Bankers slam eBay’s PayPal plan as anti-competitive

The Australian Bankers’ Association and the Reserve Bank of Australia say eBay Australia’s proposal to force Australian customers to use its wholly-owned subsidiary PayPal would lessen competition for online payment services.

The ABA – which counts the big four banks among its 25 members – has urged the Australian Competition and Consumer Commission to block eBay’s  move. It disputes the eBay line that using PayPal will afford users better protection from fraud . “Clearly, the public benefits are exaggerated or illusory…and will be outweighed by those anti-competitive effects as competition will be restricted, innovation and development will be constrained, new entry will be discouraged, and PayPal will be able to increase fees and charges to eBay users.”

The RBA says customers should be given the decide whether PayPal is safer than alternative payment methods. “In principle, competition and efficiency could be enhanced by allowing consumers to weigh PayPal’s security attributes against those of alternative payment methods, while also considering the other attributes of each method. It is possible that, in the long run, this competitive process may achieve safer payment facilities than would be the case if PayPal were the only payment option available.”

The ABA was invited to make a submission by the ACCC, which is trying to decide whether eBay should be granted immunity from prosecution under section 47 of the Trade Practices Act, which prevents action that would substantially lessen competition. The ACCC has received more than 200 submissions, mainly from eBay traders furious with the change.

The ABA estimates that eBay’s move could lock PayPal competitors out of 65% of online auction transactions. “It is also ironic that a site that prides itself on providing its users with the opportunity of shopping around for the best deals and prices, wishes to mandate that its users must use eBay’s own payment service and pay whatever fees and charges PayPal chooses to levy,” the ABA says.

An eBay spokesperson declined to make a response to the ABA’s submission, saying it will make a formal response to the ACCC as part of its process and does not want to comment on specific submissions.