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eBay’s Day In Court: No Soup For You

February 14th, 2013

Indeed, eBay is not required, either under the contract or by law, to engage in any particular inquiry—just as the Soup Nazi’s rules did not have to make sense. As the court noted:

Nothing in eBay’s alleged policy actually prohibits sellers such as plaintiffs from freely offering their items for sale through other means, or from developing and maintaining independent relationships with customers.

So Genesta could still sell her wares, eBay could enforce its rules, and all is good with the world, right? Not necessarily.

The problem with both eBay and the Soup Nazi is that there may be no meaningful alternative to what they are offering. Each, in their own way, dominates their respective marketplace—eBay, the online auction market; the Soup Nazi, the “quality” soup in midtown Manhattan. If a merchant is kicked off eBay or Amazon, that merchant may still ply its wares, but not in an effective way. Now, eBay and Amazon have a vested interest in keeping merchants online, and in keeping them happy. If there is nothing to sell, then there is no reason for them to exist. The companies also have a vested interest in ensuring merchants’ claims about their products are valid and in minimizing the scope and extent of fraud or deception on their sites (I take no position about who is right here, just that eBay has legitimate interests).

But eBay has a vested interest in enforcing a host of other provisions contained in its Terms of Use, too. Indeed, any violation of these terms, or any alleged violation of these terms, could lead to a merchant being barred from an almost exclusive marketplace. And that could be a problem.

The other problem for eBay users, like the customers of the Soup Nazi, is the unavailability of an independent enforcement mechanism. eBay (like the Soup Nazi) writes the rules of the road to suit its own interests. It can choose to investigate, or not, claims of violations of its rules. eBay can change the rules at will. It can ban merchants for good reasons, bad reasons or no reasons at all. eBay can decide that, to make one merchant happy, it will deny a competitor access. It doesn’t need to take all comers. eBay may not even be required to comply with its own Terms of Use—because it doesn’t have to enter into a relationship with a merchant or seller in the first place.

The difference between the Soup Nazi and eBay is that, if the Soup Nazi kicks you out, you are denied an awesome Turkey Chili. If eBay kicks you out, you are out of business.

So online marketplaces need to have fair and reasonable policies, along with fair and reasonable enforcement mechanisms, that provide a reasonable degree of “due process” to all parties. There should be some type of independent review or, in the words of the late Mayor Ed Koch, a way for E-tailers to find out “How’m I doin?” And if they end up dominating the marketplace, regulators may come sniffing around, too. And that’s not great for retailers, or soup stores.

If you disagree with me, I’ll see you in court, buddy. If you agree with me, however, I would love to hear from you.


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5 Comments | Read eBay’s Day In Court: No Soup For You

  1. Philip Cohen Says:

    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.

  2. Theresa Moore Says:

    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.

  3. Craig Duncan Says:

    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.

  4. S. Pescion Says:

    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.

  5. Mark Rasch Says:

    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!

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