Antitrust Victory Affirms eBay's Right to Pull Sellers' Accounts
By Kenneth Corbin
A California court has handed eBay a significant victory in a legal dispute concerning the ecommerce giant's right to suspend the accounts of sellers who it believes misrepresent merchandise on their stores and run afoul of the company's terms of service.
In late January, the California Court of Appeal for the Fourth Appellate District upheld an earlier series of rulings exonerating eBay for alleged antitrust violations in barring offending merchants from selling on the marketplace.
The appellate judge upheld the June 2011 ruling of a trial court, bringing to an end the plaintiffs' fifth and final amended complaint.
The case involved a seller of vintage antique fabrics and textiles, Lisa Genesta, whose Ruins-CA store was suspended in 2008, after nine years of selling on the marketplace without incident. Genesta and Ruins-CA were jointly named plaintiffs in the case.
Court documents allege that eBay took action in July of that year in response to complaints of "unspecified misrepresentations" that Genesta made, suspending her store for seven days. Genesta allegedly "promised never to do it again," though she denied any wrongdoing.
"There followed a series of suspensions and reinstatements of plaintiffs' eBay account, which plaintiffs allege was the product of a sustained campaign by their competitors to discredit them with eBay through unsubstantiated complaints about the authenticity of plaintiffs' items," the appellate judge wrote in the opinion.
"Ultimately, in April 2009, eBay put a "permanent sales block" on plaintiffs' account, which prohibited plaintiffs from selling their items on eBay. As a result, plaintiffs are allegedly "out of business.""
Christopher Cox, the lead attorney with Weil, Gotshal & Manges who represented eBay in the case was not immediately available for an interview.
The initial action Genesta brought included nine allegations against eBay and her competitors charging, among other things, that eBay had engaged in anti-competitive behavior and breach of contract.
Those allegations were modified through a series of subsequent actions, but the courts ultimately rejected the assertion that eBay had wrongfully pulled the plug on Genesta's store, in essence affirming a significant measure of control that the company can exercise over its marketplace.
In the plaintiffs' final complaint, Genesta took issue with eBay's enforcement of a policy prohibiting sellers from engaging in business transactions with customers they had acquired through the marketplace outside of the site.
eBay, allegedly, contacted both the plaintiffs and their customers warning them against engaging in off-site transactions.
"Specifically, plaintiffs alleged eBay informed plaintiffs customers of the items it removed from the site and "if you were a bidder or the buyer of this item: we understand that you may still want the item. We hope you'll bid on it again if the seller relists it. Sometimes, instead of relisting an item, a seller will suggest that you buy it directly from him or her, off eBay. If that happens, please do not accept. If anything goes wrong with the purchase, we won't be able to help you,"" the judge wrote in the opinion. "eBay also allegedly told plaintiffs: "Do not respond to the sender if this message requests that you complete the transaction outside of eBay. This type of offer is against eBay policy, may be fraudulent, and is not covered by buyer protection programs.""
The plaintiffs alleged that that activity amounted to trade libel, and further accused eBay of soliciting comments from competitors about the veracity of the sellers' listings, which were eventually removed owing to Genesta's purported misrepresentations. That amounted to a violation of eBay's own policies for resolving complaints, according to the plaintiffs.
But the court determined that eBay's policy prohibiting contact between buyers and sellers off the site did not amount to an antitrust violation, and dismissed the plaintiffs' allegation that the policy constituted a broader embargo against sellers building their business outside of the marketplace.
"Nothing in eBay's alleged policy actually prohibits sellers such as plaintiffs from freely offering their items for sale through other means, or from developing and maintaining independent relationships with customers," the judge wrote. "And aside from their claim that eBay's implementation of the policy had a specific, deleterious effect on their business prospects, plaintiffs have not explained why the policy should be viewed as unfair, or as imposing unreasonable restrictions on competition in any relevant market; as a consequence, plaintiffs have failed to suggest even an arguable basis for finding that either the policy, or eBay's alleged communication of it to their customers, constitutes a Sherman Act violation."
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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