eBay’s Day In Court: No Soup For You
Written by Mark RaschAttorney Mark D. Rasch is the former head of the U.S. Justice Department’s computer crime unit and today serves as Director of Cybersecurity and Privacy Consulting at CSC in Virginia.
Some retailers sell products. Some retailers sell services. But companies like eBay (NASDAQ:EBAY), Amazon (NASDAQ:AMZN) and Craigslist sell something more—a marketplace. They are not simply a “store” but the entire mall—the downtown retail zone. If you can’t sell on eBay, Amazon or Craigslist, then, to a great extent, you can’t sell online. So what happens if you are banned for life from one of these marketplaces? A recent California Appellate Court decision substantially impaired the rights of consumers to have access to these marketplaces when the merchant/marketplace owner determines that the consumer did not follow the rules.
Linda Genesta was a long-time eBay seller. For 18 years, beginning in 1999, she sold what she described as “high-end, high-quality, imported authentic European and American antique and vintage textiles, fabrics, pillows and trims.” Everything was fine until July 2008, when eBay allegedly removed Genesta’s items from the marketplace, alleging “unspecified ‘misrepresentations'” in violation of its Terms of Service. After what Genesta called a “sustained campaign by [her] competitors to discredit [her] with eBay through unsubstantiated complaints about the authenticity of the antiques,” eBay put a “permanent sales block” on her account, which prohibited Genesta from selling items on eBay. As a result, she says, she is effectively “out of business.”
That’s the problem with an online marketplace. If you get banned from the marketplace, you have few opportunities to get back on. Sure, Genesta could have gone to Craigslist or eBid or uBid, but they have neither the market share nor the name recognition of eBay. Even though the Internet is an open market, and Genesta could have created a Web site to sell her wares online, quite frankly, the open Internet provides little opportunity for small merchants to reach a large market. So when she was banned from eBay, Genesta sued the online forum for interference with a business relationship and antitrust violations under California law.
This is similar to the episode of Seinfeld when the “Soup Nazi” imposed a set of rules of behavior on those who wanted to get soup. Violate those (ever changing) rules, and you were banned from buying soup—often for life. “No soup for you!” Indeed, a number of economics professors have put up a Web site that addresses the case of the Soup Nazi in terms of antitrust barriers to entry and monopoly power. Of course, if you are denied soup from the Soup Nazi, you can still get soup somewhere else—just not the same soup.
And that, in essence, is what the California Appellate Court held in denying Genesta’s antitrust claim against eBay. eBay was entitled to create its own rules of engagement, just as the Soup Nazi was entitled to his (stand to the right, step up, order, pay, leave). Violate the rules (ask for bread), and—you guessed it—”No soup for you!” eBay’s rules indicate that, if the company suspects you are selling counterfeit merchandise (or, worse, if others—including competitors—simply complain loudly enough that you are), it could ban you from the marketplace.
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February 15th, 2013 at 12:48 am
So, eBay users have to follow eBay’s ever-changing, 270-page set of rules and, regardless, sell on eBay only at eBay’s pleasure. But, what about eBay following “the rules”? Or does the US Criminal Code on wire fraud and the facilitating thereof not apply to eBay? The ugly reality for consumers dealing with the clunky, unscrupulous eBay/PayPal complex.
February 15th, 2013 at 11:55 am
So in other words, if eBay decides you are a risk to their continuing success and someone tips them off falsely (bearing false witness) about an honest merchant, it goes along with their perjury. Thanks for reminding me once again why I don’t do business with eBay. It used to be such a friendly place, but I stopped using it in 2005 and have never looked back. As to small businesses not doing well, there are so many other online retail marketplaces to choose from. This small business person would be better off using Etsy, where supplies are not frowned upon. The listing fees are less than eBays, and the listing duration is three months, not 7 days. So, no soup for eBay.
February 21st, 2013 at 12:51 pm
I wonder why, Genesta sued eBay, rather than the competitors she believe engaged in a “sustained campaign … to discredit [her] with eBay through unsubstantiated complaints about the authenticity of the antiques”.
Making intentionally false statements about an individual or business is libel. If proven in civil court, those making such claims about Genesta could be forced to pay her for the revenue she lost due to being removed from eBay.
Though IANALawyer, and I imagine Genesta was counseled by one who advised her to sue eBay rather than the competitors she claims libeled her, it seems to me she is suing the wrong parties, and that the CA courts are correct in dismissing her claim.
February 22nd, 2013 at 2:39 pm
This columnist should have spent more time on details and less time watching Seinfeld re-runs! The real “Soup-Nazi” in this story is Lisa (not Linda) Genesta. She was notorious for blocking buyers who gave her any negative feedback (No soup for you!)
She named numerous defendants, anyone she perceived to be a competitor she accused of “being deputized by ebay” involved in a “conspiracy” to remove her from ebay. The antique textile market is dependent on knowledgeable buyers and sellers. Scraps of fabric are sold for hundreds even thousands of dollars. This Plaintiff had a storefront in Beverly Hills and Laguna Beach, on-line stores at Ruby Lane and etsy and regularly sells at flea maekets, antique shows, etc. She still buys from ebay sellers as well. Out of business? hardly… Her total annual sales from ebay buyers was less than $100k – not sufficient to pay her mortgage.
This frivolous lawsuit is still on-going, ebay has been cleared but some defendants – innocent former customers are still waiting for their case to be heard. This Plaintiff saw big dollars expecting ebay to roll over to shut her up. Now she wants the remaining defendants to offer a settlement to go away and help her pay ebays cost of defense… that’s just wrong.
February 22nd, 2013 at 3:50 pm
In response to S. Pescion, all I can go by is what the Court found based on the pleadings. Again, without discussing the merits of Genesta’s claim, or indeed why she was “booted off” eBay (or even whether it was a violation of eBay’s TOS), the fact remains that an online marketplace provider is NOT required to have a TOS, not required to have an appeal process, and may ordinarily kick someone off the service for any reason (good or bad.) Whether Genesta SHOULD have been kicked off is not the issue, and the court did not consider that issue. The question is whether eBay has such market power that its decision to boot someone effectively denies them entry into the marketplace, and whether that is anticompetitive. The court held that is was not, and that eBay was not, for these purposes at least, anticompetive. The decision, available at http://www.courts.ca.gov/opinions/nonpub/G045540.PDF makes no reference to the other claims you note, which may otherwise be part of the record on appeal, but are not part of the decision itself. The case also indicates that the court sustsained the demurrer (dismissal) with costs to eBay, so I am not sure how the case “is still going on” unless a petition for rehearing has been filed.
The issue HERE is not the merits of the individual case, or whether Genesta should or should not have won the case. The issue is when there are only a few participants in a marketplace (e.g., auction site) their ability to deny access can be anticompetitive. This is particularly true for the consumer to consumer marketplace. If I want to sell my used TV, and cannot acess Craigslist, eBay or Backpages, then even though I can still sell it, I am denied the most lucrative access points.
The Court decision also likewise accepted her contention that, without access to eBay she was effectively out of business — at least for the purposes of their decision. Specifically, the court referred to the plaintiff’s contention that “in April 2009, eBay put a “permanent sales block” on plaintiffs’
account, which prohibited plaintiffs from selling their items on eBay. As a result, plaintiffs are allegedly “out of business.””
Also, I reject the idea that someone can spend TOO MUCH TIME watching reruns of Seinfeld. Next thing you will tell me that people can watch The Princess Bride too many times. Inconceivable!