eBay to delay roll out of PayPal-only system in Australia - Update

(RTTNews) - Online auctioneer eBay Inc. (EBAY | Quote | Chart | News | PowerRating) said Friday that it would delay plans to roll out the PayPal-only policy in Australia to pay for deals on its auction site until July 15, after the government's fair-trading regulator, the Australian Competition and Consumer Commission, ruled that it would reduce competition. The new policy was due to come into effect next week.

Australia was the first place where eBay was planning the PayPal-only system, a change from the company's practice of testing big changes in smaller markets before expanding them worldwide.

The San Jose, California-based eBay's proposal would have required customers to pay using PayPal for items bought and sold on the site. Although cash on delivery or pick-up would still be acceptable, most other payment methods would be barred. eBay's move would also have imposed extra costs on sellers as PayPal charges a fee to accept payments via the service. This would be in addition to auction charges.

The Australian Competition and Consumer Commission, or ACCC, however, issued a draft ruling on Thursday and blocked eBay's move citing its "anti-competitive effect". While the ACCC's final decision is pending, it is unusual for draft rulings to be reversed once they have been issued.

Commenting on the ruling, the ACCC Chairman Graeme Samuel said, "The ACCC is concerned that the notified conduct will allow eBay to use its market power in the supply of online marketplaces to substantially lessen competition in the market in which PayPal operates."

The plan had "the potential to deliver some benefits to users such as increased buyer protection insurance in certain circumstances." "However, the ACCC believes that consumers are in the best position to decide which payment method is most suitable for them," he said.

eBay, which has more than five million registered customers in Australia, said that it was disappointed with the ACCC decision. "EBay believes the consumer benefits of this initiative are worth fighting for on behalf of its buyers which will ultimately benefit sellers," the company said in a statement.

The company believes sharing of information between eBay and its own PayPal on each transaction will allow it to stop fraud more effectively than other payment services.

Meanwhile, eBay's rival, The Trading Post, which launched its own online auction site last month, said that eBay's decision to challenge the ACCC's ruling shows that it is "blatantly disregarding the needs" of its local buyers and sellers. The Trading Post is a print and online classifieds business owned by Telstra's Sensis Classifieds division.

For the recently closed first quarter, eBay had reported 22% earnings growth, driven by a 24% rise in revenue, helped mainly by marketplaces' net transaction revenues, the ongoing expansion at PayPal, Skype and its global classifieds unit.

EBAY is trading at $28.58, up $0.50, or 1.78%, on a volume of 2.33 million shares.

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