eBay Fraud Scams exposed

In the article eBay: pro-choice, but only when it suits the writer brought up an interesting point when he said:

“… and certainly hasn’t done much to neutralise the increasing toxicity of the eBay brand.

Ding Ding Ding Ding Ding!, I thought. eBay Brand is becoming increasingly toxic. What caused this? Major Media finally noticed and begun publishing news of too many years with too many complaints by eBay customers who were ripped off, cheated, scammed and simply ignored by eBay management.

Then I found another article by the same Author: eBay trashed its brand for sake of profits he wrote earlier.

Randy Smythe published this Article: eBay death of thousand cuts in February 2008
warning about management’s questionable decisions and changing marketplace conditions.

eBay’s managemen IS aware they are losing marketshare, as eBay’s spokesman Griff mentioned just a few days ago at eBay Live! 2008:

“
Griff: We had to make these changes because, without buyers, there will be no eBay in two years.

“

But unfortunately it appears that solutions offered by eBay top brass are still in the spirit of money grabbing, uncompetitive, monopolistic strategy which permiates everything eBay has done for the past 5 years. Thus eBay continues to be perceived as a marketplace full of fakes, cheats, scammers, stolen goods headed by the type of management who will close their eyes to the crimes perpetrated on their website (since they derive revenues from such crimes) till they get sued out of millions and forced by courts to make the venue safer.

Just before I completed publishing this, another news source appeared with the same observation: Sydney Morning Herald published just one hour ago: eBay pays the price for PayPal debacle

It’s hard to imagine anyone doing more damage to eBay’s reputation than the auction giant has done to itself over the past few months.

Finally bowing to public (and potential legal) pressure, eBay last week announced it has scrapped plans to force its members onto the PayPal payment system, which it owns, by excluding all other payment options except cash on delivery.

Everyone from the Reserve Bank to the Australian Competition and Consumer Commission could see it was anti-competitive and monopolistic. EBay insisted it was for the protection of the buyers and sellers. My only surprise was that it could maintain this public stance with a straight face.

Update: 7/12/2008 Here is a link to eBay Brand discussion from 2005. So three years later time has shown that many of the industry experts were right three years ago.

As predicted, eBay’s stance of ‘just a venue’ bringing buyers and sellers together had no leg to stand on in European courts yesterday. Louis Vuitton, Christian Dior and Givenchy won their lawsuit against eBay and a hefty US $63,000,000 fine will perhaps make those at eBay helm think about ignoring the counterfeit problem across eBay sites.

The case against eBay in a commercial court in Paris was brought jointly by six brands belonging to the LVMH group.

Louis Vuitton Malletier, the group’s handbag and luggage section, and clothing brand Christian Dior Couture accused eBay of “negligence” in allowing illegal copies of their goods to be sold in online auctions.

Four perfume brands - Dior, Guerlain, Kenzo and Givenchy - sued for what they called “illicit sales” of their products.

They alleged that even auctions involving their legitimate perfumes were illegal, because only specialist dealers were permitted to sell them.

The court barred eBay from selling the four perfumes in future

According to the judgement, eBay must pay 19.28m Euros in damages to Luis Vuitton Malletier, 17.3m to Christian Dior Couture and 3.25m to the perfume brands.

The BBC’s Hugh Schofield in Paris says the ruling is seen as a landmark, because it could oblige eBay to rethink its business model.

In the traditional tone spin and deny, eBay spokesman defended eBay platform by saying:

“If counterfeits appear on our sites, we take them down swiftly, but today’s ruling is not about our fight against counterfeit. ”

( WHOAAA! BS - eBay does not take fakes down SWIFTLY! As a matter of fact attorneys involved in eBay VERO program continuously complain and document cases where they reported fakes yet eBay refuses to take them down… I mean why would eBay be reluctant to do so? Simple: every sale = percentage of it goes to eBay pocket.)

eBay spokesperson further spins eBay’s position on this ruling:

“Today’s ruling is about an attempt by LVMH to protect uncompetitive commercial practices at the expense of consumer choice and the livelihood of law-abiding sellers that eBay empowers everyday. “

(GEEEZ! Now eBay talks about “uncompetitive commercial practices at the expense of consumer” HA HA HA HA … Tell me another one! Pot calling a kettle black. Just as we speak eBay is trying to remove PayPal competitors from eBay Australia site being told by the Australian Competition Watchdog Agency this is illegal, preventing Google Checkout from competing on eBay properties, issuing a new rule eBay sellers cannot advertise their own web page on eBay ABOUT ME pages…. the list goes on and on!… how is that for uncompetitive commerce practices? Here is an awesome article just published linking these two issues together: eBay: pro-choice, but only when it suits and some quotes from this article:

” eBay is screaming blue murder over being banned from selling Louis Vuitton goods by a French court… meanwhile it is pushing on with banning all payment methods except PayPal.”

“While eBay has reluctantly backed down from imposing its PayPal-and-nothing-else policy after a strict talking to from the ACCC, it hasn’t officially abandoned the policy. A public meeting in Sydney to discuss issues with the ACCC doesn’t seem to have advanced the cause much, and certainly hasn’t done much to neutralise the increasing toxicity of the eBay brand.“

I suppose I am not the only one making the same connection.)

The court barred eBay from running ads for the perfume and cosmetic brands or face a fine of $79,000 per day.

Heather McDonald, partner at law firm Baker Hostetler, said: “eBay has policies and procedures in place where they will intervene in an action between a buyer and seller if there’s a problem, and they profit directly on the basis of every item that is sold on their Web site.

“This gives them an affirmative obligation to take steps to make sure that illegal goods aren’t sold, and they certainly have the ability to do that.

“They have been able to make sure that you can’t buy a handgun and they have been able to make sure that you cannot buy pornography or prescription narcotics or other medicines on eBay.

“They have the ability to do this, they have just chosen not do and to rest the entire burden of policing eBay on the shoulders of the trademark and copyright holders whose rights are being infringed here.”
Sources:
BBC News
CNN News

The Tiffany lawsuit is next in line…I doubt eBay will win that one….
This is an article from the NYTimes: http://www.nytimes.com/2006/01/29/technology/29ebay.html
Highlights below:
“Company officials say they do everything they can to stop fraud. The company says only a minute share of the items being sold at any given time — 6,000 or so — are fraudulent. But that estimate reflects only cases that are determined by eBay to be confirmed cases of fraud, like when an item is never delivered.”

“The Tiffany lawsuit, in addition to accusing eBay of facilitating counterfeiting, also contends that it “charges hundreds of thousands of dollars in fees” for counterfeit sales.

In 2004, Tiffany secretly purchased about 200 items from eBay in its investigation of how the company was dealing with the thousands of pieces of counterfeit Tiffany jewelry. The jeweler found that three out of four pieces were fakes.”

“The women say that by watching the listings they have uncovered a ring of a half-dozen or so counterfeiters, most of them living in Rhode Island within a few miles of one other. They say the sellers supply one another with fake jewelry, conceal the fact that they are buying from one another to boost their seller status, and regularly dole out positive feedback to each other to fool potential buyers.”

This just skims the surface. Everything from handbangs, makeup, perfume, autographs, software, movies, music, iPods, etc. are fake. Today, the consumer assumes that the item is fake until proven authentic.

You can fool some people all the time and you can fool all people some time but you cannot fool all the people all the time. eBay stock is reflecting the opinions of shareholders. As usual eBay is underperforming Nasdaq, EBAY shares lost 17.66% in June, compared to Nasdaq loss of 13.55%… so this bad economy stock market losses argument is out the window as well.

Feel free to post your opinion on the one of the most frequented eBay stock forums here:
http://messages.finance.yahoo.com/mb/EBAY

Update 7/11/2008 eBay denied stay in LVMH case

The French Court of Appeals today denied eBay’s (EBAY) petition to stay an injunction issued June 30 by a Parisian court that requires eBay to halt all sales of four LVMH (LVMUY) perfumes over any site worldwide that is accessible from France, according to an eBay spokesperson.

An eBay spokesman says the company “will comply as technically and humanly possible” with the injunction while it continues to pursue its appeal of the ruling.

In a statement, LVMH says that today’s denial of the stay “confirms the seriousness of the faults committed by eBay’s sites . . . and confirms the significance of the legal precedent set by the Paris Commercial Court’s Judgment on June 30, 2008.”

The perfumes brands affected are Kenzo, Guerlain, Christian Dior, and Givenchy.

The lower court’s order bans not just sales of counterfeits, but sales of genuine bottles of these perfumes, because LVMH chooses to limit sales of these products to exclusive licensed distributors, and it does not permit its licensed distributors to sell over eBay.

Thus, the order bans so-called graymarket sales — sales of genuine products through unauthorized channels — which are not considered illegal in the United States, but are in France. According to lawyers for both sides, the injunction even forbids individuals from reselling genuine LVMH products that they received as gifts.

The injunction apparently takes effect immediately, and violations will be punishable by daily fines of 50,000 euros (about $80,000).

Here is a notice eBay has placed on its French site about today’s ruling.

For those who don’t know, Leo Leporte has over 2 million listeners on his podcast TWiT, and his weekend radio show (KFI-AM) in Los Angeles which is also podcasted.

http://en.wikipedia.org/wiki/Leo_Laporte

You can listen to this MP3 broadcast snipped from Leo’s show (4.6 Megs)
where Leo Raporte and Dick DeBartolo account how they were scammed on eBay. They both used PayPal to pay for transaction and lost their money because in reality, PayPal protection was non existent. Listen to the podcast, it’s about 10 minutes long and will open your eyes and hopefully raise your caution when considering buying on eBay :

Click here to listen to the PodCast by Leo Raporte and Dick DeBartolo

After getting burned twice, this time for $2,200:

“eBay doesn’t seem to do very much to prevent [scammers] or discourage [scammers].”

“We’re not protected…[regarding Paypal]“.

“I will never buy anything on eBay ever again….and I going to go on my radio show on a regular basis and tell everybody that.”

Source: See show 588, about 1/2 way down the podcast.
http://twit.tv/dgw588 (Our recording starts at 7th minute of the original PodCast)

The PayPal fiasco in Australia has not lost it’s juice yet, it’s indeed getting more and more interesting. Today’s article in The Sydney Morning Herald titled Clerical error exposes Google as anonymous eBay critic shows a document source screenshot identifying Google as the source of a very good document prepared in response to eBay’s attempt to stifle payment methods competition on it’s Australian site.

This 38 page document demonstrates an excellent knowledge of eBay’s inner workings and summarizes eBay’s motivations quite well:

It is submitted that:
(a) There are two markets relevant to eBay’s proposed conduct. They are:

(i) the market for the supply of online marketplace services to online buyers and sellers in Australia - in which eBay operates; and
(i¡) the market for the supply of peer-to-peer online payment processing services in Australia - in which PayPal operates or, alternatively, the market for the supply of online payment processing services in Australia (including peer-to-peer and non-peer-to-peer online payment systems) - in which PayPal operates.
(b) eBay has substantial power in the market for the supply of online marketplace services to online buyers and sellers in Australia.
(c) PayPal is likely to have substantial power in the market for the supply of peer-topeer online payment processing services and the market for the supply of online payment processing services, more generally.
(d) eBay’s proposed conduct will immediately increase transaction costs for all eBay sellers and buyers, and remove any impediment to PayPal further raising prices to eBay sellers in future.
(e) eBay’s proposed conduct will reduce the quality of producVservice provided by PayPal on the eBay Site and elsewhere as PayPal will have little incentive to innovate, improve its product offering, or provide beüer quality customer service and support once it has secured a ‘captive market’ of online sellers on the eBay Site.
(f) eBay’s proposed conduct will foreclose competition from all competitors of PayPal currently allowed on the eBay Site.
(g) eBay’s proposed conduct willforeclose competition from existing competitors of PayPal, more generally. Exclusion from the eBay Site and the network effect of increased adoption of PayPal outside the eBay Site will deter or delay innovation by existing competitors.
(h) eBay’s proposed conduct will foreclose potential competition from new entrants into the market. Exclusion from the eBay Site, the network effect of increased adoption of PayPal outside the eBay Site, and the difficulties of building critical mass against PayPal’s installed customer base, will prevent or delay entry by new competitors.
(i) The proposed conduct is not necessary to achieve eBay’s claimed purpose, nor is likely, of itself, to be effective in achieving that purpose. One of eBay’s substantial purposes for the proposed conduct, is anti-competitive.

1.3
0) The public benefits claimed by eBay should be disregarded entirely, or alternatively, be given very little weight, by the Australian Competition and Consumer Commission (the Gommission), because they either:
(i) will or are likely to exist in the absence of the proposed conduct and, as such, cannot be said to result or be likely to result from the proposed conduct; or
(ii) are illusory.
(k) eBay’s proposed conduct will result in significant public detriments including a reduction in consumer choice and a reduction in the overall quality of online payment processing services in Australia.
1.4 Accordingly, it is submitted that the proposed conduct has the purpose and is likely to have the effect of substantially lessening competition in the market for the supply of online payment processing services, and that any likely benefit to the public from the proposed conduct will not outweigh the significant detriment to the public from the substantia, lessening of competition,
1.5 The Commission should revoke eBay’s Notification by giving eBay a notice pursuant to section 93(3) of lhe Trade Practices Act 1974 (Cth) (the Act).

Here is the 38 Page Document submitted to ACCC, most likely by Google requesting that ACCC prevents PayPal from being the only payment method allowed on eBay Australia.

Last year in June, eBay temporarily discontinued it’s ads on Google in retaliation to Google’s plans to hold a Party that coincided with eBay Live event. I guess we’ll see if the retaliation streak still permeates eBay’s corporate culture or if it has left the building with Meg Whitman.

I thought when CA Security Advisor reported PayPal XSS page vulnerability in Feburary of this year, PayPal assured the writer this phishing hole was closed. See the full article: PayPal Closes a Phishing Vulnerability Published Feb 17 2008, 10:44 AM by Stefan Berteau. Was that just a lip service by PayPal?

A new article, different researcher shows the same vulnerability here in yesterday’s report:

A serious scripting error has been discovered on PayPal that could enable attackers to create convincing spoof pages that steal users’ authentication credentials.

The cross-site scripting bug is made all the more critical because it resides on a page that uses an extended validation secure sockets layer certificate. The new-fangled SSL mechanism is designed to give users a higher degree of confidence that the page they’re visiting is secure by turning their browser address bar green.

But Finnish researcher Harry Sintonen figured out a way to inject his own code into a supposedly protected PayPal page even as the green bar lulled visitors into believing it hadn’t been tampered with. Sintonen’s code simply caused an Internet Explorer alert window to open with the words “Is it safe?” as evidenced by the screenshot …..

Full Article with the screenshot of the vulnerability has been published on ChannelRegister.Co.Uk ‘Secure’ PayPal page is… you guessed it by Dan Goodin in San Francisco
16 May 2008 20:57

PayPal’s site is silent about this vulnerability… I guess the “hide your head in the sand” approach or “if you do not admit to ut, it’s not there” speaks volumes about how concerned PayPal really is about safety of their users.

PayPal is no stranger to security vulnerabilities:

• PayPal fixes phishing hole by Joris Evers, CNET News.com Published: June 16, 2006 4:12 PM PDT
• July 20, 2006 Netcraft reports this same XSS PayPal vulnerability existed for 2 years!
  

It was speculated when eBay purchased over 25% share in Craigslist that eBay is on a fishing (not phishing) expedition to observe craigslist’s success and then copy it. It is a known fact that beyond it’s founder’s innovative idea to create an online auction, eBay’s executive team has not invented anything since. eBay’s management is great at spending it’s cash on mostly miss (Skype) sometimes hit (PayPal) acquisitions. Less then a month ago we have commented on a eBay vs. Craigslist lawsuit which set the stage for Craigslist initiating their own proceedings against eBay. The full document is available here and it provides some interesting insights into what allegedly goes on behind the scenes. Read the document, it provides a peak into the world of corporate espionage, false advertising, deception and other corporate shinnanagans you won’t find in official company press releases.

eBay is certainly not a stranger to being accused of unfair play and facing substantial fines and penalties for it’s mistakes. Here is a abbreviated history of some legal processes she has faced or is currently litigating:

August 11, 2003 SHARE PRICE 25.46
eBay Accounts for Lawsuit Loss: The auction giant shaves $30M from Q2 results after a patent verdict against it was upheld last week but says it will appeal. February 28, 2008 Case MercExhange vs. eBay settled, As a part of the settlement, eBay purchased all three patents from MercExhange involved in the lawsuit, and related technology and inventions, as well as a license to another search-related patent portfolio that was not asserted in the lawsuit

July 30, 2004 SHARE PRICE 39.16
PayPal Sends Users Notice of Class-Action Lawsuit Settlement: PayPal and plaintiffs reached a settlement in the class-action lawsuit stemming from 2002, when two PayPal users filed class action lawsuits against the online payment service owned by eBay. Some of the accusations by the plantiffs were that, as of early 2002, PayPal was understaffed, hid its customer service phone numbers to save money, had rude and unhelpful phone staff, did not answer customer service email, and “without notice or warning, erroneously and unnecessarily” limited or closed accounts and then made it difficult to restore the accounts.

June 22, 2004 SHARE PRICE 43.60
Tiffany Sues eBay over Fakes : Tiffany said 73% of items purchased on eBay in a study it conducted were counterfeit

April 29, 2005 SHARE PRICE 31.71
Tentative Settlement Reached in eBay Stock ‘Spinning’ Lawsuit : the settlement calls for the payment to eBay of $3 million by Meg Whitman, Pierre Omidyar, Jeffrey Skoll and Robert Kagle, who are officers/directors/controlling stockholders of eBay, and a payment to eBay of $395,000 by Goldman Sachs Group, eBay’s investment banking firm.

In June 6 2006 SHARE PRICE 31.59
Net2Phone, Inc. filed a lawsuit in the U.S. District Court for the District of New Jersey (No. 06-2469) alleging that eBay Inc., Skype Technologies S.A., and Skype Inc. infringed five patents owned by Net2Phone relating to point-to-point Internet protocol. The suit seeks an injunction against continuing infringement, unspecified damages, including treble damages for willful infringement, and interest, costs, and fees

August 7 2006 SHARE PRICE 24.12
Louis Vuitton Malletier and Christian Dior Couture filed two lawsuits in the Paris Court of Commerce against eBay Inc. and eBay International AG. Among other things, the complaint alleges that we violated French tort law by negligently broadcasting listings posted by third parties offering counterfeit items bearing plaintiffs’ trademarks, and by purchasing certain advertising keywords. The plaintiffs seek approximately EUR 37 million in damages.

September 6 2006, SHARE PRICE 27.53
Parfums Christian Dior, Kenzo Parfums, Parfums Givenchy, and Guerlain Société also filed a lawsuit in the Paris Court of Commerce against eBay Inc. and eBay International AG. The complaint alleges that we have interfered with the selective distribution network the plaintiffs established in France and the European Union by allowing third parties to post listings offering genuine perfumes and cosmetics for sale on our websites. The plaintiffs in this suit seek approximately EUR 9 million in damages and injunctive relief

April 26th, 2007 SHARE PRICE 34.22
eBay, PayPal face court action Class action alleges unfair monopoly: eBay warned shareholders yesterday that it is facing a possible class action suit in the state of California and is likely to be hit by more patent cases. The suit alleges that eBay and PayPal acted “to improperly ‘monopolise’ the forms of payment that sellers can use on eBay”.

August 2007 SHARE PRICE 33.54
class-action lawsuit in which attorney John Fabry stated, “eBay has been deceiving millions of consumers over the years by claiming their auctions start when submitted, when in reality they do not begin for at least several hours, and up to 24 hours. However, the clock starts running on your selected auction time even though eBay hasn’t posted it yet

Jan. 10, 2008 SHARE PRICE 30.36
Lawsuit Filed against eBay Over Coin Listing Policy: The American Numismatic Association (ANA) and the Professional Numismatists Guild (PNG) are suing eBay for defamation and unfair and deceptive trade practices

May 13, 2008 SHARE PRICE 31.41
Craigslist has filed a countersuit against eBay, alleging that the auction site used its minority stake in Craigslist to engage in unfair and unlawful anticompetitive behavior, false advertising, trademark infringement, and other misdeeds.

Update: 5-15-2008 Craigslist illustrates on their blog how eBay uses deceptive advertising on Yahoo providing a screenshot of advertisements eBay ran up even on the morning of 5-14-2008. Interestingly enough, if you try to search on Yahoo for www.craigslist.org or craigslist.org those deceptive ads no longer appear.

Now that eBay came up with another way to remove competition from their site by imposing PayPal as the only payment method in eBay Australia, (and this is just a testbed market and if successful, the same is to follow for other markets where eBay can attempt to get away with it) some Aussie sellers and consumers are not happy about it and point out that Australian Competition and Consumer Commission cannot grant eBay Australia request for PayPal only payments

New US Sellers on eBay are already forced to accept PayPal or major Credit Card via merchant account if they are too new or if their feedback is not quantitative enough:

You can immagine that lot of sellers are screaming bloody murder because they do not want to be forced to accept PayPal and fork over 3% of the transaction to PayPal if they can receive Money Order or Cashier’s Check which costs the seller nothing… but then eBay would not be making that 3% additional profit forcing PayPal, eh?

This blogger just published Shame, eBay, Shame! describing PayPal promotion going to eBay buyers who do not use PayPal and concluded:

“That con will be brought down upon the eBay sellers – those who don’t wish to be involved in the hideous restraint of trade fiasco that eBay is attempting to wrought.

“

It is the vendor who should dictate which payment options he/she wants to permit to exchange his goods/services for money.

We have utilized many brick and mortar venues for our retail sales before, but I have never heard from a Mall Management or Swap Meet Operator something like: ‘well you know, cash is not safe … what if some buyer passed a fake bank note to you! …. or traveller’s checks may be fake as well, so for this reason if you wanted to sell in our venue/marketplace, you cannot accept cash, money orders or travellers checks… and ehm, since you are new around here, you can only accept Credit Cards or our Mall Gift Cards (… as we at the Mall get a percentage cut from our Gift Card transactions, which of course, makes it safer… ehm ..)’

Another fake claim eBay makes is that PayPal is cheap. I have personally recommended PayPal to many of our newbie merchants (we own a hosting company so we get lot of requests for recommendation in this area) but since PayPal increased their rates quietly, they are not one of the most expensive options out there so we recommend against PayPal.

Check these PayPal fees: 2.9% plus $0.30 per transaction so you would be paying $0.59 to PayPal on $10 sales
vs Real Merchant Fees here for example 2.1% plus $0.25 per transaction so you would be paying $0.46 to merchant CC processor

—
Update 5-8-2008 : here is an interesting news article
eBay boss: “not offering PayPal is like buying heroin” the folks Down Under are definitely not happy about being forced to PayPal and are very vocal about it. A smart credit card merchant service company should make a fortune marketing to eBayers.

—
Update 5-10-2009
Australian financial, commercial and internet industries appear to stand united against eBay’s attempt to stifle competition using “consumer safety” as a smoke screen to push through PayPal as the only payment method on eBay Australia property. Here are some interesting points made in submissions to Australian Competition and Consumer Commission:

• Australian Bankers’ Association:
  “2.1 ABA’s concerns
  The ABA opposes the Notification, its chief concerns being that:
  (a) the Conduct would limit the choice of both eBay buyers and sellers
  without justification for doing so;
  (b) the benefits of the Conduct as described in the Notification are overstated; and
  (c) the Conduct will have the effect of eliminating competition in an important segment of the market for online payment services, and of distorting competition in the balance of that market.
  2.2 The ACCC should revoke the Notification
  ABA submits that the ACCC should revoke the Notification under s 93(3) of the Trade Practices Act 1974 (Cth) (”the TPA”) because the Conduct:
  (a) has the purpose and/or is likely to have the effect of substantially lessening competition; and
  (b) is not likely to result in a benefit to the public, or to the extent that it would result in any likely public benefit, any such benefit would not outweigh the public detriment that would be caused by the lessening of competition likely to result from the Conduct. According to Phishtank.com, 72% of the phishing sites it identified in February 2008 were fraudulently imitating eBay or PayPal websites.’ More recently, eBay has been subject to phishing scams affecting sellersm6 The Conduct does nothing to prevent these phishing scams. A further potential security issue for PayPal is that PayPal does not take the same steps that banks take to verify the identity of their account holders by requiring the provision of drivers’ licences, birth certificates, etc.
  “

• Electronic Frontiers Australia Inc : ”

  Prevailing prices on eBay will increase
  PayPal impose various fees and commissions on users receiving payment through PayPal. eBay’s proposed conduct would impose these additional direct costs on eBay sellers who do not use PayPal, or who do not exclusively use Paypal. The direct per-transaction fees alone could cause affected eBay sellers to raise their fees by up to 5% to compensate.

  eBay and PayPal’s notoriously poor customer service record
  Many websites on the Internet are devoted to criticism of eBay and PayPal’s customer service, policies, and actions. Some examples include www.nopaypal.com and www.paypalwarning.com. A frequent criticism of eBay and PayPal’s customer service is that they are ‘faceless’ corporations, who to the greatest extent possible try to ‘hide behind’ email communication, typically conducted with boilerplate ‘form’ emails, and that they do not make available, or do not sufficiently make available other contact methods such as telephone. If eBay proceed with their proposed conduct, PayPal will in effect have a largely ‘captive market’ and will have no incentives to provide better levels of customer support, or a better service generally. In short, PayPal will be free to give less and charge more.

  PayPal’s ‘user agreement’
  Australian users of PayPal’s services are required to accept the terms of a contractual ‘user agreement’, which is posted on the PayPal Website. Many of the terms of this ‘user agreement’ are potentially misleading, unconscionable, unfair, or unenforceable. Some specific criticisms of the PayPal ‘user agreement’ include:
  The user agreement is in reality, not one agreement but constitutes more than a dozen separate documents. The ‘user agreement’ incorporates the terms of 13 other ‘policies’ by reference, including a ‘Privacy Policy’, ‘Closing Accounts and Limiting Account Access’ policy, ‘Buyer Complaint Policy and PayPal Buyer Protection Policy’, ‘Fees Policy’, ‘Acceptable Use Policy’, etc;
  PayPal reserve the right to amend the user agreement and policies at any time;

  The user agreement allows PayPal to place a ‘hold’ on any funds in a user’s account for up to 180 days and to ‘fine’ the user up to $3000 for contraventions of the Acceptable Use At common law, this ‘fine’ is likely a penalty and would be unenforceable for that reason; and The user agreement (and associated polices) contain many terms which may be ‘unfair terms’ within the meaning of Part 2B of the Fair Trading Act 1999
  (Vic), including terms which:
  o Permit PayPal but not the user to avoid or limit performance of the contract;
  o Penalise the user but not PayPal for a breach or termination of the contract;
  o Permit PayPal but not the user to vary the terms of the contract;
  o Permit PayPal unilaterally to vary the characteristics of the services supplied to the user;
  o Limit PayPal’s vicarious liability for its agents; and
  o Limit the user’s right to sue PayPal.
  The effect of eBayls proposed conduct will be to force eBay users who currently exercise an informed choice not to deal with PayPal to accept the current and future terms of PayPal’s user agreements and policies.

  On the whole, eBay appears to be arguing that:

  eBay customers are incapable of choosing the ‘best’ payment option, according to eBay’s definition of what the ‘best’ option is;
  For those customers’ own good, eBay must force them to use the ‘best’ payment option;

  It is impliedly irrelevant to eBay’s decision-making that the ‘best’ payment option is provided by a wholly-owned subsidiary of eBay, and will result in a significant financial benefit to eBay.

  eBay’s argument is condescending and paternalistic at best, and ignores the fact that eBay users are capable of making rational choices about what they view the best payment method to be

  Most if not all of the benefits claimed to result from eBay’s proposed conduct are already available to buyers and sellers who want those benefits. The only change in those benefits which eBay’s proposed conduct would cause would be to force those benefits upon people who currently choose not to receive them because they view the associated costs as too high. EFA submits that this cannot properly be characterised as a public benefit.

  EFA submits that the ACCC should revoke the notification lodged by eBay.

  “

• Australian Securities & Investments Commission :
  “However, unlike most AFS licensees that provide banking or non-cash payment services, PayPal has declined to become a signatory to the Electronic Funds Transfer Code of Conduct (EFT Code). The EFT Code is the key consumer protection code of conduct applying to the payment services industry, and covers fundamental issues concerning consumer rights, security, disclosure and resolution of mistaken or unauthorised payments.
  PayPal’s business involves the provision of EFT transactions in relation to EFT accounts within the meaning of Section 1 of the EFT Code, and, if it became a signatory to the Code, it would be regulated by Part A of the Code.
  Part A prescribes rules of conduct relating to the provision of EFT transactions, including around: record-keeping requirements, liability for unauthorised transactions, liability in cases of system or equipment malfunction, audit-trails, and complaint investigation and resolution procedures.
  ASIC considers that it is highly desirable that PayPal become a signatory to the EFT Code, given the large numbers of retail customers who use eBay, as it would provide an additional desirable layer of consumer protection that is not currently in place”

• RESERVE BANK OF AUSTRALIA: “
  The Reserve Bank sees some potential issues with the proposed conduct in terms of its impact on competition in the Australian payments system
  The issues: The proposed conduct by eBay is to mandate the use of PayPal for almost all transactions on the eBay site. This raises three potential issues in relation to the payments system.

  The first is that it could limit the ability of new on-line payment systems to become established and for alternative systems to compete in the on-line payments space.

  The second is that it could restrict merchants’ ability to negotiate lower fees.

  And the third is that it restricts choice for consumers

  eBay states that the service operated by PayPal offers some security advantages to consumers relative to other payment methods currently available for eBay transactions. Should consumers value PayPal’s security features highly, they will choose it over other payment methods and this may, in turn, place pressure on those other systems to improve security for similar transactions. It is possible that, in the long run, this competitive process may achieve safer payment facilities than would be the case if PayPal were the only payment option available.

  “

These comments by some of the best brains in major institutions of Australia are not just some bloggers rantings. They clearly summarize and expose the true motivations of eBay management.

Update: 5-26-2008 eBay has submitted their official eBay response to Objections against PayPal being the sole payment method in eBay Australia. The response reads oddly fractured and quite dissociated from eBay’s original underlaying claim that PayPal is the safest way to pay. It makes an interesting point:
“Condition 1
4.6 eBay buyers and sellers who do not wish to pay PayPal fees are able to avoid doing so by listing and purchasing items through competing services, such as other online marketplaces, list, search and redirect sites, online and offline classifieds, specialist listing sites, individual retailer websites, and the like.
4.7 It is also significant that, since the announcement by eBay of the proposed implementation of the Project, Oztion’s membership has reportedly increased by approximately 22% to over 250,000 members.’ It would appear that this is attributable to migration of buyers and sellers from eBay. Accordingly, there is evidence to suggest that a number of sellers will choose alternative sales platforms in response to the implementation of the Project, providing a strong incentive for eBay to maintain a competitive offering.”

Are we to understand that eBay is telling buyers: If you don’t like PayPal, go away-> the Oztion’s way. This does not appear to be a customer friendly approach. This take it or leave it attitude, verbalized, certainly enhances eBay’s bully image. But what else is new. The Australian Competition and Consumer Commission announced they will make a ruling within next 2 weeks.

Update 5-30-2008 It appears that GOOGLE submitted it’s objection to eBay’s attempt to push out the competitor payment systems from it’s Australian marketplace. AuctionBytes reporting on this here. :
“eBay prohibits sellers from accepting Google’s Checkout service as part of its Safe Payments policy, and apparently Google is concerned a move toward a PayPal-only policy in Australia would impact its market share. The anonymous ACCC submission reads in part:

eBay’s real purpose, or one of eBay’s substantial purposes, is to substantially lessen competition in the Market for Online Payment Processing Services, by preventing or hindering competitors of PayPal from competing effectively against PayPal in that market. eBay and PayPal are related bodies corporate. eBay is acting to increase PayPal’s share of the Market for Online Payment Processing Services, thereby increasing the revenues to the eBay group as a whole.

The submission also called the public benefits of the PayPal-only policy “illusory.”