PayPal Lawsuits

Is PayPal Still Hiding Payments in an Ebay Auction?

In the Pay Pal Inc. v. bids case, eBay plaintiffs’ attorney Jeffrey P. Soto presented his winning argument in court that the company was not liable for accepting and completing transactions for people who do not qualify as buyers on its e-commerce website, eBay. The plaintiffs were seeking damages for their loss of profits and the fees they paid eBay to have a “Buy Now” feature on their site. Soto maintained that eBay’s Terms of Use, including the ban on bids, do not allow the company to take advantage of people who wish to buy products on eBay, regardless of whether they can actually pay for them.

The Electronic Service Providers Association (ESAA) opposed the lawsuit.

“The reality is that eBay does not have a ‘Buy Now’ feature any more, and it was never a part of the original eBay site design,” stated Robert Gamache, Esq. “A Buy now button was added later by someone else, and it was never part of the original design. If Esa had been successful in this lawsuit, then everyone who sells e-books on eBay, along with ClickBank and Amazon, could be held responsible for their users’ actions – not just the website owner and/or developer.” Gamache also stated that there is nothing in the eBay Terms of Use that discusses an optional feature known as bidpay. He likened the lawsuit to rules that prevent service providers like AOL or Yahoo from being able to act as a mediator when a customer wants to send a spam message to another user.

There are a number of factors to consider in assessing whether PayPal lawsuits may impact on digital products sold through e-commerce sites such as eBay.

First, courts do not recognize an individual’s rights to use their own identity in online digital product sales. Therefore, e-businesses that sell digital products typically agree to pre-determine an individual’s identity before they allow that person to register for any transactions on their site. Additionally, digital products typically contain an “About” and a” Disclosure” page, which often include information about the business behind them. Any information that does not identify the business should be marked “provided by” and users should not provide monetary refunds based on their personal knowledge of the business’s identity.

Second, there are a number of defenses to a PayPal demand for payment, including (but not limited to) negligence, strict liability, unjust enrichment, and errors and omissions.

In order for a plaintiff to establish a defense to a PayPal demand for payment, they must show that a merchant acted in bad faith, either verbally or in circumstances that do not reflect positively on the merchant. The courts have held that merchants do not automatically create a bad faith defense, and they have upheld the rights of merchants to self-defend against a PayPal demand for payment. Furthermore, merchants need to demonstrate that they did not act in bad faith or ignore indications that a purchase cannot be made because of insufficient funds.

Third, eBay recently updated their user agreement to include a ban on any and all use of automated bidding software or other means to place a successful bid on a product.

Specifically, this section now makes it illegal to allow third parties to use PayPal payment integration to automatically place bids on ebay auctions. Although eBay has taken action to protect its users, it is important to recognize that many other websites, including “bidvertiser” sites, may be unaware of eBay’s updates and may still be violating the anti-bidware policies of eBay. Therefore, eBay and other online destinations have an important role to play in ensuring that websites abide by their anti-bidware and e-commerce policies, while protecting merchants from PayPal lawsuits regarding automated bidding software.

Finally, a common defense in PayPal lawsuits involves the act of “hiding” a signature. Simply put, a signature is a small line, usually just above or below a name or address in an email.

While some people are comfortable with the idea of hiding a signature, which allows someone to circumvent the intended contact, hiding a signature is not an acceptable excuse in the context of eBay. Although it is unlikely that PayPal would actually ban an individual from posting on an eBay auction simply because they used the pejorative term “Hide Your Signature”, it is strongly suggested that members consider discussing any potential instances of hiding a PayPal payment indicator with a buyer before making any transactions on eBay.

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