eBay requiring sellers to use PayPal

Crikey logo

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.

11 Replies to “eBay requiring sellers to use PayPal”

  1. I’m a PayPal and eBay user and haven’t had any bad experiences with them, but I know many people who have and they prefer to pay via Direct Deposit if the seller offers it.

    I personally like the benefits of PayPal — being that it is instant, integrated reasonably well with eBay, handy for international purchases, and safe enough (providing your not the type of person who clicks every link in every spam email they receive). I can pay for an auction in less than a minute and that’s great for me.

    However, to remove nearly all other payment options is very crappy. How many legitimate sellers request DD payments every day and have no problems. I suspect quite a lot and now each one will have to foot the PayPal bill because uneducated folks got ripped off. Of course, plenty of people (including experienced sellers/buyers) have been ripped off using PayPal.

    And that’s the main problem here — people being scammed out of money. Why not just make PayPal mandatory on all sales, and for anyone who chooses not to use it and gets ripped off, tough luck.

    The ability to get your money back might be easier when using PayPal, but the scammers are still going to exist. Maybe that’ll be enough to boost consumer confidence in eBay. The increased PayPal buyer protection up to AU$20,000 sounds nice.

    But to me it just seems like a way to get a bigger commission.

    The marketplace on eBay is huge and I reckon most sellers/buyers will just have to lap it up in the end. I don’t see too many moving over to that other auction site I saw advertised at 12AM amongst the phone sex ads, or Oztion.

  2. @Michael Meloni: My admittedly minor direct experiences with eBay and PayPal have not been negative — but that’s not the point here. It’s the anti-competitive requirement that sellers use PayPal. eBay is the biggest player, with the biggest audience, and sellers looking for the best possible price for their offers end up there — and eBay finds another way to extract a little more money from every customer.

    My Crikey article has more, though for the time being it’s behind their paywall.

  3. Yeah I love PayPal. But agree that requiring it is dodge.

    The Paypal anti-competitive behaviour is a very visible one. I was wondering the other day how many invisible monopolies exist. Like, the other day I was shocked an appalled to learn from Four Corners that Australia’s credit market is dominated by GE. And given how aggressive Business is to sign you up to credit, it’s convenient to focus your loathing onto the one company.

  4. @jason: I like the term “invisible monopoly”. I daresay that there’s a tendency to that in various infrastructure areas. Aren’t most of the major airports all owned by the Macquarie group? Or Sydney’s motorways? I’m not sure about that and I suppose I should check my facts…

    On consume finance specifically, I’ve been told by people at Apple dealerships that the margins are so low on the computers themselves that they make more money out of selling you a lease than selling the computer.

  5. I disagree with the analogy you begin with in the article. I think a more true to life analogy would have Bob tell Frank Lowy to piss off, and he’d leave without buying Alice’s shoes. Then Alice will be pissed off at her landlord’s new requirements, and move her shop elsewhere. That’s just market economics, capitalism, whatever you want to call the magic.

    eBay should be able to do whatever they want with their product — they’re not forcing anybody to use it, nor are they forcibly removing anyone’s money like your analogy implied. If their actions have a negative effect on their users, people will stop using eBay and eBay will lose money. It’d just be, again, market economics doing its magical thing.

    In that sense, I also disagree with your representation of eBay as a monopoly. A monopoly (or at least a coercive monopoly, though the terms are almost synonymous these days, thanks to our culture’s acceptance of all doctrines socialist) is a business that set its prices and policies with immunity from the laws of supply and demand. eBay does not have this. This is only possible by Government creation. If you see eBay as a monopoly, it is a non-coercive monopoly or an efficiency monopoly. It has so much control of the market because it offers the best product. This disappears as soon as it stops offering the best product — i.e. it is not immune from market forces.

    I’ve probably gone off on a million tangents, but I hate competition laws so much for their hypocrisy. eBay has a capitalism-given right to offer its products to the market as it wishes. It’s not immune from the forces that could destroy it.

    In the end, it’d be amoral for the Government to bust in with its monopoly of force and tell eBay what to do. That’s fascism, but hey… every time I see a politician on the news all I see is example after example of fascism, and no one believes me!

  6. @Alex Willemyns: That, sir, is a well-argued comment! For those that missed the Crikey article, it began:

    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 p-ssed off.

    You’re right, Alice could indeed move her shop elsewhere. But, with either eBay or Westfield, the result is that you move away from where the biggest collection of potential customers are. If you want to be where the customers are, you play by the rules of that forum.

    Nevertheless, as a piece I’m about to write for Crikey today will say, the Australian Competition and Consumer Commission (ACCC) will investigate this eBay/PayPal deal. As The Sheet reported yesterday:

    A spokeswoman for the ACCC said eBay must prove that the public benefit flowing from the move outweighs the public detriment of what seems to fall under the “third line forcing” provisions of the Trade Practices Act.

    I do hope you’re not over-using the word “fascism”. I’ve previously warned about this. 😉

  7. I understand your point, but I disagree. eBay has no more obligation to provide public benefit than your local fish and chip shop. It’s a business — somebody’s property — it isn’t chopped liver to be flailed around at the public’s will.

    By moving her shop elsewhere she will be moving away from where the most customers are, there’s no argument. At the same time though, eBay should not be punished for being successful — they still have the same rights to their property, and the disposal of it, as you or I do. Just because Alice isn’t happy doesn’t mean Frank Lowy has to change everything.

    Further on that point, it’s just as you said — if she wants a place on eBay’s property, she must play by eBay’s rules. It’s just like if I’m on your property, I follow your rules. If I don’t like them, I get off your property. Again, being big and successful does not take this right away from eBay. So long as Alice is on Lowy’s property, Alice plays by his rules. If she does not wish to, she can go elsewhere.

    eBay must prove that the public benefit flowing from the move outweighs the public detriment

    Why should eBay have to do this? First of all ‘public benefit’ is is extremely subjective. What one person sees as public benefit, another may see as detriment. Secondly, on moral grounds, eBay retains all the rights that you or I do. eBay is the property of eBay, and eBay can dispose of eBay as eBay wished to dispose of eBay. There will be no public detriment caused by eBay’s changes, because eBay is only making changes to itself — its own property. Whether other individuals wish to engage with eBay is totally up to them — they’re not being forced in anyway. The Government has no roll to play, but to let the market do its thing, and let the people enjoy their liberty.

    Imagine if the Government disallowed Prussia.Net’s latest innovation because it ‘did not provide public benefit’. According to whom? And when did your company take on this burden of providing for the public? (By current day definitions, as in this case with eBay, the answer would read ‘as soon as you became successful’ — utter idiocy, I believe.

    Refining what I wrote yesterday, perhaps it’s not fascism per se that we see in cases like this, but actions of fascist nature. If you want to boil down Socialism to its basic definition it would be something along the lines of ‘the Government owns the means of production, and therefore, there is no private property’. Fascism would read ‘individuals retain the right to property (at least, a semblance of it), but the Government holds total power over its disposal or use’. So far as that, the Government telling eBay how it can or cannot dispose of its property is most certainly of a fascistic nature.

    The Government, through the dastard competition laws, says that in order to keep ‘liberty in general’, we must take away the liberty of some. I disagree: so long as eBay is denied liberty, I am denied liberty.

  8. @Alex Willemyns: I like talking about these things with intelligent people. I wish I had more time today to respond at appropriate length — though in summary I do see where we must “agree to disagree”. I certainly agree that individuals should have the right to dispose of their property etc as they see fit.

    Still, in this case, there are two key factors, I think:

    1. It’s the law. There’s this bit of the Trade Practices Act which I’d never heard of, but apparently applies. I haven’t read it yet, so I don’t know whether I like it or not. But eBay Australia does need to play by the rules as they stand.
    2. eBay Australia is not a true individual, but a corporation. Now a corporation is a legal entity which we have created which has the legal powers of a human, except that it’s immortal and has no other prime directive except to maximise its profits. The 2003 Canadian movie The Corporation explains why this may be a Bad Thing. The 3-hour film is on Google Video

    I certainly agree there’s a bit of hypocrisy between a government saying that the market will solve all and yet rules have to be made to prevent liberty overall. I need to read and explore more to respond to your final point though.

  9. I’m not arguing that it’s not the law, the problem is that the law is immoral. Agree to disagree, I suppose. Email me later when you have more time, though. And we can agree to discuss.

  10. It should be clear, I am a wholesaler and not a good writer or a stock expert, but I have a first hand inside look having been a powerseller almost from e bay start, for over 10 years, 1.7 million per year sales and account for $156,000 paid to e bay per year for seller fees, this is the bases in which e bay shows profit or loss in a great way for there core business, this does not account for paypal fees charged, seller manager pro, e bay stores. Buyers and sellers are leaving e bay, this can be proved by http://www.sellerdome.com/
    It is interesting how the 1500 employee lay off received so much attention, however, OVER 10% of total powersellers were laid off/suspended because of flawed aggressive policy poorly implemented has not had a placement. This is proved by http://blog.sellerdome.com/?p=16 between 15k-30K e bay powersellers who account for $3000-$20,000 in seller fees paid each month for each of those sellers. This seems a larger story than a simple layoff of e bay employees. Ebay saves money by laying off paid employees, but e bays profit takes a hit by getting rid of partners who contribute to e bay profit. For example: 20,000 powersellers/partners laid off/suspended that account for an average of $5,000 per month seller fees = $100,000,000 each month in seller fees not received by e bay. That is $1,200,000,000 per year in revenue given up for aggressively flawed policy by current management. The idea current ebay management had was by getting rid of 10% of its selling partners was going drive back 32% of its buyers, however, that has clearly not been the case, because the policy change was flawed and implemented with such aggression over a short period of time, 6 months total, 3 months aggressively. Ebay seems to have driven away buyers by this and the new search method that sellers or buyers don’t like with no concern of management. The company has managed to drive its investors away in the same motion as stock prices show a drop since new management put in place 6 months ago, before market crash. Ebay management charged its sellers/partners for decline in its core business and seems not to have taken into account the increased competition of walmart, best buy, circuit city and many others putting marketing dollars into the online sector of business. Ebay pushing away its partners, sellers and buyers, is only going to make profit softer and push away investors. With 70% more competitors in the market e bay only dropped 30% seems a strong market hold for e bay and a reason to support its partners in a currently working policy rather than place blame partners and will prove to decline its future market share which is pointed out by many market analysis.

    Ebay, through the wild west style new management, took a look at itself and realized it had a drop in the number of sellers buying on its site. It decided it was because of bad “buyer experience” and immediately, it seems without full thought of backfire, decided it was the sellers fault. In some cases, this may be true, but it is most likely because of the additions to online retailers such as walmart, bestbuy, circuit city and the lis t goes on that were not competitors before and had not sunk the marketing dollars into the Internet sector of there business plan before. The more big sellers the less customers for ebay. It is widely known that e bay has blamed sellers rather than external forces for the slow in sales. Instead of working within the community, that once believed that people are basically good, took on a policy that made its community fell like criminals and strong feelings of dislike for the symbol that was once regarded. Ebay has aggressively pushed away its partners will prove to decline its future market share and a relationship that may go un repaired when new management is called upon.
    Ebay has withstood the .com storm because of a superior system and its ability to hold steady to the working core business policy. Its customers fell that is no longer the case and many companies like bonanzle.com and OLA.COM (onlineauction.com) are rushing to try to meet seller and buyer demands that ebay seems unwilling to meet. Many small auction sites have tried to compete in the past but been successful in driving traffic. Now a once complacent audience of e bay buyers and sellers are seeing the changes and the likely hood they are being driven away through aggressive, unfair, flawed policy changes and are taking note to change to someone with the old values that made ebay a community that worked. You can see from the chart below the demand that is being driven to for example.
    This is a small amount of buyers and sellers compared to e bay, but it does show a market who is hungry to meet the demand of current buyers and sellers, and what is maybe most important that buyers and sellers are finding the ability for change.

    When e bay was a “venue”, now it is felt by many of its sellers that it acts as an employer or landlord by design of new policy, it was profitable for sellers and a great value for buyers. Sellers drove traffic to the site because buyers knew they could get many of the items for a large percentage below retail, at or below wholesale. E bay is a follower now and is trying to make itself like Amazon and other .com retailers. Ebay sellers who use Amazon report little to no sales. E bay has a niche (wholesale products) and Amazon has a niche (books, CDs with unmatched distribution etc) and both worked independently of each other, this is why Ebay sellers are not successful on Amazon and Amazon sellers are not successful using ebay. New ebay management has had a hard time realizing Amazon is a different market plan. Many e bay sellers are leaving to do Amazon but it is feared this will not prove successful for them. The e bay system worked and most were satisfied, buyers and sellers could realize other bad buyers or sellers.
    Buyers and sellers are not happy anymore and the numbers will continue to show as long as this management stays. Economy will play a roll, that is why ebay can’t afford to gamble with management that has proven to drive its partners, sellers and buyers, away. The company is large enough it will be around for a long time, maybe not in the online auction sector effectively as it was before, but it is still a mystery to many who use or used to use the site why this management has been allowed to make this aggressive of a change. If this is where they wanted to go, it would takes years to change a company this size effectively, it can’t be done in 6 months times and certainty not given a slow in the economy.
    Things are not happy under new management/John Donahoe management has made no one happy, sellers or buyers or its investors. It has been a 6 month meltdown since new management fumbled a working system.
    I talked to the owner of onlineauction.com 1-800-900-2828, Rowen Grisham, a previous e bay powerseller who seen improper change coming long before many sellers and buyers realized. He said he had seen a flood of sellers and buyers calling to learn about the site in the last 4 months. Rowen Grishamw says they are about to roll out a goggle search program that will make it more visible. This is just one example of where e bay buyer and seller base is going. Grisham seems to want to supply its sellers and buyers with a fair service, as when the ebay site was born and acted as a venue rather than an employer. Small companies that are hungry and taking advantage of a situation where ebay is not satisfying its demand.
    Anyone considering investing or putting time into future sales may want to take a look at the aggressive, flawed policy’s they have put in place, there are little to no direct policy as there has been. Sellers, buyers and investors wouldn’t be leaving if there was any good reason to stay.
    E bay has done a poor job or emplaning the new changes to its buyers, sellers only after a few months of effect, some loosing there e bay business because of improper, unmonitored data, is still learning and it seems no one knows the answers even at the top account managers level. Its buyers do not realize that the DSR DETAILED SELLER RATING, the 5 stars under the feedback rating is not based on a 100 point scale like every other system in the free world. For example, from 1 to 5, 1 is poor, 3 is average and 5 is excellent. With e bay, 4,5 is average and 5 is good, I am glad they didn’t have my math teachers in Collage. So many times buyers rate a 3 when they don’t realize they are giving the seller a unacceptable rating that could potentially suspend his/her account from e bay as so many has been suspended in the last 3 months because of improper data that has been now used as the bible of e bay to rate seller performance. It should also be noted that a flaw in the data of the 5 star DSR is that if a customer is happy, they fell that leaving positive feedback served its purpose and they have caused a positive vote to the seller, e bay has not educated the buyer, so they do not leave a star rating at all, and are not required to and a large % do not, but leave a positive feedback as it is not required. But the buyer who is mad and is leaving hasty feedback will be more than motivated to leave a 1 or 2 for all stars. For this reason, good sellers offering great service and products are being suspended from e bay by record numbers, this cuts the life cord of the seller as well as core business at e bay and the reason buyers come to the site and investors invest in the company.

    Ebay may have ruined their market flair for both buyers and sellers forever. Too many restricting rule changes, increased charges, paypal demands, seller ratings. This has ultimately destroyed their bottom line.
    Don’t think eBay and its payment system engage in unfair, at the very least unethical or even illegal business practices? Retailers are asking for congress to crack down on organized computer crimes, but eBay, said “they would be unfairly targeted in the proposed legislation” Read article from link below:

    http://news.moneycentral.msn.com/ticker/article.aspx?Feed=3 DAP&Date=20080922&ID=9174700&Symbol=EBAY

    Many sellers, buyers and investors alike have a dedicated special interest and hope they turn themselves around, but it is going to take some quick and correct policy change back to the system that worked to undo what has been done in what would be considered by many as well as a powerseller account manager in a telephone conversation said that this is “the most aggressive change e bay has ever done” it is costing sellers there business and driving buyers away from the site. The Best Match search is fatally flawed and $0.35 listings are not going to fix that.

    Sellers of the unique items that made eBay famous (and who paid listing fees) are leaving in droves, while eBay brokers deals with corporate sellers of new stuff you can get anywhere who don’t pay listing fees deteriorate the profits. And their buyers are following them. Watch the Q4 and Q1 figures. A company of this size can keep up appearances for some time, but its customers, its customers customers, that is sellers and buyers, are speaking up and cannot be ignored in the long term, the leader of these policy’s are and continue to drive away the core business of e bay and investors are taking notice.

    E bay bought Bill Me Later, I would have been surprised just 6 months ago, but I am unhappy to report that I am not at this time, the reason is this management has taken down the tread that holds e bay together as can be seen by its buyers and sellers everywhere complaining about the flawed aggressive policies that have taken place over the last few months, maybe you have heard some of them or are one of them. Every comment citing that the previous system was not broken. E bay has had community and trust, this 13 year trust has been violated and has failed both sellers and buyers in just a few months of unfair, faulty policy change that has taken a ship this size and turned it so fast that it is out of control and is facing a challenge to bring the ship back to course as it was before in the core business, although still ignored by management at this time, this is just in the core business, this shows the danger of a lateral move like credit right now. Take into account there could’t be worse timing as the world economy will not view this favorably given recent events. This policy change was over a short aggressive period, but the negative impact will make it difficult to navigate back in position, if this venture is not successful, it will be even worse for ebay, its investors, and20the management that follows. The core business has taken a great hit world wide, now it is committed to a market that is new. A new market during the time when its core business is in jeopardy due to flawed policy and a slowed economy with management proven only to drive away customers. This will prove a challenge that may take years to repair relationships of its sellers and buyers when it has been realized by investors concerned on top of unpopular credit service. Migration back to the system with effective proven 12-15 record, built by previous management over 12-15 years, seems to be the only way to save the future profits and stability the company once enjoyed.

    So, e bay wants its investors to trust it in a huge risk buy, when the investors are clearly concerned and most can see that e bay can not run its core business in a way that is satisfying to its customers, causing them to leave, look for other suppliers that will eventually be able to meet demands of the once complacent sellers and buyers. Sorry, it would be hard for anyone with basic knowledge of the problems with recent policy of the core business to buy this, having been a seller and buyer for 10 years, it makes it even harder to buy. I can say, I am happy to report my family, who bought stock when they=2 0seen my success on e bay, sold there stock when I explained the new managements flawed, unfair, and aggressive policy handed down. The stock has followed since this and many are betting with there dollars fell it will continue to fall. Maybe Jim Cramer, hyper as he is, has a point when he said he could not get behind the company, and that someone should buy the company “and put them out of their misery.” It is hard to argue with him, stock sold back in march, when these policies were being talked about, not yet implemented agressively, sold ebay seems to be the smart move. Stock was $30-$32 per share at that time, March 2008, it dropped every since as can be tracked from any stock quote chart. Yes, the economy took the abrupt hit, stock price had already plummeted by 1/3, $19-$22 per share, before it happened that our country was in trouble from bad credit/debt. Some say they wouldn’t want to touch this a credit market at this time. I would also not want to answer to shareholders when they learn what long time sellers and buyers have seen in the past few months. Good thing for golden parachutes I guess, maybe that will soften the fall?
    I think this report on NYtimes has some good in site of the problems facing the company with the current buy:

    Maybe enough people will sign to make it worthwhile?

Comments are closed.