eBay Fraud Scams exposed

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

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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.

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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.”