“A tying arrangement is defined as "an agreement by a party to sell one product but only on the condition that the buyer also purchases a different (or tied) product, or at least agrees he will not purchase the product from any other supplier."

• eBay disallows the use of any other viable payment alternative or concurrent product

There are 2 more levels, but I think the point is clear- this service offers no real value to eBay sellers due to both the fees and the monthly limits.  This method is just as disingenuous as the international services being presented as payment service options.  Keep in mind eBay's statement under unacceptable service: Payment through online payment methods not specifically permitted in this policy. Unless eBay specifically states a method is acceptable then by default it is unacceptable.

Unacceptable options
AlertPay.com, anypay.com, AuctionChex.com, BillPay.ie, ecount.com, cardserviceinternational.com, CCAvenue, ecount, e-gold, eHotPay.com, ePassporte.com, EuroGiro, FastCash.com, Google Checkout, gcash, GearPay, Goldmoney.com, graphcard.com, greenzap.com, ikobo.com, Liberty Dollars, Moneygram.com, neteller.com, Netpay.com, paychest.com, payingfast.com, Payko.com, paypay, Postepay, Qchex.com, rupay.com, sendmoneyorder.com, stamps , Stormpay, wmtransfer.com, xcoin.com

There is an option on the forbidden list that is highly valuable to both Buyers and sellers within eBay, due to its global brand recognition and service reliability- and that is of course Google Checkout.  eBay's justification for banning the use of Google Checkout was the methods untested security, however it has been two years and eBay has not changed their position and as demonstrated has continued with the ban of Google Checkout by eBay members.

eBay's reasonning for this policy: in their own words

 

   

 

      

• In the US culture, wide spread use of cashier’s checks and money orders for online purchases are simply not that common.- These payment methods are too inconvenient for the modern American consumer who prefer to use Credit Card & online payment services. eBay -in their exclusive dealings notification submitted to Australia's accc early this year (2008)- acknowledges the preference for these payment methods for online purchases as opposed to checks or money orders:
  
• http://www.accc.gov.au/content/trimFile
  

PayPal, Bpay and direct deposit are generally used as online

payment mechanisms. Paying at the shop cheque or money order are skewed toward offline

purchases. 

• eBay perpetually warns members that it is risky and of course if they choose that payment method they can forget about receiving any help in recovering their loss from eBay- there is not a eBay.com exclusive buyer or seller protection - you must use PayPal.  eBay's buyer protection policy essentially does nothing other than tell the member to contact the other party and to use the dispute console.  The eBay buyer protection page also informs the buyer if they paid with PayPal they can file a dispute with PayPal and of course informing the member that with PayPal they would be covered from 200 to 2000 dollars of loss.  http://pages.ebay.com/help/tp/isgw-buyer-protection-steps.html 

• The habitual message from eBay Inc. to eBay members is they cannot trust their trading partner so they better use PayPal for their own protection, because again eBay will not help if something goes wrong

• eBay continuously and without providing any credible evidence touts that PayPal is the safest payment option- how many users would agree with this statement?

• eBay has begun to slowly enforce the use of PayPal only into the market- special eBay selected category seller can only offer PayPal, any one with less than 100 feedbacks received must only offer PayPal, and anyone who is not meeting eBay’s standards must only offer PayPal (and of course are further punished by money holds)

• 97% of items sold on eBay.com offer PayPal as a payment method. Any seller actually wanting to make a sell will accept PayPal otherwise they won’t have success – bidpay is no longer an option so those few transactions that might have occurred certainly won’t now. If you are going to sell on eBay or are already entrenched within eBay than you are being forced to purchase eBay’s other product PayPal.

• The eBay community includes 83.9 million active registered users from around the world, making it the most popular shopping destination on the Internet.(http://www.ebaymainstreet.com)

• Over 768,000 professional sellers in the U.S. use eBay as a primary or secondary source of income. Another 1.5 million individuals sell on eBay to supplement their incomes. Thousands of additional businesses save money by purchasing equipment and supplies on eBay.(http://www.ebaymainstreet.com)

• 97% of all transaction on eBay offer PayPal as a payment method(http://www.ebaymainstreet.com)

• At any given time, there are approximately 115.3 million listings worldwide, and approximately 6.9 million listings are added per day.(http://www.ebaymainstreet.com)

• In Q1 2008, Gross Merchandise Volume, the value of all successfully closed listings on eBay worldwide, was $16 billion. Total GMV for 2007 was more than $59 billion. Currently, more than $2,040 worth of merchandise is sold on eBay every second. (http://www.ebaymainstreet.com)
  

• · Refer to the above- I would call that not an insubstantial portion of interstate commerce

• eBay sellers are tied to purchase from the supplier (PayPal) to the exclusion of the opportunity to purchase similar products from another supplier of the product

• eBay owns PayPal which is the tied product that must be purchased to the exclusion of any other provider offering similar products/service if a seller wants to successfully sell or continue to sell on eBay successfully

• eBay Inc.>eBay marketplace & PayPal (same owner)

• eBay Inc> eBay Marketplace & PayPal offer a product that is geared toward restricting outside competition thus allowing eBay Inc. to acquire revenue for all aspects related to the selling of products within the marketplace and the processing of those transaction exclusively through PayPal
  

• In economics and especially in the theory of competition, barriers to entry are obstacles in the path of a firm which wants to enter a given market.

• Banning other viable payment methods, disallowing consumer choice, disproportionate market share (to the extreme) causing an unusual frequency of usage of the product/service among consumers in the relevant market.

• Over 768,000 professional sellers in the U.S. use eBay as a primary or secondary source of income. Another 1.5 million individuals sell on eBay to supplement their incomes. Thousands of additional businesses save money by purchasing equipment and supplies on eBay.(http://www.ebaymainstreet.com)

• Distributor agreements - Exclusive agreements with key distributors or retailers can make it difficult for other manufacturers to enter the industry.- unfortunately this isn’t an agreement but rather extortive forcing of the product to be used exclusively by members selling within the eBay marketplace. Exclusive agreement- if you want to sell on eBay you must agree to use PayPal to the exclusion of any similar product

• Network effect - When a good or service has a value that depends on the number of existing customers, then competing players may have difficulties in entering a market where an established company has already captured a significant user base.
• Confirmed active registered users worldwide at the end of Q1 2008 totaled 83.9 million (http://www.ebaymainstreet.com)
  
• Over 768,000 professional sellers in the U.S. use eBay as a primary or secondary source of income. Another 1.5 million individuals sell on eBay to supplement their incomes. Thousands of additional businesses save money by purchasing equipment and supplies on eBay. (http://www.ebaymainstreet.com)
  

• Losses to society- sellers and buyers

• Monopolization of markets resulting in prices being out of equilibrium (i.e. higher prices)
• Rigid organizational structure, having much the same shortcomings as the socialist economy (cf. John Kenneth Galbraith's works), etc...
• Monopoly on intermediate components (with opportunity for price gouging) leads to a throwaway society
  

• Over 768,000 professional sellers in the U.S. use eBay as a primary or secondary source of income. Another 1.5 million individuals sell on eBay to supplement their incomes. Thousands of additional businesses save money by purchasing equipment and supplies on eBay.(http://www.ebaymainstreet.com)

• 97% of all transaction on eBay offer PayPal as a payment method (http://www.ebaymainstreet.com)

• In Q1 2008, Gross Merchandise Volume, the value of all successfully closed listings on eBay worldwide, was $16 billion. Total GMV for 2007 was more than $59 billion. Currently, more than $2,040 worth of merchandise is sold on eBay every second.(http://www.ebaymainstreet.com)

Ebay, Google's top advertiser, pulled its ads from the search giant's site after Google announced that it would hold a party Thursday night in Boston, where eBay had planned activities that evening as part of its Live! 2007 conference, a gathering of the auction site's devotees. The planned Google celebration devolved into a Boston tea party of sorts, with eBay dropping Google ads in protest of the search engine's party poaching. Google then backed off, canceling its shindig. EBay played it cool, announcing that its ad purchases were halted as part of a routine test of marketing options. Cynics responded that anyone who bought that claim should check to see if eBay might be auctioning off a bridge in Brooklyn.Google vs. eBay: Round One

Friday, Jun. 15, 2007 By JEREMY CAPLAN

• Receive payments funded by PayPal Balance, PayPal Instant Transfer or PayPal eCheck
  

• 2.9% + .30 transaction fee
• Receive payments funded by Credit Card, Debit Card or Buyer Credit
• 2.9% + .30 transaction fee
• International fees
• 3.9% + 2.5 % of the of exchange rate + .30 transaction fee (https://www.paypal.com/us/cgi-bin/webscr?cmd=_display-xborder-fees-outside&countries)

• If you advertise with Google AdWords, you will also be eligible for free transaction processing for some or all of your Google Checkout sales each month. For every $1 you spend on AdWords each month, you can process $10 in sales the following month for free through Google Checkout

• So for every dollar I spend on adwords (again I already use and pay for PayPal) I would be able to process 10 dollars in sales free of charge.

• For example in the Month of July 2008 I would have been able to process sales up 1463 dollars without any fees.

• However, because I am forced to use PayPal I have had to absorb 2.9% + # of .30 (fees) in processing fees for the 1463 dollars of total funds processed that if allowed to use Google Checkout would not have cost me anything – just a benefit (note that it is a benefit of using their other services) for using what I already use.

• Of course the international transactions are much higher than Google Checkout, and again PayPal offers me no additional benefit!

• Over 768,000 professional sellers in the U.S. use eBay as a primary or secondary source of income. Another 1.5 million individuals sell on eBay to supplement their incomes. Thousands of additional businesses save money by purchasing equipment and supplies on eBay.(http://www.ebaymainstreet.com)

• 97% of all transaction on eBay offer PayPal as a payment method (http://www.ebaymainstreet.com)

• The eBay community includes 83.9 million active registered users from around the world, making it the most popular shopping destination on the Internet.(http://www.ebaymainstreet.com)

• The massive volume of eBay members using the PayPal payment service due to lack of other opportunities allowed in the eBay marketplace has allowed PayPal to advance in the ecommerce market at unusual- in fact remarkable pace.
• PayPal is convenient because you don’t have to input any information for transactions as is needed with merchant payment methods. PayPal’s massive user base is a direct result of the eBay marketplace usage – and as pointed out above is forced usage (either direct or as a result of eBay’s manipulation of the perception of eBay members created and compounding the notion that buying members cannot trust their trading partner) 
• eBay Inc.'s Direct and undeniable activities to prevent Google Checkout from entering the payment service market by using the eBay user base as hostages and extorting Google Inc. by pulling eBay’s Ad usage to strong arm Google to prevent them from offering their product Google Checkout to eBay members. The reality that we were already banned from offering Google Checkout service for eBay marketplace transaction further demonstrates eBay’s mafia style approach to controlling the consumers who sell and purchase in the eBay Marketplace in an effort to preserve their monopolistic reign over both the eBay market and as they gained footing in the rest of the e-commerce market effectively eliminating any opportunity for competition. 

SAN FRANCISCO--E-commerce payment company PayPal has grown organically on the back of eBay, but apparently no longer.

PayPal President Scott Thompson said here at the RBC Capital Markets conference Wednesday that by year's end, his company will derive more total payment volumes from its Merchant Services than from eBay buyers and sellers. Merchant Services is the name for the payment software PayPal provides to third-party sites like Starbucks, Delta Airlines, and American Outfitters.(In the last quarter, eBay buyers and sellers---long the bread and butter of PayPal's business--racked up about 51 percent of the payment volumes.)

That's a big shift for a company that was bought by eBay only six years ago.

"We've had organic growth with eBay, but as merchants migrated off the eBay platform (by building their own sites), they've brought us with them," Thompson said while speaking to a group of fund managers and venture capitalists at RBC's technology, media, and communications conference.

That trend also couldn't come sooner. PayPal is facing increased competition from the likes of Google's Checkout and newcomer Amazon.com. eBay's retail rival, Amazon, recently introduced an e-commerce payment service called Checkout by Amazon.

To be sure, Thompson was giving a virtual sales pitch to investors. But the story is impressive. PayPal now serves 33 percent of the top 100 e-commerce sites {and the entire eBay.com user base} in the United States, according to Thompson. In the second quarter, PayPal reported net revenue of $602 million, a 33 percent rise from the previous year. And it reported a total payment volume in the quarter of more than $14 billion, or 35 percent growth.

PayPal's international picture is also promising. He said the company expects that growth overseas will put PayPal's international business over that of its U.S. business next year. "By the back half of 2009, the international business will exceed our North American business."

As for mobile, PayPal has been investing in the market for the last three years, but the company's offering hasn't caught on in the United States, Thompson said. As a result, the company changed its mobile strategy in the last year. It plans to focus on bringing services to underdeveloped payment markets. Those might include China or Russia, which don't have robust electronic infrastructures.

"In Russia, lots of people stand in line to pay their bills every month. That's a perfect use case for PayPal," he said.

August 6, 2008 4:19 PM PDT

PayPal branches out from eBay's money tree

Posted by Stefanie Olsen 

• The large base of users resulting from the massive user base of eBay has spread the demand of PayPal into the ecommerce market. If someone already has a PayPal account and they see it as a payment option they are more likely to do so than to hunt down the credit card and punch in the data. The disallowance of Google Checkout has prevented the opportunity for e-shopping consumers to have a choice of convenient payment methods.
• eBay in the last few months has begun a coupon discount program in the name of customer retention- oddly that is the customers of their customers eBay sellers, which I find interesting given the eBay marketplace selling platform neglects to offer any function for sellers to create their own buyer retention programs- and cannot even discount their customers beyond the shipping fee - example if I want to discount my customer's invoice by 50% eBay's system does not allow for it, which is very interesting given the rational for this coupon program is in the name of buyer retention.  The natural implication is the purpose of the coupon is acquisition rather than retention- a new PayPal user for if the eBay user didn't already have a PayPal account than with a coupon similar to the picture of the one I received could be very effective in acquiring a new PayPal customer.  Of course eBay projects that it is for the best eBay buyers, but the question is how many of those buyers are now new PayPal. users? 

• A common practice of monopolistic behavior is to gain and control the market by creating barriers of entry for those seeking to enter the market.  Advancing user base with coupons with the intent to boost the market share of eBay's tied Product PayPal further entrenches the e-commerce market in using the PayPal payment service effectively stamping out any opportunity for possible competitors to enter the market outside of eBay as described in the abstract below:
  

Abstract: This paper introduces the concept of “exclusionary bundling.” Under exclusionary bundling, a firm with market power in good A and facing actual (or potential) competition in good B prices an A-B bundle in a way that makes it impossible for equally-efficient one-good rivals selling B to compete. Exclusionary bundling has a foreclosure effect similar to that of predatory pricing, but the two practices have important differences. Unlike traditional predatory pricing, the exclusionary behavior need not be costly to the firm. The intuition is that under predation, the firm actually has to charge a price below cost and thus loses money that it later has to recoup. Under exclusionary bundling, the firm only has to threaten to raise its unbundled prices if the bundle is not bought. All customers are led to buy the bundle and so the threat never need be carried out.

Exclusionary Bundling

by

Barry Nalebuff

An important factor to note is these coupons are not for eBay's customers the sellers- meaning they are not giving their customers discounts for the purchase of their services (listing the product, store subscription fees, Final value fee commissions) they are giving coupon's to eBay selling members' customers if they pay through eBay's PayPal - the tied product.

In a nut shell eBay is robbing both merchants who are essentially forced into usage due to the unusual demand of the service due to PayPal being the only real available option until a competitor is able to break the barrier. I ask you – if Google Inc. has not been able to achieve entry into the online payment service market who can?