Law Report

Internet auction giant eBay is under scrutiny from the competition regulator. It wants to force all its Australian buyers and sellers to use just one method of payment. Is this a restrictive trade practice or a consumer friendly move?

Transcript

This transcript was typed from a recording of the program. The ABC cannot guarantee its complete accuracy because of the possibility of mishearing and occasional difficulty in identifying speakers.

Damien Carrick: Today we're looking at a legal revolution in Japan, a revolution where authorities are using soap operas and TV ads as part of a campaign to sell the public the virtues of jury duty.

Man: In Australia, UK, and the United States, we have this trend of going away from juries, and here seems to be something so counter to the trends we are seeing in other parts of introducing a jury to a country that, albeit it did have one for a brief period, hadn't had one for 60 years.

Damien Carrick: Selling Japanese law reforms, that's later.

First to selling stuff and buying stuff online.

Worldwide, the internet auction industry is dominated by eBay, and right now here in Australia, eBay is under scrutiny from our competition regulator. You see, eBay wants to force all its Australian buyers and sellers into using just one method of payment, the PayPal system, which eBay happens to own. Is this a restrictive trade practice, or a consumer-friendly move to improve security? The issue is firing up eBay users.

[Montage of blogs from The Australian...]
It's as big a scam by eBay as the scams they're pretending to defend us from.
Their fees will now lose my business.
PayPal rocks, I don't understand you guys. Get over it. Online, instant payment is the way of the future...
Forcing PayPal down Australian throats creates extra cost and no extra value. If this happens, I refuse to use eBay. eBay, smarten up.
Time to look for an alternative to eBay. Evil-Bay's days in Australia are numbered.
[Song: 'I bought on EBay']

Damien Carrick: Comments of irate bloggers on the website of The Australian newspaper.

Alan Davidson is a lawyer and University of Queensland academic. He says eBay is using the small Australian market as a giant guinea pig. If it gets the green light from Australian regulators, it will roll out these same restrictions globally.

Alan Davidson: EBay is massive. EBay turns over $US44 billion per year. Their profit from that is a substantial amount of money. There are some figures that say there are 273 million users, there's another place I saw it was 140 million registered users.

Damien Carrick: How do people buy and sell and transfer funds?

Alan Davidson: That currently is more of a private arrangement. Typically they can do it with a money order, they can use cash on delivery, they can make arrangements with credit cards... But what has been a popular option, and certainly an option encouraged by eBay, is to use PayPal, and one reason they encourage it is eBay owns PayPal.

Commercial: If you're one of the millions of Australians who are doing it, it's important that you use protection when shopping online. To practice safe shopping online, use PayPal. PayPal protects you in lots of different ways. It keeps your finances ...

Alan Davidson: PayPal is a mechanism whereby you pay money to PayPal, they have a guaranteed system of safety, so they say, and then once a certain amount is deposited, the seller is assured of payment using that particular mechanism. PayPal charges between 1.1% and about 2.5% for their services.

Damien Carrick: Just recently, eBay have announced that from June, payment options will be radically restricted from a whole range of options, down to, I think, paying by PayPal. What's going on here?

Alan Davidson: Their announcement is that this will occur in two stages. On 21 May, everybody selling an item on eBay must include as one of the payment options, PayPal. But after 17 June, the only payment option they can use will be PayPal. It's indeed what could be described as a severe restrictive trade practice. It's not entirely new, because they have experimented with requiring PayPal in other countries for limited items such as health and beauty items and certain computer items, but they're doing it en masse in Australia as an experiment.

Damien Carrick: So from here on in, people won't be able to buy and sell using, say, direct deposits in bank accounts, or money orders or personal cheques—those options will no longer be available?

Alan Davidson: Those options will no longer be available. I should add that there are some exceptions to it, so large-money and ticketed items like motor vehicles, boats, motorcycles, aircraft, trucks, caravans, real estate and businesses are exempt from that.

Damien Carrick: EBay say that there are very strong security reasons for implementing this change. They say that you are four times less likely to have a dispute over a purchase if you pay using PayPal as opposed to other forms of payment.

Alan Davidson: Many people would disagree with that. There are PayPal Sucks sites on the internet, there's a book called The PayPal Wars, there are many disgruntled users out there. Perhaps that's to be expected because there have been millions of people who have used PayPal and it only takes a small percentage of people to be disgruntled for that to reach the internet and the presses. If you go to the internet you can read blog after blog after blog of people who have had problems with PayPal.

[Montage of blogs from The Australian]
Just greed, greed, greed. EBay is no longer value for your money. Bye bye eBay.
I've been using EBay for over six years with 5,000 sales and 300 buys, and the only problems I've ever encountered with payments have been when I use PayPal.
EBay has been rapidly destroying its reputation by gouging its sellers and taking the buyers for granted. FeeBay is more like it.

Alan Davidson: One of the problems has been that the company PayPal don't really want to have a consumer feedback session, they deliberately hid their telephone number and they just did not want to know about the problems. It was perhaps a 99% success, but there is a significant problem for certain people.

Damien Carrick: Now is Australia the first market in the world where eBay is trialling these new restrictions, this new payment system?

Alan Davidson: On this basis, on this global basis, the answer to that is yes. And it is an experiment. If it works in Australia, then that'll be their cue to expand it. If you just imagine this for a moment: a $44 billion turnover, eBay makes a significant amount of money on to sales, but now they requiring their sister company, PayPal, to be the payment choice, and even at 1%, that's $440 million profit a year, but they charge between 1.1% and 2.5%, so they are increasing their profit margin by close to $1 billion annually.

Damien Carrick: Does this move raise any potential legal or regulatory questions?

Alan Davidson: Restrictive trade practices is the first thing that comes to mind. They are telling people that if you use our eBay service, you must use our PayPal service. Part four of the Trade Practices Act deals exactly with these types of issues, in fact Section 47 deals with Exclusive Dealings, where you link one type of service with another service. In fact the two most relevant provisions, one is where you say we require you to use our service, or the reverse position where you are not allowed to use a competitor's service. And a competitor's service could be another type of payment system, such as a system like PayPal, and there are many of those out there on the market. They are not as popular as PayPal, but there are other systems out there.

Damien Carrick: Apparently eBay has approached the ACCC, the Australian Competition and Consumer Commission, and asked for what's known as an exclusive dealing notification. What is that, and why is it asked for?

Alan Davidson: Well if you've been reading the press, you'll see that comments have been made that the ACCC will be keeping an eye on this. Well rather than waiting till the ACCC makes a determination that it is a breach of Section 47, an exclusive dealing, Section 93 of the Act allows for eBay to lodge a notification. It's a good corporate government policy. It is saying to companies out there, 'If you think you might be in breach, tell us and then we will investigate it, and we will make a determination. While we are investigating it, you are deemed not to be in breach of the provision, and even if we decide that you are in breach, you've got 30 days afterwards to reverse that position.'

But it allows this: Part four the Trade Practices Act is not based upon criminal concepts, it's based upon economic concepts. So that it encourages competition, and it says that monopolies and large oligopolies are bad. This allows them to say, Look, in these circumstances, we think PayPal whilst it might be an exclusive dealing, it also has a public benefit. So the ACCC can make a determination that notwithstanding that you are in breach of Section 47, there is a corresponding public benefit and we will permit it.

Damien Carrick: And what kind of corresponding public benefit might that be? The security argument which eBay has been putting up?

Alan Davidson: Yes, that's exactly it. They'll say this is safer and it's four times safer as they have been promoting. 'It creates stability, we have an insurance program in place, it will reduce frauds', and the ACCC is under an obligation at this stage to investigate all that. It's going to be a delicate process because I know from the internet and from past anecdotal evidence perhaps about PayPal that there are a lot of disgruntled people out there. So you can't be persuaded just by that alone, you need to look at the statistics about the number of complaints versus the public benefit. I'm not making a decision one way or the other, and my personal view is that I'm undecided. But I'd like to see those facts and figures that go before the ACCC to see what they will do with it. My gut reaction is that this is terrible. It is a restrictive trade practice, it means we don't have choice, there are many blogs on the internet where people have said 'I've sold 6,000 items on eBay and I will never use them again.'

Damien Carrick: But it's big business, so they need to get their business strategy right.

Alan Davidson: It is huge business. It is billions of dollars, yes. And their experiment in Australia, if they can get around our restrictive trade practice laws, then they might be able to get around the American anti-trust laws in a similar way.

Guests

Dr Alan Davidson,
Lawyer and academic University of Queensland

Presenter

Damien Carrick

Producer

Anita Barraud

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