Steve Hodgkinson
Australia: a tale of eBay, PayPal and third-line forcing
The Australian government's competition watchdog has issued a draft ruling denying eBay the right to foist PayPal onto its buyer and seller customers. When does cross-selling become evil - and even illegal? When customers no longer have a choice, comments Steve Hodgkinson. An interesting skirmish in the eternal quest for commercialisation of online services is going on in Australia. eBay is attempting to require that its customers, both sellers and buyers, use PayPal to settle the bill in its online auctions. In justification, eBay claims that PayPal offers customers better security than other payment channels. All well and good, except that eBay also owns PayPal - and of course benefits from PayPal's payment processing fees. Sounds evil to me, and this is a view shared by a rising mob of disgruntled eBay customers in the normally peaceful garages and lounge rooms of Australia 's online auction bazaar. eBay notified the Australian Competition and Consumer Commission (ACCC) on 11 April that it proposed to implement the changes in two stages. From 21 May 2008, all sellers were required to offer PayPal as one of their accepted payment methods. The second stage is due to commence today, 17 June 2008, with the requirement that all transactions on eBay must be paid for using PayPal or cash on pickup. The Trade Practices Act in Australia forbids what is called 'third-line forcing' - a heavy-duty form of cross-selling: “You can buy this from me, but only if you also buy this other thing from this other company.” Third-line forcing is blocked when the government believes that it materially restricts competition and consumer rights. Australian law is similar to that of the US and EU in this regard, so this case is a bellwether for eBay's ambitions in the Northern Hemisphere. Technically, what has happened is that eBay has lodged what is called an exclusive dealing notification with the ACCC to obtain immunity from court action for its proposed actions. Immunity is conferred automatically when the notification is lodged. If, however, the ACCC takes exception to the proposed action on the grounds that it substantially lessens competition, and does not deliver a net public benefit, it may issue a draft notice proposing to revoke the notification. The ACCC issued the draft notice on 12 June. The Chairman, Graeme Samuel, stated “The ACCC acknowledges that having PayPal as the only payment provider has the potential to deliver some benefits to users, such as increased buyer protection insurance in certain circumstances. However, the ACCC believes that consumers are in the best position to decide which payment method is most suitable for them. The notified conduct denies them that choice. Accordingly, the ACCC considers that these benefits do not outweigh the anti-competitive effects of the conduct."Samuel required that eBay delay its proposed requirement for buyers to use PayPal until the ACCC delivers a final ruling on the matter. eBay and interested parties now have time to lodge submissions in response to the draft notice, before the ACCC decides whether to issue a final notice revoking the notification. This will be an interesting test of the extent to which a market dominant online services provider can require that its customers also use services provided by its other subsidiaries and related companies.
