27 June 2008 Dr Richard Chadwick General Manager

27 June 2008
Dr Richard Chadwick
General Manager
Adjudication Branch
Australian Competition and Consumer Commission
23 Marcus Clarke Street
Canberra ACT 260 1
Dear Dr Chadwick,
eBay International AG exclusive dealing notification N93365
OZtion suppo~.tsthe proposal by Australian Competition and Consumer Commission
(ACCC) to revoke the exclusive dealing notification lodged by eBay International AG
(~RQY).
OZtion is an Australian C2C (consumer to consumer) online auction site and is
currently the second largest online auction site in Australia. OZtion offers Australian
and New Zealand sellers an online sales platform to trade with buyers. The site
currently hosts over 750,000 simultaneous items for sale, has over 290,000 registered
members and attracts over 1 million unique visitors per month. OZtion commenced
operations in 2005 and has the experience, systems, support and infrastructure in place
to provide Australians with a viable alternative to eBay.
OZtion has set out below further information about online marketplaces in Australia
and its comments on eBay's proposal to require eBay users to offer and use PayPal.
Online marketplaces in Australia
Some of the market share data set out in the ACCC's draft Notice is not current and
understates OZtion's current market position.
In terms of market shares by number of items listed, below is a chart setting out
current market shares based on number of listed items:
# o f Items Listed
Others, 0 04m
1%
OZtion
Trading Post
AussieBids
eBid Australia
13 Bang4bucks
ta BidSell
eSwap
Auctionbidz
El DOLA
4sale2buy
OZBlD
Consumer choice and payment security
OZtion agrees with the ACCC's conclusion that eBay's conduct will result in a
detriment by preventing consumers selecting the payment method they prefer, whether
that choice is based on security, cost, accessibility or other matters. Further, OZtion
does not believe that it is necessary for consumers to use PayPal in order to minimise
"bad buyer experiences" on online marketplaces.
OZtion believes the best approach is to provide consumers with information about
alternative payment methods, including the relative safety of those methods, and then
allow consumers to make an informed decision as to what method(s) best suits their
requirements.
In accordance with this approach, OZtion includes information about safe trading and
safe payment methods on its site and the advantages and disadvantages of each of
these different methods. Links to OZtion's Safe Trading Guidelines are provided to
buyers at each stage of the transaction process:
Safe Trading Centre
(httl): i~~\vw.o/tio~i.com.au
cont~.n~'001
2005:hel11 com~non:safctradingisafctra
dili~ccntre.i?spx)
Safe Trading Guidelines
(Iit~p:l~\\;\i~w.o~tion.com.a~r~contcnllOO
12005~hel~~cornnion~tri~dc~a~c~as1~~)
Payment Methods (compares each payment method)
(http:/ww\v.oztion.co~n.a~~iconte~it~OO
12005!lielp!Buv~~aynienttypes.aspx)
Buyer Protection
(httl,: \c\t u .o/tinn.cotn.ai~content 00 1 200T1hcluco~n~nonisafctracli~i~!~L~i~yc~~~
rotection.aspx)
Buyer Shield
(http:~~w~~~\~.oztion.co~~~.au/'conterit'O
I200S/heIpicommon1safetrading/buyers
Iiicld.nsps)
OZtion recommends the following safe payment methods for buyers: C.0.D
(Australia Post service), credit card, Paymate and PayPal. These payment methods all
have some form of recourse in place for the buyer (pay on pickup I credit card charge
back I buyer protection I complaint procedure). PayPal is no safer than any of these
other safe methods. Other available payment methods that are categorised as "not
safe" include bank deposit. cheque, money order and cash in mail.
I-Iowever, it is important to note that payment method is only one aspect of safe
trading. As such, OZtion's approach to safer trading also includes seller identity
checking (see further:
h t t ~ ~ : i i \ vw.oztion.com.au
u
contentlOO13005iheIuim~account~verifiuser.aspx
).
Further, "safe" and "not safe" payment methods are only an issue when buyers are
dealing with a seller that they are of unsure of. If a buyer is confident in dealing with
a seller then the actual payment method becomes less of a concern. For example,
when a buyer has previously dealt with a seller they may be comfortable to use any
payment method. Similarly, for those sellers with a good transaction rating history the
payment method is usually less of a concern. OZtion's internal statistics reveal that
direct deposit is the preferred payment method for the majority of buyers. Direct
deposits have the advantages of convenience, accessibility, immediacy and, in most
cases, are fee free.
Impact of eBay's conduct
OZtion is concerned that eBayls proposed conduct will have an adverse impact on
consumers, online marketplaces and online payment methods. These concerns apply
to both the first stage of eBay's conduct, namely requiring sellers to offer PayPal,
which has already been implemented by eBay; as well as to the proposed second stage
whereby eBay will require sellers to only use PayPal.
OZtion shares the concerns expressed by other market participants that eBay's conduct
may create a disincentive for innovation in online payment methods that could lead to
improved security, accessibility and service for consumers. OZtion is further
concerned that eBay, by requiring all its users to offer PayPal, will undermine existing
payment methods for online marketplaces. Requiring all eBay users to offer PayPal
will reduce the likelihood of users opening accounts with other payment providers.
OZtion is also concerned that requiring sellers to use PayPal creates a disincentive to
those sellers to use other online marketplaces. Whilst PayPal does not currently
discriminate in the level of fees it charges for eBay and non-eBay use, it does
discriminate in the level of protection offered. Non-eBay purchases have "Buyer
Complaint Policy", whilst eBay purchases have "Buyer Protection". Under the Buyer
Complaint Policy:
"PayPal will make its best efforts to recover your paymentfrom the seller, but
recovely ofyour pay~tientis not guaranteed. Your recovery is limited only to
the amounts that PayPal is able to recoverfiom the seller."
Accordingly, if PayPal is unable to recover the payment from the seller then no
recourse is offered. In contrast, under the Buyer Protection policy for eBay purchases
whilst PayPal will first attempt to recover payment fiom the seller, if it is unable to do
so it will pay the buyer the maximum amount ofcoverage for which their transaction
qualifies. This may be up to $20,000 if eBay's proposed conduct is implemented. See
further I~ttps:i!~~ww.pavp;.~I.co~niau!cgibin;\~cbscr?cmd-p/~!ciilaiDolicvb ~ ~ v ccon~~laint-nutsidc;
r
h t t p s : . ' ~ w \ ~ ~ v . p a ~ ~ a l . c o ~ ~ ~ ~ a ~ ~ ~ ~ ~ i - b i r i v e s c rpbp-outside.
?c~iid=eniuaolic
In relation to the "network effects" discussed by the ACCC in the draft Notice, it is
also important to note the impact of eBayls restrictions on the use of user feedback.
The eBay User Agreement (clause 8) provides that feedback is owned by eBap and
that members cannot show their eBay feedback on other marketplaces nor can they
show feedback from other marketplaces on eBay (see:
http:~i~agcs.cba\;.co~~i.au!hclp/policics/uscr-a.~~~ccni~nht~il?
~rksid-11130).This
operates as a strong disincentive for many members from using other online
marketplaces as they cannot take their good record with them, nor can they use good
feedback from other sites on eBay. User feedback is important and valuable
information for users of online marketplaces. As noted above, where sellers have a
good transaction histo~y,safety will generally be less ofa priority when choosing
between alternative payment methods.
OZtion believes it is not fair to require sellers to incur the additional costs of using
PayPal to sell goods on eBay. In relation to this additional expense, it is important to
note that PayPal fees are not subject to GST. For sellers who conduct reasonably
significant levels of business on eBay, this adds to the cost to them of using PayPal as
they are not able to claim GST input credits on PayPal fees.
If the ACCC would like any further information about any of the matters set out
above, please do not hesitate to contact Philip Druce on the details below.
Kind regards,
Philip Druce
General Manager
OZtion Pty Ltd
r-
I
EXCLUDED FRsl:.",-.
PUBLFC EEG;SS E 2