eBay drops requirement to include PayPal option, opens site to more payment competition

The Australian Competition and Consumer Commission has dropped a probe into online auction house eBay after the site decided to finally abandon a requirement that sellers use eBay’s wholly-owned payment provider PayPal as a payment option.

The move has been welcomed by other internet retailers, including rival group PayMate, which called on the ACCC to investigate eBay two years ago for what it said was an anticompetitive proposal.

eBay Australia said yesterday that from July 14, it would no longer require sellers to include PayPal as a payment option. Instead, sellers have the option to use PayPal, smaller rival PayMate or merchant credit cards.

The decision comes after years of controversy, with eBay at one point proposing the elimination of all payment options except for PayPal and cash-on-delivery.

While eBay has argued over the past two years that using PayPal is necessary to protect consumers from scamming, the ACCC has said it would limit sellers’ choices when using the site and block competition from rival payment providers.

“The ACCC welcomes the action taken by eBay which gives eBay sellers further choice as to the payment system they use, while ensuring consumers are offered safer payment options by all eBay sellers,” ACCC chairman Graeme Samuel said in a statement yesterday.

“The ACCC acknowledges eBay’s cooperation with the ACCC’s inquiries and appreciates the work done by it to address our concerns.”

eBay first proposed that sellers would be forced to use PayPal for all transactions back in 2008, arguing sellers would be protected from scammers by doing so. Under this proposal, other payment options including bank deposits were to be scrapped.

But eBay dropped that plan after a huge backlash from users and regulators. Sellers were permitted to offer a limited number of alternative payment options, but were still required to offer PayPal as a payment option.

Now, the site will no longer require sellers to include the PayPal option.

The ACCC said that while it had not formed a final view on eBay’s PayPal requirement, it believes the site’s decision will allow members greater flexibility when choosing payment options.

“It is not customary for the ACCC to refer to investigations that are not in the public arena, however a substantial number of complaints have been received about certain eBay policies which affect the offering and acceptance by eBay traders of online payment services.”

“The ACCC considered a large amount of information as part of its investigation and considers this is an appropriate outcome.”

Dilip Rao, chairman of rival payment group PayMate, says the move is a step forward for competition and will allow sellers the most amount of choice when distributing their goods on eBay. He says this is crucial, as a number of Australian online retailers use eBay as a major source of commerce.

“We have been fighting this battle for two years. eBay is the biggest online marketplace in Australia, blowing everybody else away by a mile. If you want to be involved in ecommerce in Australia, you simply have to be on eBay.”

“The problem is that the current provisions don’t give sellers much room to move in saying “pay me a different way”. Nobody else has had a look in until now, so we welcome the decision.”

Rao says they took the position with the ACCC that unless eBay offered private options as well, the market was closed and PayPal was at an advantage. Additionally, he feels that significant damage may already have been done.

“I think there are probably a number of people who have left eBay because they didn’t want to be straight jacketed because of the options. There are alternatives, the ACCC has said so, and scrapping this requirement will enhance the whole experience.”