Government regulators in Australia have told eBay to hold off on plans to move to a PayPal-only marketplace in Australia on June 17, 2008. The Australian Competition and Consumer Commission (ACCC) said it believes consumers are in the best position to determine whether, for their particular transaction, PayPal offers the best features in terms of security, fraud protection, dispute resolution and insurance, at the price offered. It also said that having a single payment provider on eBay may reduce the incentive for other payment systems to develop more secure and cost effective systems.

The ACCC issued the draft notice on June 12 proposing to revoke a notification lodged by eBay International A.G. on April 11, 2008. The ACCC took into account 650 submissions by buyers and sellers as well as by online payment providers; financial industry participants and organizations; the Professional eBay Sellers Alliance; government authorities; and consumer and community associations. The ACCC also sought information from eBay's main competitors, including OZtion and Sensis, which operates the Trading Post online classifieds site.

ACCC Chairman Graeme Samuel issued a statement published in an ACCC press release on Thursday. "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." While the organization believes a PayPal-only policy has the potential to deliver some benefits to users, such as increased buyer protection insurance in certain circumstances, it believes that "consumers are in the best position to decide which payment method is most suitable for them."

The ACCC said 650 eBay users - half of them from buyers - sent submissions with the overwhelming majority of them opposed to the notified conduct. They raised concerns regarding restriction of choice, increased fees and issues associated with PayPal's security, dispute resolution and customer service.

Interested parties identified themselves as follows: approximately 5% were PowerSellers (i.e. sales average greater than $2000 per month); approximately 50% were regularly buyers on eBay approximately 33% were sellers.

The agency noted that the second largest online marketplace after eBay is OZtion, which "is currently not a significant competitive constraint on eBay," and said " the threat of effective new entry into the supply of online marketplaces in Australia is low." It cited "powerful network effects" as significant barriers to competition.

The ACCC examined the supply side and demand side market in Australia, and concluded that "the evidence available suggests that there are few, if any, close demand side or supply side substitutes for online marketplaces offering a combination of search, list and transaction functions."

"The ACCC is concerned that the notified conduct will allow eBay to use its market power in the supply of online marketplaces to substantially lessen competition in the market in which PayPal operates," Samuel said.

eBay implemented the PayPal only in two stages. From May 21, 2008, all sellers on eBay were required to offer PayPal as one of their accepted payment methods. eBay said it would require that all transactions be paid for using PayPal or cash on pickup beginning June 17.

"In light of the serious competition concerns raised in the draft notice and the significant concerns raised by interested parties, I have asked eBay to delay implementation of the second stage of the conduct until a final decision is made by the ACCC," Mr Samuel said.

Daniel Feiler, the Head of Community & PR for eBay Australia & New Zealand, responded via email to an inquiry about the ACCC draft notice: "eBay is currently assessing the ACCC draft notice and will make further comment following the review process."

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.

The full ACCC draft notice is available in PDF format on the AuctionBytes website:
http://www.auctionbytes.com/pdf/eBay_Draft_Notice.pdf

Comment on the AuctionBytes Blog:
http://blog.auctionbytes.com/cgi-bin/blog/blog.pl?/pl/2008/6/1213272308.html

Note: article updated Thursday morning to include statement from eBay Australia.