01 July 2008
Key Points:
The ACCC is considering the competitive and public benefit effects of eBay's proposal to force customers to either use its online payment system, PayPal or pay for goods on delivery. The ACCC has issued a draft notice proposing to revoke the notification.
Currently, sales on eBay can be completed by using various payment methods including cash, personal cheque, money order, credit card, bank deposit or payment via an online system (such as PayPal).
eBay is proposing to make it mandatory for Australian customers to either pay cash on delivery or use eBay's own online payment system, PayPal. Direct debits, personal cheques or money orders will be forbidden and sellers will be forced to pay PayPal a commission to accept an online payment. Buyers will pay no more to use PayPal.
Since 21 May 2008, sellers have already been required to offer PayPal as one of their accepted payment methods, but the ACCC has requested that eBay delay the second phase of the proposal until the ACCC has completed its assessment of the potential competition and public benefit effects of the proposal. This could take up to a month.
Why did eBay notify the ACCC in the first place?
Exclusive dealing is the imposition of restrictions by a company, on another's freedom to choose with whom, in what or where they deal. Section 47 of the Trade Practices Act 1974 prohibits exclusive dealing if it has the purpose or has or is likely to have the effect of substantially lessening competition.
Under eBay's proposal, customers will be restricted from processing payments for eBay transactions other than through PayPal or paying on pickup, so the exclusive dealing provisions may be relevant.
How does the notification system work?
Businesses may obtain immunity for bundling or "tying" conduct, that might otherwise risk breaching the exclusive dealing provisions of the Act, by lodging a notification with the ACCC. Broadly, (and with certain exceptions) once a notification is lodged with the ACCC, the business is automatically immune from a breach of the provisions, unless the ACCC investigates and revokes the notification.
The ACCC may revoke a notification where it is satisfied that the conduct is likely to have the effect of substantially lessening competition and that in all the circumstances either:
In this way, the notification regime places the burden on the ACCC to investigate and make findings in relation to the notification. Before revoking a notification, the ACCC will issue a draft of its reasons and provide an opportunity for interested parties to participate in a conference to discuss the issues.
Where the ACCC decides to withdraw the immunity, the protection ceases 30 days after the ACCC notifies the business of the decision
What next?
Over 800 submissions have been received, overwhelmingly against the proposal, including a 38-page submission reported to be from Google. Google has its own payment system called "Checkout".
The ACCC raised concerns that the proposal will substantially limit competition in the online payment services market by limiting consumers' choice of payment methods:
"PayPal currently competes with a range of other providers to supply online payment services to users of online marketplaces. If the notified conduct is allowed to go ahead, there will be no competition for the supply of such services to buyers and sellers using eBay. 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."
eBay claims that its proposal will not substantially lessen competition but will instead benefit the public by providing more secure payment options for eBay customers. Users of PayPal do not need to provide the seller with their personal information such as bank account or credit card details and PayPal will act as an intermediary in the event of a dispute. Users of PayPal will be provided buyer protection of up to $20,000 per eligible transaction under the proposal (currently, the limit is $3,000).
If the proposal is implemented, it will be the first time eBay has imposed a mandatory payment method anywhere in the world.
The ACCC is seeking submissions from interested parties until 3 July 2008.
