eBay PayPal decision under ACCC microscope

The competition watchdog is examining eBay’s decision to require vendors to use the PayPal online payment system to see if it breaches the Trade Practices Act.

The scrutiny by the Australian Competition and Consumer Commission has been triggered by an eBay application for an exemption from competition laws. The move could prevent it forcing vendors to use PayPal.

The Trade Practices Act prohibits companies from engaging in exclusive dealing – in short, where a business will only supply a service to a customer on the condition that the customer won’t do business with a competitor.

eBay has asked the ACCC for an exemption from the prohibition on exclusive dealing because it believes buyers will benefit from the increased security it says PayPal provides.

“PayPal has several features as a payment method that mean that the disputes and ‘bad buyer experiences’ will be substantially reduced or minimised when PayPal is used to process payments for purchases on eBay. The enhanced security delivered through PayPal’s ‘closed loop’ system is particularly beneficial to buyers,” eBay says in its application.

eBay announced its decision to require vendors to use PayPal, a wholly-owned subsidiary of eBay, on Friday last week. eBay vendors have responded with anger to the decision, which they say will increase transaction costs.