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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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