ACCC knocks back eBay PayPal plan

eBay’s bid to require sellers to use its PayPal online payment system has suffered a big setback following an preliminary decision by the competition watchdog not to approve the plan.

The Australian Competition and Consumer Commission yesterday issued a draft notice rejecting eBay’s application to be allowed to require its sellers to use its proprietary PayPal online payment system.

If allowed to go ahead, there is a real prospect the eBay plan could undermine competition between the various online payment systems that currently vie with PayPal for market share, ACCC chairman Graeme Samuel says.

“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,” Samuel says.

In its reply to eBay, the ACCC acknowledges that the compulsory PayPal plan may produce some limited benefit to buyers by providing them with a higher standard of purchase protection, but says this small advantage is outweighed by the increased costs to users and reduced innovation the move would generate.

“The ACCC believes that consumers are in the best position to decide which payment method is most suitable for them. The notified conduct denies them that choice,” Samuel says. “Accordingly, the ACCC considers that these benefits do not outweigh the anti-competitive effects of the conduct.”

eBay’s decision to mandate the use of PayPal generated a wave of outrage among users of the site, with the vast majority of more than 650 submissions sent to the ACCC by eBay users opposed to the plan.

The ACCC decision will be welcomed by eBay sellers in Australia, Professional eBay Sellers Australia chief executive Phil Leahy says.

“It’s a victory for common sense. We applaud the decision by the ACCC in taking eBay to task on this issue. PayPal is a wonderful product, so why not let the market decide to use it,” Leahy says.

eBay’s announcement of the move earlier this year led to an explosion in interest in rival online auction systems, with competitor sites such as Oztion enjoying an immediate boost in listings.

“We’ve always said buyers and sellers should have a choice of payment method, and now it seems the ACCC also believes they should have that choice,” Oztion general manager Philip Druce says.

Druce denies that the ACCC decision could see a reversal in the flow of new users to Oztion.

“For us it’s business as usual. Even when we started, eBay was the dominant player. We’ve come a long way since then and it was because we offer a great service, not because of eBay payment methods,” Druce says.

A spokesperson for eBay says it is assessing the ACCC draft notice and will make a further statement once it has completed that process.

eBay had planned to start mandatory PayPal from 17 June, but the ACCC has requested that it delay flicking the switch until the competition issues are resolved.

The ACCC will now take further submissions in response to its draft notice until 3 July before making a final decision, likely to be several weeks after that date.

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