[Milsurplus] More New eBay Garbage... Update

[J Forster]

SAN JOSE, Calif. (AP) — EBay Inc. is exploring whether to require
customers to use its online payment service PayPal, a move that has
angered users and prompted antitrust scrutiny in Australia, where a
PayPal-only rule takes effect next month.

It's unclear whether eBay will institute a similar policy in the United
States and other countries. However, the online auction company often
tries big changes in smaller markets before expanding them worldwide,
and says it is open to that in this case.

"We are going to take learnings from it and apply them accordingly,"
said eBay spokesman Usher Lieberman.

EBay says it wants to reduce disputes and restore trust in its
marketplace with the PayPal-only plan. Because eBay and PayPal can share
information on each transaction, eBay says use of PayPal allows it to
stop fraud more efficiently than outside payment services. Pressing that
safety argument in a heated discussion with Australian users, an eBay
executive compared the new rule to banning the sale of heroin on street
corners.

But critics lament that PayPal is costlier than other payment options,
and they suspect eBay is just interested in increasing PayPal's revenue.
Australian banks say the plan will eliminate competition for the sake of
exaggerated benefits.

"Competition will be restricted, innovation and development will be
constrained, new entry will be discouraged and PayPal will be able to
increase fees and charges to eBay users," the Australian Bankers
Association said in a filing with regulators Thursday.

Because eBay sellers are commonly independent merchants who don't accept
credit cards, PayPal acts as a go-between. Buyers use their credit cards
and bank account information to make payments, and PayPal relays the
funds to sellers' PayPal accounts, charging them 30 cents plus a
commission — up to 4.4 percent in Australia. The second-most common
method of payment on eBay Australia, bank transfers, cost 20 cents each.

Australia's bankers group says PayPal is not as immune to fraud as eBay
claims. While PayPal does keep bank and credit card account information
secret between trading partners, the bankers group decried that it does
not verify identity as banks do.

EBay's financial reports indicate that PayPal, while hardly fraud-proof,
is getting better at cracking down. Its loss rate is 0.24 percent, down
from 0.33 percent a year ago. That means that for every $100 transacted
with the service, PayPal has to eat 24 cents because of fraud. That is
slightly lower than the rates seen in credit and debit card transactions
involving the top 20 online retailers, said Avivah Litan, a payments
security analyst with Gartner Inc.

EBay contends that when users opt for methods like bank transfers, their
transactions are four times more likely to result in a disputed payment.
EBay says reducing that risk will attract new buyers to the site.



And, the company adds, it doesn't stand to profit directly from the
PayPal rule. It claims its investments in new buyer protections could
outweigh any gains from increased PayPal fees. For instance, under
Australia's new plan, if a buyer doesn't get what he or she paid for via
PayPal, eBay will refund the buyer up to 20,000 Australian dollars
($18,600).

To make the PayPal rule possible, eBay has applied for — and
automatically gets — immunity from Australia's anti-monopoly Trade
Practices Act. But the Australian Competition and Consumer Commission,
which is investigating, could revoke that immunity if it finds the plan
will harm the marketplace. A decision is expected soon.

Critics say eBay is just trying to fatten its bottom line. Growth in
eBay's core auction listings has slowed in recent quarters, pushing eBay
to expand other parts of its business, which includes PayPal,
classifieds sites and online telecommunications service Skype. And eBay
has already taken other steps viewed as protecting PayPal, such as
banning Google Inc.'s rival Checkout service on alleged safety concerns
months after it was launched in 2006.

Sellers in Australia are "absolutely furious" and resent that they are
subjects of an experiment, said Phil Leahy, president of the 600-member
Australia chapter of the Professional eBay Sellers Alliance.

Leahy sells DVDs, movies and CDs through eBay, a high-volume, low-margin
business. He says using PayPal instead of bank transfers would cost him
$4,700 per month, based on his January sales numbers of $332,000. "It's
the difference between making money and not making money," he said.

Leahy estimates Australian buyers use PayPal about 50 percent of the
time — eBay would not confirm the figure — versus an 85 percent rate in
the United States. He said bank transfers are used in 30 percent of
transactions. The rest are conducted with bank and personal checks,
money orders, or cash on delivery, all of which are banned under eBay's
new plan unless the payments are exchanged in person. That happens
rarely.

Shaun O'Brien, a seller of home theater accessories, said many
Australians trust their banking system more than online services like
PayPal. He worries buyers will leave when they are deprived of a choice.

"Australians here have been heavily educated against putting credit card
details online," O'Brien said. "There are plenty of customers out there
that refuse to use PayPal."

The Australian experiment could lead to a less-stringent step: Perhaps
eBay will require all sellers to at least offer PayPal as a payment
choice. No matter how it turns out, however, eBay surely has more big
plans for PayPal, which has grown steadily since the auction company
bought the payment service in 2002. Last year it accounted for $1.9
billion in revenue, 25 percent of eBay's total.

In fact, eBay's top e-commerce executive, Rajiv Dutta, PayPal's former
president, said last year he was convinced PayPal would someday be
bigger than eBay's better-known auction and marketplace business.