Criticism of eBay

eBay has its share of controversy, including cases of fraud (eBay claims that its data shows that fewer than .01% of all transactions result in a confirmed case of fraud), its policy of requiring sellers to use PayPal, concerns over forgeries and intellectual property violations in auction items, and suspending the accounts of other family members for being associated with one suspended family member.

Fraud

One mechanism eBay claims combats fraud is its feedback system.

When a user feels that a seller or buyer has been dishonest, a dispute can be filed with eBay. An eBay account (whether seller, buyer or both) may be suspended if there are too many complaints against the account holder.

Until "June 2008"., eBay allowed Mystery Box and Mystery Envelope auctions; however, these are almost all fraudulent auctions because the seller can manipulate the box contents to make sure it is never a good deal for the buyer. Mystery Envelope auctions offer cash prizes of an undisclosed amount to auction winners. The auction winner usually receives from 10% to 30% of the money he paid for the auction back in 'winnings'.

Professional scammers target new members to take advantage of their unfamiliarity with how eBay or PayPal works. New members can be easily tricked into thinking there is a special Web site they should make payments through (which is in fact a fake site setup by a scammer) or they may be tricked more easily into using a fake escrow company.

Many complaints have been made about eBay's system of dealing with fraud, leading to its being featured on the British consumer rights television program Watchdog. It is also regularly featured in The Daily Mirror's Consumer Awareness page. The complaints are generally that eBay fails to respond when a claim is made.

Frauds that can be committed by sellers include

• selling counterfeit merchandise - see section below for more details;
• shill bidding - see section below for more details;
• selling bootleg merchandise;
• receiving payment and not shipping merchandise;
• shipping items other than those described;
• giving a deliberately misleading description;
• knowingly and deliberately shipping faulty merchandise;
• knowingly selling stolen goods;
• misrepresenting the cost of shipping; and
• shipping at a slower service than that paid for.

Frauds committed by buyers include

• PayPal fraud, namely filing false shipping damage claim with the shipping company and with PayPal;
• Friendly fraud: receiving merchandise and claiming otherwise;
• returning items other than received; and
• the buyer sending a forged payment-service e-mail that states that he has made a payment to the seller's account (an unsuspecting seller may ship the item before realizing that the e-mail was forged).

Fraud is combated by

• third-party businesses, such as CheckMEND, compiling lists of stolen goods from local authorities and businesses so eBay consumers can check to see whether the goods they are buying are stolen; and
• third-party software that could potentially eliminate eBay account

Ebay, however, does not abide by the clearly spelled account protections in the Fair Credit Reporting Act. That act requires the timely release of transaction details to victims of identity theft .. in abject violation of section 609 of the act. by alerting users if they are being tricked into going to a bogus, or "spoof", Web site (see anti-phishing).

Shill Bidding

Shill bidding is bidding that is used to artificially inflate the price of a certain item. It is usually carried out with "shill" account(s), either the seller under an alternate account or another person in collusion with the seller. Shill bidding is prohibited by eBay , and, in at least one high-profile case has been prosecuted by the United States federal government as criminal fraud. However, eBay has been criticised for not doing enough to combat the problem.

Forgeries

It is estimated that about a quarter of all ancient coins and about two-thirds of all antiquities sold on eBay are modern forgeries. In March 2008, Professional Coin Grading Service issued an alert noting counterfeit PCGS slabs and various United States and Chinese coins originating from People's Republic of China being sold on eBay.

In court papers introduced by attorney for jeweler Tiffany & Co., it was claimed that researchers for Tiffany had determined that over 70% of the Tiffany silver jewelry offered for sale on eBay was fake. Tiffany & Co. filed a lawsuit against eBay in 2004 which claimed that eBay profitted from the sales of counterfeit Tiffany items that infringed on its trademark. On July 14, 2008, a Federal District Court judge ruled that eBay does not have a legal responsibility to monitor users selling counterfeit items.

According to experts consulted by the FBI for its Operation Foul Ball and Operation Bullpen sting operations, more than half of all autographed sports memorabilia items are forged. eBay is no exception. In fact, because eBay allows sellers to be virtually anonymous, the percentage of fake autographs sold on eBay may be higher, particularly for the most prominent celebrities and sports stars.

Bootleg DVDs

There have been claims from some disgruntled users that the DVDs some eBay sellers sell are occasionally bootlegs, especially Disney DVDs that have gone "into the vault" (i.e. temporarily discontinued by the company) and not been reissued yet. These out-of-print DVDs are regularly advertised as being on sale at eBay, as well as from other, less controversial sellers. However, according to some users, the other sellers are more likely than eBay to be selling the genuine article, though at a higher price.

Feedback system

eBay allows buyers and sellers to rate each other by using a feedback system. Before eBay's January 29, 2008, policy-change announcement, at the end of every transaction, both the buyer and seller had the option of rating each other. Both parties had the ability to rate each other and the experience as a "positive", "negative", or "neutral" rating and leave a comment no longer than 80 characters. As of incoming CEO's John Donahoe's announcement however, the option for sellers to leave anything other than positive feedback to buyers was removed.

According to critics, weaknesses of the feedback system include:

• Small and large transactions carry the same weight in the feedback summary. It is therefore easy for a dishonest user to initially build up a deceptive positive rating by buying or selling a number of very low value items, such as e-books, recipes, etc., then subsequently switching to fraud. eBay has since restricted digitally-delivered items to classified listings, which do not involve feedback.
• Users and generators of feedback may have different ideas about what it means.
• Feedback and responses to feedback are allotted only 80 characters each. This can prevent users from being able to fully list valid complaints. URLs are not permitted in feedback.

eBay acknowledges weaknesses in its feedback system on its own policy pages, noting several of the above points.

Originally and until around 1999, feedback could be left for a seller or buyer whether or not it involved a transaction and could be left multiple times by the same person. While one upside is that it allowed people to offset feedback in case of fortune reversals (as feedback can never be edited or retracted once it is left) and has even allowed people to leave feedback for a seller or buyer simply for answering a question, the downside of this more than offset it as it allowed people to flame others or try to ruin credibility (as every feedback also counted towards one's rating, no matter what). Eventually, a user could only leave feedback if he won an auction, and only one feedback message could be left per transaction within a week. This means even if a buyer purchases multiple items from a seller within a week, only one feedback rating is allowed to be left.

Intellectual property in auctions

Holders of intellectual property rights, have claimed that eBay profits from the infringement of intellectual property rights. eBay responded by creating the Verified Rights Owner (VeRO) program, which provides to rightsholders auction takedowns and private information on eBay users on demand.

• In September 2005, eBay's privacy practices relating to its VeRO program came under scrutiny when South Bend, Indiana-based television station WNDU-TV reported that the Embroidery Software Protection Coalition was accusing American buyers, identified by eBay, of copyright infringement, and demanding monetary settlements. eBay's privacy policy warns that eBay may disclose personal information on the request of any VeRO rightsholder investigating illegal activity, although according to a University of Notre Dame law professor, there is no legal basis, in the United States, for copyright infringement claims against buyers.
• Some manufacturers have abused eBay's VeRo program, through which copyright and trademark owners can quickly protect their rights, by seeking to prevent all sales of their products on eBay.
• In November 2006, a U.K. High Court ruled that a VeRO rightsholder's takedown request to eBay constituted a legal threat under design patent law. Since groundless legal threats under design patent law are unlawful, the ruling holds that groundless VeRO takedown requests based on design patents are also unlawful. Further, the text of the ruling appears critical of the VeRO program in general: "It is entirely wrong for owners of intellectual property rights to attempt to assert them without litigation, or without the threat of litigation, in reply."
• On June 4, 2008, a court in Troyes, France awarded luxury goods maker Hermes damages of $30,000 as a result of the sale of two counterfeit Hermes bags on eBay in 2006. The court also ordered eBay to run a statement reporting the court case on the home page of eBay's French Web site for three months.
• On June 29, 2008, a court in Paris, France awarded damages of 40 million euros ($ 63 million) to luxury goods group LVMH over eBay auctions of counterfeit bags, perfumes and other items. The plaintiffs further alleged that auctions of legitimate perfumes were also illegal, because, they claim, only authorized resellers are permitted to sell them, and authorized resellers are not permitted to sell on eBay. The court agreed, entering a permanent injunction against eBay auctions of LVMH perfumes, whether counterfeit or not. After the appeals court declined to stay that injunction, eBay announced that French users would be barred from buying or selling LVMH perfumes and cosmetics on any of eBay's sites.
• In July 2008, a United States court decided a trademark infringement lawsuit by jeweler Tiffany & Co. in eBay's favor: "... It is the trademark owner's burden to police its mark, and companies like eBay cannot be held liable for trademark infringement based solely on their generalized knowledge that trademark infringement might be occurring on their websites." eBay advertises and profits from the sale of Tiffany products through its site, while Tiffany claims that no third-party resellers are authorized to sell Tiffany jewelry. Despite eBay's efforts to find and cancel illegal listings, many "Tiffany" listings are judged by buyers or by Tiffany to be counterfeit. The judgment specifies that eBay's advertising of the availability of Tiffany products on its site is a protected fair use of Tiffany's trademark, that eBay sufficiently protects buyers by canceling auctions reported to the VeRO program as believed to be infringing, and that eBay is not obligated to suspend sellers reported to VeRO without further evidence of infringement.

Bid sniping

Main article: Auction sniping

February 2008 boycott

A boycott against eBay commenced on February 18, 2008 by users in objection to eBay's updated fee structure and feedback policy. The strike lasted until February 25, 2008, with some calling for an extension or second strike.

When eBay announced increased final value fees with the pretext of lowered insertion fees, it was found that after calculations, the costs to sell on eBay turned out to be more than before, after averaging out the revised fees. Moreover, it was announced that sellers could no longer leave negative nor neutral feedback. A poll eBay sellers participated in showed that 90% of the participants were unhappy with the feedback policy change.

eBay reported no discernible impact on listing numbers from the strike.

October 2008: eBay requires sellers to use PayPal

In some countries (including in the United States), eBay requires sellers to use its PayPal service to facilitate payment with the claim that this makes transactions safer and easier. As of October, 2008, eBay no longer permits sellers to solicit bank/personal check or money order payments from buyers, in addition to its previous policy of prohibiting the use wire-transfer services such as Western Union and Moneygram. In addition to eBay fees, sellers must pay a percentage to PayPal (which is owned by eBay), as well; PayPal collects percentages on shipping charges in addition to sale prices. PayPal then adds its own transaction fees on top of eBay's listing fees.

Australia

In April 2008 eBay announced an introduction of a 'PayPal only' policy in Australia. The new policy would have meant that sellers will only be able to offer PayPal or cash payment on pick-up as payment methods. eBay claims that PayPal is the most secure method of payment.

Under the Australian Trade Practices Act 1974, it is unlawful for a company to require the use of a third party's products or services in order for a person to deal with the company, known as Third Line Forcing. eBay submitted a notification under the Act, which provides automatic exemption from this provision unless the notification is subsequently revoked by the Australian Competition and Consumer Commission (ACCC).

As part of its assessment of the notification, the ACCC called for submissions from interested parties.. This attracted a record number of complaints from eBay members, banks, Google, and members of the business community and the Reserve Bank of Australia.

The ACCC completed an initial draft proposal to revoke eBay's notification, stating that it believed consumers were in a better position to judge risk on individual transactions than eBay's management and has ruled the plan anti-competitive. However, before a final decision could be announced on July 3, 2008, eBay announced that it had withdrawn the notification to the ACCC and shelved its "PayPal only" plans.

United Kingdom

A similar policy requiring sellers to offer PayPal was also introduced in the United Kingdom, though in stages. The first stage, which was adopted on March 25, 2008, was aimed at sellers with feedback scores under 100 and in certain high risk categories. The requirement was extended to all sellers from June 3, 2008. This has attracted criticism by some of its users.

United States

A purported class action lawsuit has been filed over this policy.

Other eBay controversies

Other notable controversies involving eBay include:

• In May 2000, eBay seller Kenneth Walton auctioned an oil painting on eBay for $135,805, due to speculation that it might be the work of California modernist painter Richard Diebenkorn. Walton pretended to know nothing about art and claimed to be surprised by the price the painting fetched, and the auction attracted international media attention. In several investigative reports by The New York Times, it was revealed that Walton was in fact an experienced eBay art dealer with several unhappy customers, and that he had colluded with two other eBay sellers to bid up each other's auctions. The Times described this as a "shill bidding ring". Walton and his cohorts were banned from eBay and subsequently pleaded guilty to fraud after a threat by the federal government of the first ever prosecution for shill bidding on eBay.
• On May 28, 2003, a U.S. District Court jury found eBay guilty of willful patent infringement and ordered the company to pay $35 million in damages. The plaintiff was MercExchange, which had accused eBay in 2000 of infringing on three patents (one of which is used in eBay's "Buy It Now" feature for fixed-price sales, 30 percent of eBay's business and growing). The decision was appealed to the U.S. Court of Appeals for the Federal Circuit (CAFC). The CAFC affirmed the judgment of willful infringement, and reversed the lower court and granted a permanent injunction. eBay appealed the permanent injunction to the U.S. Supreme Court, which on May 15, 2006 found an injunction is not required nor automatic in this or any patent case where guilt has been established. The case was sent back to the Virginia district court for consideration of the injunction and a trial on another MercExchange patent the inventor claims covers the remaining 70 percent of eBay's business model (see eBay Inc. v. MercExchange, L.L.C. ). This case has been particularly controversial since the patents involved are considered to be business method patents (see Software patent debate).
• On July 28, 2003, eBay and its subsidiary PayPal agreed to pay a $10 million fine to settle allegations that they aided illegal offshore and online gambling. According to the settlement, between mid-2000 and November 2002, PayPal transmitted money in violation of various U.S. federal and state online gambling laws. eBay's announcement of its acquisition of PayPal in early July said that PayPal would begin the process of exiting this market, and was already doing so when the ruling occurred. These offenses occurred prior to eBay's purchase of PayPal.
• In late 2006, eBay effected a policy change which showed less information about bidders once auctions reached a certain value. This policy has been criticized for making shill bidding much harder to detect, to the potential disadvantage of buyers and significant advantage to unethical sellers who may artificially inflate the price of an auction. An investigation by The Sunday Times in January 2007 uncovered substantial evidence of shill bidding on eBay.
• An April 2007 lawsuit in California over monopoly practices.
• An August 2007 class-action lawsuit in which an Australian attorney stated, "eBay has been deceiving millions of consumers over the years by claiming their auctions start when submitted, when in reality they do not begin for at least several hours, and up to 24 hours. However, the clock starts running on [sellers'] selected auction time even though eBay hasn't posted it yet."
• On January 29, 2008, a series of new policy changes were announced including an increase in the final value fee and a decrease in the listing fee (when averaged out, the fees actually cost sellers more). Among the more controversial moves was the announcement that sellers would soon only be able to leave positive feedback for buyers, and would no longer have the ability to provide negative or neutral ratings regardless of the experience. The policies also give greater benefits to higher volume sellers. eBay now explicitly gives higher volume "Powersellers" a 5% to 20% discount on the final value fees. These sellers can also receive better terms on shipping costs and preferential positioning in search results.
• On February 18, 2008, sellers and buyers who felt the new fees and feedback structure were unfair commenced a one-week strike against eBay.
• In April 2008, eBay announced it was suing online classified site Craigslist to "safeguard its four-year financial investment." eBay claimed that in January 2008, Craigslist executives took actions that "unfairly diluted eBay's economic interest by more than 10%". In response, Craigslist filed a countersuit against eBay in May 2008 "to remedy the substantial and ongoing harm to fair competition" that Craigslist claims is constituted by eBay's actions as a Craigslist shareholder.
• In July 2008, eBay started letting web retailer Buy.com list millions of items for sale on eBay without having to pay the listing fees required of other sellers. Its account also highlights eBay's flawed Detailed-Seller-Rating system as Buy.com's eBay account, which was changed in December 2007 to "buy" via a name usurption, always gives free shipping and yet has a 4.8 Rating on "shipping charges," which is below the amount required for the 15% powerseller discount.
• In January 2010, David Davidson from Droitwich, Worcestershire recieved widespread tabloid attention in the United Kingdom after eBay withdrew his listing of a Dad's Army board game. eBay claimed that, as the box graphics contained images of swastikas, it was technically Nazi paraphernalia and, as such, breached the firm’s offensive material policy. Mr Davidson was told he would be able to relist the item if he removed any images showing the swastika on the box.
• eBay has consistently refused to cooperate with the Internal Revenue Service and other governmental taxing agencies that have requested information regarding sales conducted on eBay.com. These agencies suspect that on many (if not most) eBay transactions, the sellers are failing to report income and/or sales tax as required by law. Canada Revenue Agency filed suit against eBay Canada and in 2007, the Federal Court of Canada ruled that eBay Canada must provide the requested information. The Court of Appeal upheld that decision and in 2008, eBay Canada began providing names and sales data for its largest sellers.