On Wednesday afternoon, LulzSec and Anonymous joined forces to encourage people to boycott PayPal by withdrawing their money and closing their accounts.

The back story is that PayPal has cut off WikiLeaks’ account, meaning that people could no longer donate money to WikiLeaks via PayPal. Anonymous launched distributed denial of service (DDoS) attacks against PayPal. Last week the FBI and others arrested people alleged to have been responsible for those attacks. So this week, the boycott of PayPal.

The joint statement by LulzSec and Anonymous makes for interesting reading. It describes DDoS attacks as “ethical, modern cyber operations”. Such things are actually a criminal act, despite what Anonymous may imagine the law to be. “Law enforcement continues to push its ridiculous rules upon us,” they write, when it’s not law enforcement who makes the laws, but governments.

The call for the boycott was unfolding as Triple J’s current affairs program Hack was going to air, and I phoned in a report. Here’s the audio.

I found it interesting that presenter Tom Tilley responded to my comment that DDoS is a crime by saying “Yeah I imagine there’d be people with lots of different points of view about what they’re doing and whether it’s indeed lawful.”. Personally I reckon the law in this is pretty clear. Pandering to their audience?

The audio is ©2011 Australian Broadcasting Corporation. It has been extracted from the full program audio [MP3].

You really have to wonder about PayPal. Every day they seamlessly process a squillion pissy little transactions from countless innumerate trailer-trash. Nice work. Then they ruin their reputation with Kafkaesque requests and oddly incompetent “service”. Like now.

“We need your help resolving an issue with your PayPal account,” they emailed me on 9 May. “We need a little more information regarding your organisation, since your PayPal account is registered as a charity or non-profit.” Huh?

As Gary Stark tweeted just now, “You, a non-profit? While that might not be your intention, it’s probably just about right.” That’s true enough. But I’m certainly not a charity or non-profit, I’m certainly not tax-exempt, and I’ve never claimed to be. I’m not even an “organisation”. And have never claimed to be.

By “a little more information” PayPal means photo ID, another document showing my address, a bank statement linking me to my bank account, confirmation that I’m not not a “politically exposed person”, and “organisation and payment information”, whatever that might be. But I’ve been travelling for the last fortnight and I’m not carrying all this stuff.

They’re also asking for one item I’m going to have trouble with. Proof of my tax-exempt status. For no such thing exists. As Leslie Nassar tweeted, “If you can’t prove you’re not who you’re not saying you aren’t, then no Internet Money for you.”

Back on 10 May I emailed service@paypal.com.au to ask why all this was happening. I told them that I’m an individual doing business as a sole trader, and have never claimed to be anything different. I received no response. Typical. My PayPal account is now “limited”. Which means frozen.

This morning I’ve contacted PayPal’s compliance team by both email and fax.

You are asking me to prove my tax-exempt charitable or non-profit status. Why? I am not tax-exempt, non-profit or charitable, and have never claimed to be. Never. An email to service@paypal.com.au on this matter dated 10 May went unanswered. Why? Your demand for proof of tax-exempt status does not include the option “But I am not!” Why? I do expect written answers to these “Why?” questions.

I’ll let you know what happens next. Meanwhile, do feel free to vent your own frustration at PayPal in the comments. I daresay I’m not alone here.

I wrote about this previously, though I didn’t mention that eBay gave up in face of such clear opposition — the 700+ submitters and the ACCC, that is, not me! However Lauren Weinstein writes that in the US eBay has announced that PayPal (or credit cards) are to be the required mechanism for all transactions.

He says:

eBay is also making other changes to de-emphasize auctions entirely by making fixed-price sales more attractive — essentially undermining the basic auction model on which they built their business, and turning eBay even more into Just Another Online Store in many respects.

There are numerous alternatives to selling on eBay. I’ve wondered why so many eBay auction sellers have been willing to be fleeced for so long by eBay’s increasingly callous practices toward this bedrock group.

However as Scott Howard observes:

The difference is that in the US people probably won’t notice or care if this goes ahead.

Banking in the US is for the most part years behind where it is in Australia — and the concept of transferring money into someone else’s account is completely foreign to almost all Americans, and Cheques (err… checks!) still rule as the primary form of payment for anything other than small payments.

Even EFTPOS is only just starting to take off — and then only by banks marketing the cards as “check cards” (which are generally actually just Debit Visa or occasionally Mastercard cards).

The nett result of this is that the vast majority of sales on eBay in the US are already either PayPal, COD or occasionally (non-PayPal) credit card. Without the additional option of a fast/free/easy payment method like direct deposit, PayPal has already won here.

Hat-tip to Professor Roger Clarke.

[This was me in Crikey yesterday.]

Thank the gods I don’t work for the ACCC! The poor sods have to read 700+ public submissions on eBay Australia’s plan to force sellers to use PayPal — which they own. As Crikey reported, this could breach the “third line forcing” provisions of the Trade Practices Act.

Being a lazy geek rather than a tireless public servant, though, I can skim for juicy tidbits. They reveal a widespread fear of eBay bullying.

Greg Walter, for instance, runs online payment system Qpay. He dismisses eBay’s claims that PayPal is the safest and, wearing my moth-eaten network security hat, I tend to agree. But eBay sellers often fear being cut off if they use PayPal’s competitor: Qpay has just one solitary eBay seller as a customer.

Bully or not, eBay is unquestionably Australia’s biggest online-only marketplace. With almost 6 million customers it dwarfs its nearest competitor Oztion with barely 250,000. New entrants BidSell and eSwap are even tinier.

Oztion saw a 22% rise in numbers following eBay’s PayPal-only announcement — proof, says eBay, that there’s genuine competition. But Philip Leahy of the Professional eBay Sellers Alliance reckons Oztion won’t last. It’s an “eBay clone”, he told the ACCC, and there’s “a belief” that once they get a bigger market share eBay will sue them into oblivion. Paranoia?

Even the Reserve Bank has weighed in. Requiring PayPal could make it harder for new online payment systems to establish themselves, restrict merchants’ ability to negotiate lower fees, and restrict consumer choice. Reading between the lines, the central bank sees its role as ensuring that money flows smoothly through the economy. Delays and fees are friction in the pipes which must be engineered out. Computers and network efficiencies should cause transactions costs to fall. eBay’s plan causes them to rise. Markets FAIL.

eBay’s 15-page response omits mentioning their claimed $2.6 billion contribution to the Australian economy. Instead it’s all harmless little eBay. “eBay transactions comprise only [redacted by ACCC] of all online retail transactions in Australia. Given that online retail transactions themselves represent only a part of the online payments market, eBay’s contribution must necessarily be considerably smaller than that.””

The ACCC’s decision will be known mid-June, just before eBay’s planned 17 June start of the PayPal-only regime.

Stilgherrian blogs at stilgherrian.com and is still trying to sell his old crap on eBay.

I’ve written about this at length previously, both here and in Crikey [1, 2], with plenty of interesting comments from readers. And I’ve just written a piece for Crikey today, to be published around 2pm Sydney time.

Meanwhile, you can read some overview pieces at Auction Bytes and The Sheet. And you can see eBay’s full 15-page response at the ACCC website: it’s the second submission on the page, from “Applicant”.

To make things just that little bit more interesting, yesterday Telstra’s Sensis division announced a free auction site at Trading Post.

[Update 1250pm: The story will now run in Crikey tomorrow (Thursday). Busy news day, apparently.]

Here’s how I first described the scenario:

Imagine that you’re Alice, proud owner of the new shoe shop at your local Westfield. Bob is buying a pair of brogues. As Bob opens his wallet, suddenly Frank Lowy appears. “There’s some terrible con-men around,” he intones gravely. “Let me handle that.” He grabs Bob’s cash and pockets a fiver. “I’ll give you the rest next Wednesday,” he says, and disappears.

Alice, understandably, is mightily pissed off.

Sellers on eBay have been mightily pissed off overnight too, because the world’s biggest online marketplace has just pulled the same stunt. From 21 May, all eBay sellers must offer PayPal as a payment method. And from 17 June — unless the buyer is physically collecting the item from you or for a few big-ticket categories like real estate and motor vehicles — they must pay you via PayPal.

Now as Alex Willemyns pointed out, Alice could just set up shop elsewhere. Bob could choose another shoe store. However since Westfield and eBay both dominate their respective markets, that could well be a poorer choice.

The ACCC has also pointed out that eBay must prove that the public benefit from this move outweighs the detriment of what could be a breach of the “third line forcing” provisions of the Trade Practices Act. eBay has requested immunity from legal action. The ACCC is accepting public comments until 2 May.

Today’s Reserve Bank angle is interesting. As The Age reports:

The Central Bank has long called for buyers and sellers to have as much choice as possible in what payment systems they use and strongly opposes any moves that reduce competition in the market…

The Reserve has expressed support for new methods of payment that could act as competition for international card schemes. New methods could give merchants and customers more choice about how they make and receive payments.

A 2006 speech by an Assistant Governor of the Central Bank, Philip Lowe, documented the growth of alternative payment schemes overseas that had not yet been adopted in Australia.

For example, a number of countries had adopted “online debit” schemes that allow customers to transfer money directly from their bank account to the merchant without needing to use a credit card or scheme debit card.

Reading between the lines — and without doing any further research on the point — it seems to me that the Reserve Bank sees its role as ensuring the money flows as smoothly as possible. Delays and fees are friction in the pipes which need to be engineered out.

Computers and network efficiencies should cause the cost of transactions to go down. eBay’s move causes them to go up. Market FAIL.

Now PayPal isn’t necessarily evil. Indeed, for small businesses setting up an online presence, they’re often the most cost-effective way to accept credit card payments, and the easiest to set up technically.

But delays and fees are certainly the problem. eBay sellers don’t like PayPal’s extra transaction fees of 1.1 to 2.4%, nor the 5 to 7 working days it takes to access your money. If a transaction might be “risky” (PayPal’s call), they can freeze it for 21 days. During this time, says their Product Disclosure Statement, “Any money in your PayPal account will be pooled with money from other holders of PayPal Accounts and deposited by PayPal with a licensed bank.”

In other words, PayPal banks your money and earns interest. You don’t.

According to a CNN report, US PayPal users can keep their account balances in a Money Market Account — provided they remember to opt in. Australians don’t have the choice.

PayPal also has a poor reputation for dispute-handling. The internet is littered with stories about people’s accounts being frozen without warning, about consumer credit rights being ignored because PayPal claims their terms of service over-ride them — at paypalsucks.com and screw-paypal.com and here for starters.

eBay is spinning this as being “for your protection”. Their announcement uses words based on “safe” 6 times, “protect” 12 times, and “secure” twice. But then bullies demanding a percentage of your business takings has always been called a protection racket.

The CEO of PayPal competitor Paymate, Dilip Rao, isn’t impressed with the security spin either. “eBay have presented no data to show that Paymate is a less safe way to buy or a less reliable way to sell on eBay compared to PayPal,” he says. Ironically, Paymate was created by eBay Australia but sidelined when its US parent bought PayPal.

eBay is burning bucketloads of goodwill here. So far their response is to tough it out. But any online business can be replicated with a few programmers, and goodwill is your only real asset.

Anti-competitive behaviour news story of the day: With a few minor exceptions, eBay will require all payments to be made via PayPal — which they own. I’ve just written a piece for Crikey, which will appear around 2pm Sydney time which is now online.