15/5/2008 - The Courier Mail...
eBay rules turn users off
Article from: 
By Jennifer Dudley
May 14, 2008 12:00am
EBAY is one of the internet's biggest success stories.
Starting in 1995 with the sale of a broken laser pointer, the online auction house has flourished into one of the world's most powerful companies, raking in billions of dollars each year and attracting 83.9 million active members.
Such is its popularity that more than 115.3 million items are up for auction at any given time, and about 6.9 million new items are added each day. The company estimates that users trade $2175 worth of goods each second.
In enabling sales between countries, eBay has opened up a rich cross-border trade in everything from antiques to electronics, breaking cultural barriers and sometimes good taste.
After all, who would know about the Virgin Mary's appearance on a decade-old grilled cheese sandwich without eBay?
But eBay's success could soon turn sour in Australia. eBay Australia is about to introduce controversial, world-first payment regulations that are already angering buyers and sellers alike, and are being investigated by the Australian Competition and Consumer Commission.
Even eBay officials admit the new rules will see some users abandon the website, and they recently hosted meetings with members across Australia to avert a potential boycott.
The firm claims it is making the changes to improve users' safety and reduce the rates of online fraud, but not all buyers are buying into its reasoning.
Some eBay users say the company is creating an online monopoly with the changes, as well as double-dipping on fees.
The new regulations will restrict how a buyer can pay for an eBay item.
From May 21, sellers will have to offer PayPal on all eBay listings, in addition to other payment methods.
But on June 17, the regulations will tighten further. Sellers will only be allowed to offer PayPal or cash-on-delivery as payment methods. All other forms of payment, including bank deposit, Australia Post money order and bank or personal cheque, will be banned from the website.
Using PayPal will cost sellers money. Credit card payments through PayPal attract a fee of up to 3.4 per cent of the money transferred plus a fixed 30¢ fee or more if money is received from overseas.
These soon-to-be compulsory PayPal fees will be in addition to the fees eBay charges sellers to list their items on the site, and the fees payable if their items sell.
Given that eBay owns PayPal, and could benefit financially from extra charges, it is easy to see why eBay users are critical and even angry about the changes.
Alastair McGibbon, eBay Australia's trust and safety director, says he has been experiencing this wrath firsthand.
McGibbon, along with eBay Australia vice-president Simon Smith and PayPal Australia managing director Andrew Pipolo, met eBay users in Melbourne, Sydney and Brisbane last week to explain the changes.
Their reaction, he admits, was less than welcoming. Some attendees yelled and booed at the eBay officials, while others asked tough questions.
"It's an emotive issue when you talk about fees, but (sellers) need to be rational and look at how it affects their businesses," McGibbon says. "There are going to be some sellers who leave the site and there will be some buyers who will leave the site. There is clearly the potential for this to be not a revenue-positive exercise for eBay in the short-term.
"Our job is to try and educate them on why this is best."
Despite the newly compulsory fees, McGibbon says eBay's new rules are not financially motivated but are designed to reduce the number of fraudulent eBay transactions and misunderstandings on eBay.
McGibbon says eBay's "internal numbers" show buyers who use PayPal are four times less likely to have a problem with their trades, due to fraud, miscommunication or any other issue.
"Really, this research shows that your payment method is the most important determinant of whether you will have a problem with your transaction," he says.
Though he cannot reveal data to back up this claim, McGibbon says eBay would have been irresponsible not to act on it for the sake of eBay buyers.
Problems with other payment methods, he says, include buyers mistyping bank account numbers, sellers failing to identify bank deposits and the threat of forged cheques and money orders.
Sharing bank account details can also heighten the risk of identity fraud, he says.
By eliminating these methods of payment, McGibbon says eBay will reduce the number of bad experiences buyers endure. This should keep them coming back to the site, which can only be good for sellers, he says, regardless of extra fees.
In addition, PayPal's Buyer Protection will also be increased to insure items up to $20,000, up from $3000 – a move that Internet Industry Association chief executive Peter Coroneos says should increase buyer confidence online.
However, eBay Australia is acutely aware of the potential legal issues involved in forcing its members to use its own financial services company.
McGibbon says eBay "approached the ACCC prior to the announcement" to explain its position, and law firm Deacons filed an "exclusive dealing" notification with the ACCC following the announcement, asking its changes to be immune from the Trade Practices Act.
The Act prohibits companies from imposing restrictions on who its customers deal with, whether those restrictions involve an outright ban or substantially lessen competition.
In eBay's notification, Deacons partner Calum Henderson argues that the changes will not substantially lessen competition and adds: "In any event, any detriment to the public which may be caused by a lessening of competition as a result of the policy would be outweighed by the significant public benefits that would be likely to result from the move."
The ACCC granted eBay immunity in the interim, as per its policy, but asked for public submissions to inform its ultimate decision.
The Reserve Bank of Australia recently responded, arguing the move "restricts choice for consumers", restricts "merchants' abilities to negotiate lower fees" and could limit competition in the online payments market.
More than 200 eBay users also made submissions and few were favourable. Some claim eBay is creating an "abhorrent denial of freedom of choice" and an undesirable monopoly .
Others are concerned the changes will detrimentally affect their incomes.
Antique book trader Graeme J. Moore, an eBay seller for more than three years, says he is concerned his elderly customers will be disinclined to use PayPal and are often geographically unable to pay in cash.
". . . eBay is obviously trying to gain market domination with a payment service they own," he writes.
Brisbane small business trader Daniel Gibney, who has been selling on eBay for seven years, has also set up an online petition to protest against the payment changes. More than 12,000 members have signed it so far.
More worrying for eBay, some members appear to be looking for alternatives.
Philip Druce, managing director of Australia's second-largest auction site OZtion, says the rate of new memberships has risen dramatically since eBay's payment policy announcement – from 250 new members a day to 650.
"We've found we've had a lot of new members come across, especially people who don't want to be restricted in the payment methods they offer," he says. "Our statistics show that 79 per cent of buyers use direct deposit and those buyers obviously are going to be forced to use PayPal and pay an extra 2.4 per cent on the transaction amount (if they stay at eBay)."
Druce, who founded OZtion with Kelvin Yip in 2005, says the auction site will continue to offer buyers a wide range of payment options including bank deposit, PayPal, credit card, cash-on-delivery, cheques, money orders, escrow, wire transfers and Paymate, an Australian internet payment rival to PayPal.
Whether the controversial changes to eBay Australia will inspire traders to go outside eBay Australia will be watched closely, locally and abroad.
Last month eBay United Kingdom forced its members to offer PayPal on all listings from last month, but will not ban other payment methods.
McGibbon admits eBay Australia's move is a "bolder" change, a world first, and a move that will undoubtedly be watched closely by all of eBay's 38 outposts.
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