In a timely reminder that the grant of immunity for
exclusive dealing conduct which would otherwise be a breach of
the Trade Practices Act is not necessarily a foregone
conclusion, the Australian Competition and Consumer Commission
(ACCC) recently issued a draft determination
rejecting eBay's application for immunity in respect of
its proposed requirement that users of its on-line marketing
facility make and receive payments through accounts held with
its related company, PayPal.
eBay operates a website in Australia through which the sale
and purchase of goods can be transacted by members of the
public. It currently allows sellers to nominate a number of
payment options on the site. PayPal operates a secure on-line
payment service by which members conduct financial transactions
with one another over the internet without the need to provide
the other party with specific financial information such as
bank account details.
In April 2008 eBay lodged a 'notification'
with the ACCC seeking immunity for a proposal to require, as a
condition of use of the services on its site, that users and
sellers conduct the financial aspects of their transactions
using PayPal accounts (Conduct).
The Conduct which eBay sought to notify is a form of
exclusive dealing known as third line forcing. It occurs where
one party supplies or offers to supply its goods or services on
condition that the acquirer also acquires goods or services
from a particular third party. Such conduct is a "per
se" breach of section 47 of the Trade Practices
Act, in that no substantial lessening of competition need
be established for a breach to occur.
A party can obtain immunity from prosecution for exclusive
dealing by notifying the conduct to the ACCC. Immunity will be
automatically conferred 14 days after the date of the
notification unless the ACCC determines that the claimed public
benefits of the conduct do not outweigh its anti-competitive
The eBay notification
For a large range of conduct constituting exclusive dealing
(including third line forcing) the grant of immunity is
infrequently opposed by the ACCC. Such was not the case in
respect of the eBay notification.
Although eBay claimed significant public benefits would
arise from the Conduct, which were largely related to reducing
what eBay calls 'Bad Buyer Experiences', the
ACCC investigated the matter and decided on 12 June 2008 to
revoke the immunity which would otherwise have automatically
applied to the Conduct. In the course of its investigations the
ACCC received approximately 650 submissions from eBay users
most of which opposed the grant of immunity. Such a substantial
response provided the ACCC with ample evidence on which to rely
in support of its decision.
The ACCC's Draft Determination
The ACCC found that the public benefits flowing from the
Conduct were not sufficient to outweigh the anti-competitive
eBay operates in a market for the supply of on-line
marketplaces in Australia and eBay holds substantial power in
that market ;
PayPal competes with a range of on-line payment
providers supplying services to facilitate transactions on
the Conduct would enable eBay to leverage its power in
the PayPal market;
the Conduct was likely to substantially lessen
competition by reducing consumer choice, resulting in
higher transaction costs and by reducing the prospect of
innovation in on-line payment systems; and
while there were public benefits in reducing Bad Buyer
Experiences and some public benefits would arise from use
of PayPal (such as increased dispute resolution for higher
value transactions), there were negligible public benefits
In a comment which may not assist eBay or PayPal
commercially, the ACCC also found that the evidence did not
support the view that PayPal was the most secure payment method
or offered the best services.
The ACCC's determination is only a draft at this
stage. Further submissions may be made before a final
determination is made but, if history is any guide, the chances
of changing the ACCC's views are slim.
The decision highlights the fact that the ACCC will not
merely rubber stamp notifications in respect of exclusive
dealing and demonstrates the need to take care before invoking
the process, lest disgruntled consumers use the process to
publicly voice their concerns about a company's goods
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general guide to the subject matter. Specialist advice should
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In some cases these fees or surcharges are higher than what a bank charges to these merchants for use of the system.
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