ACCC v eBay

The ACCC has signaled today that it is likely to challenge eBay Australia’s move to require PayPal to be the exclusive payments mechanism for online transactions (well, other than cash).

“Given eBay’s position as Australia’s leading online marketplace, the notified conduct will substantially reduce competition to supply online payment services to users of online marketplaces more generally.

“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.

So let understand this. There apparently is a market for online marketplaces (or trading) that eBay has market power in (OK, fair enough for the moment). But there is another market for the supply of online payment services to users of online marketplaces. It is that market that there will be some reduction in competition in as a result of this. The idea is that if you want to supply online payment services to people trading in an online market place, you are left with other options other than eBay. If that isn’t enough, you are foreclosed.

But are there such things as suppliers of online payment services purely to online market places. Not even PayPal is this. There is BPay, credit cards, bank deposits, cheques and all of the other things that were available to eBay users up until this latest move. And are any one of these going to leave the market for online payment services for online marketplaces (other than eBay) if they can’t be used for eBay? Surely, each is earning their fees from the wealth of other activities both online and in the economy at large. Seems very unlikely that exit will occur but maybe there is some information I do not have.

What is more, the ACCC seems to be stepping in to say that consumers need choice and can exercise that choice and so that is why eBay’s action is anti-competitive. As I noted earlier, I believe that it is for this reason that eBay is stupid. But is it really up to the ACCC to determine that? After all, if there are no competition issues, if eBay think that is what their customers want isn’t eBay both in a good position and also appropriately incentivised to make that determination?

9 thoughts on “ACCC v eBay”

  1. I agree with you on principal. But as an occasional seller let me tell you it can hurt. The combination of eBay’s and Paypal’s fees on one transaction can be quite horrendous.

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  2. Joshua

    You do realize that eBay own Paypal don’t you?

    Doesn’t that make a bit of a difference to your argument?

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  3. JM, yes I did know that. Why else would they have had to notify the ACCC?

    Makes no difference to my argument as to whether or not this will lessen competition.

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  4. Given the grand name of the website, I expected more basic economic logic.

    eBay has overwhelming market power in online auctions, and if it makes PayPal as the monopoly payment vehicle the latter will become de-facto standard. This may not push other payment services out of business, but it will
    – gain market share at their expense,
    – impede new entrants into the market,
    – reduce competition and thus prevent price reduction and service improvement.

    It would be interesting to seen how eBay’s hired-gun economic consultants figure that this is not anti-competitive, but eBay did not make the report public. To me, this speaks for itself.

    The ACCC does not “seem to be stepping in to say that consumers need choice and can exercise that choice”, it is explicitly doing it, as it is a basic part of its charter.

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  5. As an other of an ‘economics’ blog, i would have expected a thorough analysis of the detrimental consequences of ebay’s push to have paypal as the only payment method. if you studied economics at all, you would have some appreciation of what the term ‘MONOPOLY’ means and how it is relevant here. Ebay/paypal are definitely in the best position, relative to the ACCC, in deciding what is in the best interest to both its sellers and buyers, however, in this case it is clearly neither. They are concerned about their bottom line, and pushing all other payment options (please be aware credit cards and banks are not the only deposit taking facilities online) out the window because they want all revenue to flow onto themselves. This is why the ACCC has to step in. They are the regulatory body who monitors such conduct. As single sellers and buyers using their site, we have little power against the giant.

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  6. Joshua: “Makes no difference to my argument as to whether or not this will lessen competition.”

    I can’t see how it won’t. There are several competitors to Paypal in the auction payments market:

    * other companies with similar (web only) models
    * cashiers cheques (which I’ve used a few times)
    * direct wire transfer (which I’ve also used)
    * Western Union (which I avoid like the plague, but I’ve had one seller insist on it)

    All of these have been allowed by eBay in the past.

    There are many people (probably a minority, but nonetheless not small) that refuse to use PayPal and insist on other methods. I spoke to one personally a few years ago and she explained why. Briefly:

    * for sellers, Paypal does not allow them to withdraw their money for somewhere between 7 and 14 days (Paypal make money on the float in the meantime)

    * the charges are too high

    * the payment protection facilities are next to useless, except in narrowly prescribed circumstances.

    She preferred other payment mechanisms, and for large amounts so do I.

    Further, I can’t see how eBay’s lack of power over other, non-auction payment markets in any way alleiviates the concerns re. using it’s monopoly power in online auctions to extend its control over online auction payments. Different markets.

    IANAL but it seems to be that is the sort of thing the US Sherman Act (antitrust legislation) was explicitely designed to prevent.

    eBay have a near monopoly in online auctions (quick, name a competitor), but PayPal are just one of many. eBay are now using their monopoly in auctions to create a new monopoly in auction payments.

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  7. As is always the case when you purchase something from a vendor whether it is online or offline, you are offered choices of standard payments methods that are widely accepted anywhere (e.g. cash, credit card, cheque etc.).

    Ebay’s new decision is the equivalent of Joe’s milk bar forcing his customers to use “Joe’s proprietary payment service” to pay for the goods instead of a standard method of payment (e.g. cash).

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  8. During a recent auction we were credited with winning an item we were bidding for, this was done so by the auctioneer placing the items in my account, won items. During the same auction we won a further 3 items which followed the same format, however the auctioneer then informed me that we did not win the first item as they had sold it at the best interest of the customer. The fact that this item is still in our won items, affected my bidding for other items, and in fact even 3 days after closing the items are still showing as won.
    Is there any recourse we can take to affect this?

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