eBay guarantee PayPal 80% of post split payments

eBay PayPal Split smeBay have filed an amended registration statement regarding PayPal Holdings, Inc, setting out more terms of the pending divorce of the two companies.

eBay/PayPal performance fines

One of the most notable clauses is what happens if the continued use of PayPal as a payment service on eBay rises or falls. The answer is restitution of $13million.

For each percentage point that the Penetration Rate exceeds the Baseline Rate (80%) PayPal will make a payment to eBay at an annualized rate of $13 million. In the event the Penetration Rate falls below the Baseline Rate by an amount up to 5%, eBay will make a payment to PayPal at an annualized rate of $13 million per percentage point decline.

PayPal fees for eBay sellers

The operating agreement will require PayPal to offer comparable eBay merchants pricing for PayPal’s payment services in the lowest twentieth percentile of rates charged to comparable non-eBay merchants, as defined in the agreement“. If that legal mumbo jumbo leaves you bemused, rest assured that it means PayPal rates for eBay merchants will remain largely consistent with today’s pricing relationship.

In addition if PayPal offers to non-eBay merchants any term that is more favorable than the terms currently offered to eBay merchants then they’ll be obliged to offer the same deal to eBay merchants.

Non-compete and compete

The agreement bans eBay from creating a competing payments system, and PayPal from developing a competing marketplace. However what it does do is free PayPal up to chase a deal with the likes of Amazon or Alibaba, and likewise give eBay the flexibility to bring other payment providers on to eBay (although the performance fines above would kick in if the thresholds were breached).

If you’d like to read the entire SEC filing it’s available online.