August 2, 2010, 5:32 PM

An eBay antitrust suit lands back in federal court

A judge has set aside a default judgment in the class action suit over PayPal.

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EBay Inc. will get a chance to defend itself in federal court against a lawsuit by sellers complaining that eBay effectively requires eBay merchants to use PayPal, the online payment service eBay owns.

U.S. District Judge John Corbett O’Meara set aside a default judgement in favor of the eBay merchants he issued June 16 after eBay and PayPal had failed to respond to the suit. EBay requested that judgment be set aside, and O’Meara agreed last week.

“Federal policy strongly favors allowing parties to resolve their disputes at trial rather than by default,” O’Meara wrote in his ruling. He added there was no indication that the defendants had ignored the complaint.


“The company is pleased with the ruling,” says Michelle Fang, associate general counsel at eBay. Peter Macuga, lead attorney for the plaintiffs, did not respond to a request for comment.

Six eBay sellers in four states filed the class action lawsuit in April alleging that eBay “has implemented accepted payment policies which effectively limit sellers to accepting payments only through eBay owned PayPal.” The suit says that such policies restrain trade and violate the Sherman Antitrust Act.

The court filing, submitted in Detroit on behalf of the plaintiffs, details changes made to eBay’s payment policies during the last 10 years and alleges that other accepted forms of payment are not viable alternatives because of their higher costs and entry requirements that shut out new sellers. It states that the company has “prohibited the use of any forms of payment that are more favorable than PayPal.”

EBay’s web site lists acceptable forms of payments as PayPal, ProPay, Moneybookers, Paymate, merchant credit cards and payment upon pickup. PayPal charges sellers up to 3% of the sale price and 30 cents per transaction. EBay implemented a paperless payment policy in 2008 that stopped sellers from being able to accept cash, checks, money orders or other forms of non-electronic currency except for items sold in particular categories such as motor vehicles and real estate.

EBay reported $4.41 billion in revenue for the first half of 2010. PayPal, which eBay bought in 2002, represented more than 37% of eBay’s companywide revenue during the second quarter of 2010.  

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