Cheryl J
techmanIs eBay about to seriously rip off its users?
May 16th 2008 01:52
As of 17 June 2008 eBay Australia intends to implement a ruling that buyers will no longer be able to pay by bank transfer, cheque or money order and will be forced to use PayPal. Now for those that may not know, PayPal is owned by eBay and both eBay and PayPal charge separate fees. So eBay will receive two cuts of each seller’s profits. Firstly, is that not double charging? Secondly, does forcing this change breach the current Trade Practices Act? The answer to the first question is a resounding yes and line on the second is clearly being pushed to the very limit of the law. And to further cloud the issue, it is only eBay Australia in the eBay group that is pushing for this change; so far. Is the risk of fraud higher in Australia than other countries to warrant such action?
So how is this allowed to happen? Well although eBay Australia has announced on its site that these changes will be made, the truth is they have put forward a notification of intent to the Australian Competition and Consumer Commission (ACCC) which has yet to be ruled upon. eBay has asked for immunity against legal action from the Trade Practices Act arguing that the public benefits of the move, which in their view would be increased transaction security, outweighs any negative effect to the public that might be caused by a lessening of competition in the online payments market. The act prohibits companies from imposing restrictions on people's freedom to choose whom they deal with.
Obviously it is a breach of the current act or they wouldn’t be asking for a ruling but the ACCC has the discretion to decide if this move is a fair response to online fraud. To complete their analysis the ACCC requested submissions by 2 May 2008 from any interested parties. This included a large number of responses, including but not limited to, an online petition which at the time of submission had 12,490 signatures and responses from major concerns such as American Express, The Australian Banker’s Association, the Reserve Bank of Australia, the Commonwealth Bank, the Australian Securities and Investment Commission and an up and coming competitor who is going to be squashed – Paymate. I admit, the number of submissions was too vast for me to wade through but opening the ones from the most serious players and a random sample of others, I found very little support and a great deal of valid apprehensions.
The ACCC has sought eBay's views on the submissions it has received, and requested that eBay provide these comments by 23 May 2008. So despite eBay Australia stating this is a given, the ACCC not only hasn’t made a ruling, the closing date for response hasn’t even been reached. The ACCC is being very transparent in their dealings with this matter and have links to the submissions made so far and the documentation is vast. Go HERE to their website It is huge amount of information - the eBay submission alone is 75 pages - but it is well worth reading at least some of it. This could make an incredibly serious impact on fair trading on the internet and this should concern everyone who uses eBay.
My personal view is that this is a step in a rather frightening direction but it is up to the ACCC to decide whether to mount a case to prevent this happening based on whether or not they see it as a violation of trade practices. The part of the act that deals with it is Section 47 of the Trade Practices Act (TPA) 1974. It is very long and written in legalese but primarily states the following: Subject to this section, a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing.
So basically the TPA prohibits exclusive dealing if it has the purpose of, or is likely to, have the effect of substantially lessening competition. With this change eBay is seeking to not only lessen competition but eradicate it. The only payment methods that will be accepted, if they are allowed to go ahead, is payment via their own company PayPal, credit card payments that are processed only by their company PayPal or cash on pick up (there are a few exemptions on very high priced goods). How is this not a clear violation of the Trade Practices Act?
If, as in their notice of intention, taking away the customers right to choose how they want to pay for their purchase will only benefit its customers, why is this not being sought for by eBay companies around the world at the same time? My thoughts, this is a test case for worldwide introduction. If the ACCC rolls over and allows this very obvious breach then it has set a precedent for eBay worldwide to follow suit. That is the scariest proposition of all as eBay has massive international presence in online trading.
In their submission eBay states that ‘…any anticompetitive effect of the Conduct is likely to be relatively minor’.
They also state that they ‘understand one of the two biggest reasons that eBay buyers decide not to purchase additional products on the eBay site is “trust and safety issues” including “bad buyer experiences” which are common sources of dispute”.’ It further goes on to state that ‘enhanced security delivered through PayPal’s “closed loop” system is particularly beneficial to buyers’.
In Section 5.10 of their submission they even state that: ‘The Benefit to PayPal users would extend beyond their experience solely on eBay if the mandated use of PayPal on eBay also encouraged them to use PayPal or another secure online payment facility for other online payments’.
In other words, it will help them grow their online payment business external to eBay…but it’s all in the customers’ best interest.
Now don’t get me wrong, I do believe there is a risk of fraud when dealing with online transactions in environments like eBay and PayPal is a proven secure payment system. BUT, I also believe the consumer has the right to choose if the benefit outweighs the risk and also who they wish to use and how they wish to make or receive payment. PayPal is not the only secure online payment facility but it is the only secure online payment facility owned wholly by eBay.
Now how about if they own the only payment system you can use, they then remove the eBay listing fee? That would be fair but of course that would seriously reduce their profit margin because at the moment they do charge twice if you are a seller choosing to use the PayPal system. But currently the seller has the choice whether they want to participate in a payment system that may make their transactions safer and PayPal is NOT the only system that is secure. By taking the route they are now, eBay is effectively forcing] sellers to pay twice. If you are small potatoes and are only selling items with a small margin for profit, for example used books, clothing etc, these fees will eat a hole in your profit that after taking into consideration, postage, handling, time etc would render it quite worthless. Therefore, either sellers will increase costs to buyers to cover these expenses by ramping up postage and handling fees, or we will have a diminished pool of sellers because it will not be worth their while.
If you are still unsure as to how dubious this is these are just a couple of snippets from the submissions to the ACCC.
The Australian Securities and Investment Commission, in their submission, stated that PayPal was a secure method of payment but to my utter surprise also included the following paragraph which I found very disturbing: ‘…unlike most AFS licensees that provide banking and 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 applying to the payment services industry, and covers fundamental issues concerning consumer rights, security, disclosure and resolution of mistaken and unauthorized payments.’
The Commonwealth Bank stated: ‘The Fact that PayPal is a subsidiary of eBay Inc is germane to this debate as is the clear commercial benefit that will accrue to PayPal as a result of this initiative.’
I’m not telling you how you should feel about this issue but I think people should be informed as to what is going on. I signed the petition against it. It will absolutely prevent me from the ‘bits and pieces’ selling that I currently participate in. I am hoping that the ACCC sees sense and intervenes to allow us, the sellers and consumers, the choice to make our own decisions and to not let such a major player get such a huge stranglehold in a market which will prevent new businesses getting a foot in the door and deny existing small players the opportunity to grow.
So how is this allowed to happen? Well although eBay Australia has announced on its site that these changes will be made, the truth is they have put forward a notification of intent to the Australian Competition and Consumer Commission (ACCC) which has yet to be ruled upon. eBay has asked for immunity against legal action from the Trade Practices Act arguing that the public benefits of the move, which in their view would be increased transaction security, outweighs any negative effect to the public that might be caused by a lessening of competition in the online payments market. The act prohibits companies from imposing restrictions on people's freedom to choose whom they deal with.
Obviously it is a breach of the current act or they wouldn’t be asking for a ruling but the ACCC has the discretion to decide if this move is a fair response to online fraud. To complete their analysis the ACCC requested submissions by 2 May 2008 from any interested parties. This included a large number of responses, including but not limited to, an online petition which at the time of submission had 12,490 signatures and responses from major concerns such as American Express, The Australian Banker’s Association, the Reserve Bank of Australia, the Commonwealth Bank, the Australian Securities and Investment Commission and an up and coming competitor who is going to be squashed – Paymate. I admit, the number of submissions was too vast for me to wade through but opening the ones from the most serious players and a random sample of others, I found very little support and a great deal of valid apprehensions.
The ACCC has sought eBay's views on the submissions it has received, and requested that eBay provide these comments by 23 May 2008. So despite eBay Australia stating this is a given, the ACCC not only hasn’t made a ruling, the closing date for response hasn’t even been reached. The ACCC is being very transparent in their dealings with this matter and have links to the submissions made so far and the documentation is vast. Go HERE to their website It is huge amount of information - the eBay submission alone is 75 pages - but it is well worth reading at least some of it. This could make an incredibly serious impact on fair trading on the internet and this should concern everyone who uses eBay.
My personal view is that this is a step in a rather frightening direction but it is up to the ACCC to decide whether to mount a case to prevent this happening based on whether or not they see it as a violation of trade practices. The part of the act that deals with it is Section 47 of the Trade Practices Act (TPA) 1974. It is very long and written in legalese but primarily states the following: Subject to this section, a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing.
So basically the TPA prohibits exclusive dealing if it has the purpose of, or is likely to, have the effect of substantially lessening competition. With this change eBay is seeking to not only lessen competition but eradicate it. The only payment methods that will be accepted, if they are allowed to go ahead, is payment via their own company PayPal, credit card payments that are processed only by their company PayPal or cash on pick up (there are a few exemptions on very high priced goods). How is this not a clear violation of the Trade Practices Act?
If, as in their notice of intention, taking away the customers right to choose how they want to pay for their purchase will only benefit its customers, why is this not being sought for by eBay companies around the world at the same time? My thoughts, this is a test case for worldwide introduction. If the ACCC rolls over and allows this very obvious breach then it has set a precedent for eBay worldwide to follow suit. That is the scariest proposition of all as eBay has massive international presence in online trading.
In their submission eBay states that ‘…any anticompetitive effect of the Conduct is likely to be relatively minor’.
They also state that they ‘understand one of the two biggest reasons that eBay buyers decide not to purchase additional products on the eBay site is “trust and safety issues” including “bad buyer experiences” which are common sources of dispute”.’ It further goes on to state that ‘enhanced security delivered through PayPal’s “closed loop” system is particularly beneficial to buyers’.
In Section 5.10 of their submission they even state that: ‘The Benefit to PayPal users would extend beyond their experience solely on eBay if the mandated use of PayPal on eBay also encouraged them to use PayPal or another secure online payment facility for other online payments’.
In other words, it will help them grow their online payment business external to eBay…but it’s all in the customers’ best interest.
Now don’t get me wrong, I do believe there is a risk of fraud when dealing with online transactions in environments like eBay and PayPal is a proven secure payment system. BUT, I also believe the consumer has the right to choose if the benefit outweighs the risk and also who they wish to use and how they wish to make or receive payment. PayPal is not the only secure online payment facility but it is the only secure online payment facility owned wholly by eBay.
Now how about if they own the only payment system you can use, they then remove the eBay listing fee? That would be fair but of course that would seriously reduce their profit margin because at the moment they do charge twice if you are a seller choosing to use the PayPal system. But currently the seller has the choice whether they want to participate in a payment system that may make their transactions safer and PayPal is NOT the only system that is secure. By taking the route they are now, eBay is effectively forcing] sellers to pay twice. If you are small potatoes and are only selling items with a small margin for profit, for example used books, clothing etc, these fees will eat a hole in your profit that after taking into consideration, postage, handling, time etc would render it quite worthless. Therefore, either sellers will increase costs to buyers to cover these expenses by ramping up postage and handling fees, or we will have a diminished pool of sellers because it will not be worth their while.
If you are still unsure as to how dubious this is these are just a couple of snippets from the submissions to the ACCC.
The Australian Securities and Investment Commission, in their submission, stated that PayPal was a secure method of payment but to my utter surprise also included the following paragraph which I found very disturbing: ‘…unlike most AFS licensees that provide banking and 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 applying to the payment services industry, and covers fundamental issues concerning consumer rights, security, disclosure and resolution of mistaken and unauthorized payments.’
The Commonwealth Bank stated: ‘The Fact that PayPal is a subsidiary of eBay Inc is germane to this debate as is the clear commercial benefit that will accrue to PayPal as a result of this initiative.’
I’m not telling you how you should feel about this issue but I think people should be informed as to what is going on. I signed the petition against it. It will absolutely prevent me from the ‘bits and pieces’ selling that I currently participate in. I am hoping that the ACCC sees sense and intervenes to allow us, the sellers and consumers, the choice to make our own decisions and to not let such a major player get such a huge stranglehold in a market which will prevent new businesses getting a foot in the door and deny existing small players the opportunity to grow.
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they'll probably get away with it because of their size and nobody will do anything about it like with supermarkets and petrol.
Comment by Bianca S
I do however, agree that the consumer ultimately should have the right to choose how they would like to pay!!!
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Comment by Morgan Bell
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it would be better if people still had the choice, if customers want to waive security and risk their funds i dont see the harm in letting them?
Comment by Hatchy
Good Blog Cheryl
Comment by Cheryl J
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eBay originally had its own payment system called Billpoint which it bought in 1999. Ironically, its major competitor was PayPal who eclipsed Billpoint to the point it was abandoned. So rather than try and beat the opposition eBay decided to buy it in 2002 for $1.5 billion.
When local player Paymate first began in 2001 it was launched on eBay with its full support and was even listed as an 'eBay recommended payment service', one of many payment options, on their site. However, when eBay purchased PayPal in 2002 Paymate was informed that eBay Australia would no longer be able to promote Paymate as a payment option. Subsequently all references to Paymate were removed from the eBay Australia website.
I guess we should have seen then that this was the beginning of the end of competition on their site.
Comment by Cheryl J
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Comment by Cheryl J
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I have a huge problem with the double billing that will now be forced onto everyone. You're right, that is why people often put 'for overseas buyers only'. I did the same thing when I realised how much it was costing me when selling. As I said above, this will definitely stop me from being a seller, it's just not worth the effort and I really am incensed at paying the same company twice.
Unfortunately, I too have a feeling that they will get away with it.
Comment by Cheryl J
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Thanks for the comment. I agree that PayPal is a safe option when buying and as a buyer I will often choose it when it's available. As a seller, it is very expensive for low cost items. I have no objection to the assertion that PayPal is trusted, I have an account with them but I cannot advocate the removal of all other options. It is very tyrannical.
Comment by Cheryl J
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Comment by Cheryl J
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First thanks for the compliment. I got really engrossed researching it.
As for the fees, the system is basically, the lower your entry price, the lower your listing fee but you also risk selling at a low price. Them's the breaks. eBay also take a percentage of your final selling price.
So the fee structure works like this. Listing prices start from 30 cents for an item with a starting list price of under $1on a no frills, no photo, basic listing and then up to $3.50 for items over $400. It's very hard to sell anything without a menu photo etc and all of these are additional fees.
The final price is 5.25% of the closing price for items under $75. From $75 to $1000 it's 5.25% of the initial AU$75.00 plus 2.75% of the remaining closing price. For over $1000 it's 5.25% of the initial AU$75.00 plus 2.75%of the initial (AU$75.01 to AU$1,000.00) plus 1.50% of the remaining closing price.
The PayPal fees are more complicated. There are withdrawal fees if the amount you wish to transfer to your bank account is under the set amount for your country. In Australia it is only free to transfer to your bank if the amount in your PayPal account is over $150, otherwise it's $1 a pop just to access it. Plus you may get charged for the EFT from your own bank. You are also charged a conversion rate if you receive payment from another country.
It is actually quite difficult to ascertain the transaction fees as they are assessed on each account. This is from the PayPal site: It's always free to send payments using your PayPal account. Personal accounts can receive a limited number of credit or debit card funded payments per year and are assessed a transaction fee. To view your Personal account limit, log in to your account and click the View Limits link.
Confused yet?
Anyway, once you take into account the listing fee, the final selling fee, the $1 charge to transfer your money to your bank and any funds transfer fee your bank may impose you can see why low profit sellers and sellers of small items wouldn't find it worth their while. It won't impact too heavily on higher priced items. Small fry are the ones who will be hurt, as usual.
Comment by Cheryl J
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I agree totally. It's the eradication of competition that irks me the most. They could easily give users the choice and still stay within their own guidelines.
I think statistically one in four transactions on eBay uses PayPal anyway so they are the payment method of choice but for the reasons I've outlined above they should not be the only option. It is plain greed and the power of monopoly that is the driving force behind this, hidden behind the mask of consumer protection.
Comment by Mountain Fog
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good post old bean!
fog
Comment by Whitney
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They're going to end up like Wal-Mart and taking over web businesses.
Comment by Louie
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Yet another example of corporate greed i imagine, mind you i hear they were doing this because Austalian banks are greedy on fees,......fighting greed with greed,hmmmmm how corporate!!!!!
cheers
Louie
Comment by Kdthestrange
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I'd read about the scam on several news sites but they had little more than the bare essentials.
I really think ebay is shooting themselves in the foot- this may be better for buyers but will really hurt sellers unless they find a way to lower fees.
I read in one of the news articles that companies like paymate and buypal (or something like that) had requested that ebay state why their payment option were considered unsafe for buyers.
It'll be good to see a response.
Comment by Jason King
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They must be astronomically well off at this stage!
My Ebay account is suspended at the moment because they want $90- seller fees but am arguing they promised free "relisting" fees on unsold items. Ggggrrrrrr
Comment by Cheryl J
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Hi Whitney, I know what you mean if you have to add more into your costs they get part of that too. I'm an avid eBay buyer and was really getting into the selling side but this has completely turned me off. Too little result for too much effort.
Hi Louie, I could understand it if it was eBay that was getting the one getting hit with sizeable bank fees (still no reason to obliterate competition) but because the money was transferring from one users bank account to another's it was the user paying transfer fees anyway. It doesn't really make sense to me. I guess thay are so big now they don't care about the small users because the big users are where the money is at for them. Corporate greed seems to have no limit
Hi KDthestrange, thanks, I think I found my inner private investigator while researching this. It will be interesting to see if they respond at all. Unless the ACCC forces their hand I think they will just shut up. They did put a very long spiel in their notification as to why PayPal was the safest option, it had something to do with the Buyer Protection Program that they have - where they cover up to a certain amount - that the competition doesn't offer or something to that effect. But, I know my credit card company has a similar policy of cover for fraud so that blows that theory out of the water.
Holy Cow Jason, they've double charged you as well! I got hit with fees from supposed free relistings too. I seriously hope all of this blows up in their collective faces. Bastards
Comment by Morgan Bell
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Comment by Cheryl J
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That's the funniest thing I've read all day. I had no idea, I have a program that blocks the ads, sneaky huh!
Maybe some nice people will click so that I get paid. In the year 2076 I might be able to make enough to pay one of my eBay seller fees.
Comment by Cheryl J
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Now it's really getting interesting...