Australian eBayers are up in arms over a new policy by the company to accept only PayPal as payment for online auctions. The fact that eBay owns PayPal is causing critics to charge a conflict of interest, and the new rule is being widely protested by professional eBay sellers in Australia.
eBay seems to be experimenting with the PayPal-only policy, and company representatives have admitted that if all goes well in Australia, eBay may become PayPal-only in larger markets like the European Union and the United States. But Australian eBayers are saying “not so fast!”
The biggest reason for the outrage amongst Australian eBay users is simply…price. The most common method of payment and Australia is by direct bank transfer. Australian banks routinely charge approximately $.20 US per transfer, regardless of the amount of money being paid. Compare that to PayPal’s rates, which can be as high as 4.4% of the total purchase price in Australia. This means that selling a more expensive item incurs a much higher money transfer fee through PayPal than by ordinary bank transfer.
In Europe as well, the direct bank transfer (or bank gyro) is the most common method of payment for goods and services. It’s not surprising then, that Europeans are watching closely to see how eBay’s PayPal-only rule plays out in Australia.
The fact that eBay owns PayPal out right is causing many to see a conflict of interest in the policy, and to suggest that the company is trying to set up a monopoly to increase their bottom line. eBay defends this charge by suggesting that PayPal payments are safer, and help the company reduce the risk of fraud and abuse in the system.
Overall though, it seems that many economists and financial experts (as well as eBay power sellers) are not buying this argument, noting that both credit cards and bank transfers also have significant fraud protection in place. There’s also no denying that eBay stands to profit from the PayPal-only rule, and even the Australian Competition and Consumer Commission is investigating the new policy, and could potentially revoke eBay’s anti-trade immunity if it finds a conflict of interest, or decides that the new policy disrupts normal competition in the marketplace.
This is not the first time in eBay has found itself in hot water over free trade practices, or with its professional sellers. In fact, the company has been progressively alienating many eBayers over the last several years; first by raising their sellers fees, then by charging additional fees for photo hosting, and now by cutting into its seller’s bottom line by insisting on PayPal-only payments for online auctions.
If this trend continues, eBay may find many of its biggest sellers opting out altogether. Because while eBay is certainly the largest online auction site in the United States — and in most countries where it competes — it is by no means the only online auction service. The company would do well to remember that it is their power sellers that actually bring in the income, and they have made eBay the profitable corporation is today.
When ebay bought PayPal, their plan at that time was to phase in the online payment portal as the sole gateway for handling money — they’re just following up with their plan, wether Australians like it or not.
The PayPal component, it’s worth saying, is a very convenient alternative for both parties so perhaps even the Australians will eventually like it.
Comment by Claude Gelinas — July 4, 2008 @ 8:41 am