PayPal: Two weeks for eBay to respond

9/05/2008 at 11:30

eBay have just two weeks today to respond to hundreds of concerns lodged with the Australian Competition and Consumer Commission (ACCC) regarding their proposed exclusivity deal with PayPal. With some 350 odd submissions it’s going to be a busy time for them.

Many of the submissions are from eBay users complaining that they want choice for eBay payments, and in fact the crux of many complaints is simply that they’ll have to pay PayPal fees on top of their eBay fees. In reality this is a lessor concern for larger businesses trading on eBay as they’ll already be paying banking or merchant account fees for each transaction anyway.

One of the most interesting submissions come yesterday, from the Australian Bankers Association (ABA). It addresses two main points – firstly the exclusion of PayPal’s competitors from a large segment pf the market, i.e. eBay. Currently they state 50% of transactions on eBay’s Australian site occur through PayPal, with the next most popular payment method being bank transfer, followed by cheques and money orders. As in the UK whilst there are alternative payment methods they are either used very rarely or are banned from eBay as an unsafe payment method.

It’s the second point that is most interesting though, the ABA assert that exclusivity on eBay for PayPal will give it a “slingshot” effect and unfair advantage for non-eBay transactions. As buyers will be forced to sign up for a PayPal account when using eBay they’ll naturally then find it more convenient to use PayPal rather than sign up for alternative services in the future.

The ABA state “Even banks, which might otherwise be expected to develop their competing services with comparable features to PayPal may be deterred from doing so”. Once PayPal gains an unassailable market position their market share is predicted to be 65% of all Australian ecommerce transactions, should exclusivity on eBay become ratified.

In conclusion the ABA say “Clearly, the public benefits are exaggerated or illusory” and finish with the warning that PayPal would be “able to increase fees and charges to eBay users.” In reality (for the UK at least) PayPal have lowered fees in recent years, although it’s a legitimate concern.

It’s worth noting that other site with third party sellers such as Amazon have their own exclusive payment method and they too are opening up their payments for off-Amazon transactions. If their off-Amazon business becomes substantial they too could face similar issues in the future.

Whatever the outcome of the ACCA ruling it’s going to an interesting time for the online payment industry.