive the seller behavior it wants.

Shipping is shipping, and it's always been allowed to collect credit card fees on shipping and handling charges.

Ebay and PayPal operate very much like the mafia, and its executives deserve the same fate.

More later.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

This user has validated their user name. by: Ming the Merciless

Mon Jan 9 19:26:55 2012

Pardon the first post of mine above, I have a new keyboard that does things and has keys my old one didn't. I hit the wrong key.

Although I still gladly accept money orders and personal checks from known customers if requested to do so, the selectively enforced prohibition against paper payments reduced my business by about 15%, and I receive fewer each year.

It's difficult to assess, however, precisely how much damage it did because of all the other asinine, business killing policies The Ho put into effect at about the same time.

But this decision was truly karma in action.

The fact remains that there are hundreds if not thousands of ebay listings in which sellers openly encourage checks and money orders.

Interesting article today in the "San Francisco Chronicle" about PayPal in Bloomberg News today. Wall Street says ebay would be worth 30% more without PayPal and that ebay should sell PayPal and quit relying on auctions for "artillery shells, harpoons and zen gardening kits."

As an aside, I can think of several appropriate purposes the above three items would have in San Jose.

The Ho once again publicly denies he's considering selling PayPal.

See Ming's Ebay Law #1.

Either I've been missing something crucial for several years or Wall Street analysts still don't get that it's PayPal holding up a crumbling ebay not vice versa.

There are many antitrust issues, and I hope the plaintiffs' attorney will consider broadening his suit by adding more.

While 'Seller Advocate' Graft has pointed out several times on this blog that ebay isn't the only online auction venue, the fact remains is that the numbers indicate that it is in reality a monopoly.

It's a monopoly that screams out for regulation that would restore the level playing field, ban coercive, anti competitive practices and ubiquitous theft and fraud that the ebafia crime syndicate commits against sellers every minute of every hour of every day.

EBAFIA/PREYPAL/BILK ME LATER: Government approved criminal syndicalism.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

by: buck efay

Mon Jan 9 19:29:08 2012

Lost numerous buyers, including Harry Rinker, who I had dealt with for over 10 years BEFORE ebay even existed! Showed the most when I ran a few guitars a year ago & got a dozen emails asking if I'd accept check or MOs. And just lost an over $1200 sale on ebay that the guy bid & won, said he hated Paypal, and said he hadn't bid in 2 years but my item lured him in & then he got frustrated trying to use PP and wound up never paying. Been doing this 25+ years, only 2 bad checks, both from Ebay buyers. Still lost less on those 2 checks then on the 2 forced Paypal chargebacks where I got damaged different items returned.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

by: wooodjungle! on ebay
Web Site

Mon Jan 9 22:19:48 2012

It hasn't impacted me for the most part.  People that want to pay with money orders still ask.
A lot of things they do should be illegal but that's the state of American now- corporations rule and can do what they want.

What I still don't know is how Ebay  can get away with allowing cash payments for a local pick up but not allowing it through the mail.  I didn't think Ebay had a say it the matter when cash was involved regardless how it is transferred.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

by: Rich

Mon Jan 9 22:43:13 2012

The merger of big business with the government is fascism and that's where America is at now.  Of course it should be illegal what Ebay's done and is doing, but the Ebay lobbyists own the politicians and also they appear to own some judges as well.  I've lost a lot of customers since the "Paypal only" rules began.  Many people feel much safer using a credit card on Amazon or sending a money order as opposed to giving Paypal all of their bank and credit card info.  Ebay's growth has been nothing compared to Amazon since 2005 and this forced "Paypal only" policy is one of many factors.  

An added part of the corruption is that Ebay forces some sellers to have maximum allowed shipping charges but Paypal only gives seller protection for tracking.  For some categories the seller will not be able to provide tracking without losing money on the max shipping.  So Ebay's max shipping rule causes sellers to lose their seller protection

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

by: eBay refugee camp

Mon Jan 9 23:04:00 2012

Well well, do we have a chance? I see some red flags with this judge,
he cannot see that google and other payment services were harmed, I smell another crooked verdict bought by eBay and their bought politicians.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

by: Paul A

Tue Jan 10 01:26:05 2012

Seems to me some posters are deliberately misinterpreting eBay's payments policy so they can scream louder.  In fact eBay does not prohibit payments by checks, MOs, or cash, they merely prohibit sellers from SOLICITING payments by those methods.  Every seller is free to ACCEPT any kind of payment.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

by: Ripley

Tue Jan 10 02:27:14 2012

@ Paul A

Isn't the fact that ebay PROHIBITS sellers from soliciting other payments a clear cut message from ebay?
Is any seller really FREE to accept any payment they want without the risk of getting black-balled by the mighty ebay?

Is it just me or does Paul A seem to have a pattern of going against the grain or seem to lack the basic comradely of many ebay sellers concerned for their future income?

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

by: Bonnie H
Web Site

Tue Jan 10 02:32:39 2012

I have been on ebay since 2001 and have over 15,000 total feedback and over 9100 actual because my buyers buy the same item every year - live plants for their pond.

Many prefer to mail a payment or use their own credit card and dislike pay pal for one reason or another. So, now they buy from my website where they can use Google Checkout, Payments by Amazon or mail a payment.

My web site sales HAVE NOT declined since 2001 when I started on ebay but my web site sales have actually increased because I allow many different options of payment. In short they buy direct now and bi-pass ebay.

I do NOT accept pay pal on my website and have only a couple of requests through the years for pay pal.

I have 100's of customers who started with buying from me on ebay years ago and have bought every year since on my website.
My records indicate that I have close to 85% return buyers each year.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

This user has validated their user name. by: Philip Cohen
Web Site

Tue Jan 10 02:47:09 2012

“Paul A” is obviously an eBay cheerleader. He’s just smart enough to now not do his paid lobbying from his eBay office. These eBay shills are getting smarter. To bad eBay’s not getting any smarter.

eBay / PayPal / Donahoe: Dead Men Walking.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

by: dan

Tue Jan 10 03:21:00 2012

two words "f ebay"....they have been a distraction to real success since day one.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

by: PullTheCarpet

Tue Jan 10 04:57:35 2012

Legally? No, and any such lawsuits are foolish and a waste of time because meeting the legal requirement to prove anti trust and tying are almost impossible and there are so many loopholes a corporation can escape through it's ridiculous.

There are an awful lot of laws, federal laws, 50 states with different laws, treaties with other countries becom supreme law law of the land (U.S. Constitution Articel 6 section 2). Read the ebay and paypal contracts then apply those laws.

Just because something is in writing doesn't mean it's valid. Courts cannot aid any party that has entered into an illegal contract whether it be in direct violation of a statute, against public policy, opposed to public morals, injurious to third persons or fraudulent no matter how it is disguised.

In any lawsuit what you think or what you claim means absolutely nothing, it all comes down to what the law says. The smartest way to bring down a giant is to pull the carpet he is standing on out from under him.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

by: JoyfulA

Tue Jan 10 08:29:49 2012

A friend of mine wanted to buy some sort of machine part, and the only place he could find it online was eBay. He said he reluctantly went through all the rigamarole to ''join'' eBay and then was faced with having to ''join'' PayPal. Too many intrusive questions made him give up in disgust, and he had the part made locally at a higher cost.

(I wonder if he counts in the stats as a new eBay member?)

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

by: Maureen

Tue Jan 10 08:53:45 2012

I have been a seller on eBay since 2000 and i took ONLY checks and money orders prior to eBay taking that option away from sellers. Most weeks i would get between $500.00-$1500.00 in sales and NEVER had a check bounce. Occasionally i would get someone who was angry that i did not take PayPal, but i never worried about them because they were few and far between.

Some how it made no sense to me that any retailer or small seller online could not accept "The Coin of The Realm" so to speak as payment for their auctions. If you walked into a grocery store or Sears and they told you that they would not take your cash, would you ever go back again, especially if you did not have or use credit cards? It makes NO SENSE to turn away any paying customer in good times or bad!

It stinks on ice and has to be illegal not to be able to accept US currency or any form of payment for something sold in the US. I bet these judges are bought and paid for in all the eBay and PayPal cases that actually do make it to trial. So sad!

Ebay was a magical thing when i first started selling, now it is a complete abomination that resembles NOTHING like its original self. My sales are almost non existent and i have all but given up, having tried everything including free shipping to get those bidders back!

I have take space in a local antique mall again after leaving that all behind for the get BIG $$$ on eBay.
The first week i was there and got a very large check, it felt so strange.
Money in my hand, no hours of taking pictures, editing them to be sure they are professional and everything is properly represented, no packing, shipping, buying packing supplies, trips to the post office in bad weather, no worry about unhappy customers leave low DSR's, no worry about losing my TSR, no fear of PayPal holding my money for no good reason, all of the above which has happened to me since eBay started to crumble.

Some nut job left me a "1" DSR for shipping in October. I immediately scanned my post office receipts to see if anyone was accidentally overcharged and checked my shipping quote in the auction.
All were to the penny except for three that I PAID MORE THAN THE BIDDER SENT ME because the box weighed heavier once it was packed. If i had been given the opportunity to speak to that bidder (but you cannot because they are anonymous) and ask them why they did it i would not feel so bad, but someone either just does not understand how to use the DSR's and made a mistake because i otherwise have all 5's or they feel like i should not be charging them for shipping, thanks to eBay's glorious idea that shipping should be free and highly promotes that concept to the bidders. All this nonsense is exhausting. The stress has FINALLY taken its toll, and i am not an easy one to break, but i am officially broken. I hope that by the end of this year i will have my own website up and running and can say goodbye to eBay forever. I cannot do any worse than i am doing right now! Ebay is just a faint memory of what it used to be.

Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal   Does eBay Violate Antitrust Laws by Forcing Sellers to Use PayPal

by: Kevin Bacon
Web Site

Tue Jan 10 09:05:49 2012

Paypal is just another way for ebay to screw still more fees,it only gets away with it because its a monopoly otherwise sellers and buyers would go elsewhere.
Its combined fees make stuff expensive to sell and as ebay is really only attractive to tightwads looking for cheap junk its sales are now falling.
I gave up a long while ago on ebay and there is not any real alternative.
I use my own site,no fees and no worry about items being pulled or rule changes on a daily basis.
Ebay stinks.

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