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eBay, Paypal Fail The Test

February 6, 2010

Trade depends on trust. And in the consumer market, the emergence of ‘trusted intermediaries’ will be critical in enabling an expansion of trade, especially across borders.

For trust to flourish, buyers and sellers must each feel that there is meaningful recourse in the event of dishonest or fraudulent behavior. And based on a situation recently referred to me by a friend – and member of IACCM – eBay and Paypal currently fail that test. They have jointly created a trading forum with the appearance of a dispute resolution system, but in reality there is little substance behind it.

In this particular case, a selller had misrepresented their goods (a table), which on arrival turned out to have serious structural damage. Following the complaints procedure mandated by eBay did not work; the seller went around the system, sending increasingly abusive and threatening e-mails. He knew precisely how to play the system. Complaints to both eBay and Paypal drew no response. The only recourse against this clearly unethical seller was to leave negative feedback on the eBay site.

This drew an immediate response from the seller, who offered a substantial refund if the negative response was altered to positive feedback. He even had official forms from eBay on which this change could be made. Of course, once the review was made favorable, he simply sent a sneering note – essentially ‘Ha ha, I fooled you!’ There is, of course, no way to change the comments on eBay once the input has been made favorable.

This vendor sits on eBay right now with a 99%+ approval rating. He clearly knows how to manipulate the system – and neither eBay nor Paypal appear to care. Despirte extensive e-mail evidence of this illegal behavior, their is no mechanism for referral – except of course via litigation, which (as the seller is no doubt aware) would be far too time consuming and costly to pursue.

Does this matter? I think the answer is yes. Paypal today offers the world’s largest dispute resolution system. eBay is a core provider of trading services. It is important that global brands of this type build a robust process that can support ethical and principled trading relationships.

I am sure this is not an isolated incident – what are your experiences and what do you think should be done by way of improvement?

  1. The Very First step is to NOT do business Cross-Border. If you really want to safeguard yourself against fraud, you MUST do business within your country of residence. It has been proven Over and Over again. Law enforcement / the Legal System is the Only avenue for remediation. And that can only happen WITHIN the country you live in. The whole idea of doing business outside our borders is Completely Rediculus. Just because we are given the option DOESN’T mean it Works.
    And, that Ebay Does NOT allow sellers to have a link to their websites in every listing is a HUGE Mistake. I find that people will buy from a seller on Ebay because the buyers consider it a Public Transaction. So, there is a sense of security A) the seller isn’t bogus because they have a Real Website. B) The seller won’t screw me because the Whole Country is watching. The likelyhood of an “Off Ebay” transaction is minimal at best.
    This is PRECISELY why the ORIGINAL EBAY worked so well. If one could go back and review the transactions of the 1999 – 2002 period and compare them to Now, you’d see the difference IMMEDIATELY.
    Ebay, now, Does NOT go with the flow of human interaction, as it did from its inception. People govern themselves through a series of mechanisms such as Feedback, Websites, word of mouth, the Legal System, etc…
    Ebay IS JUST A VENUE. For Ebay to attempt to operate beyond that is completely ridiculous and self-defeating.
    Ebay’s belief that it is or can be more than that is completely FICTICIOUS and UNACHIEVABLE.
    Trust Flourishes when the above-stated protocols are in place.

    • Thanks for your comment. I should clarify that the transaction I referenced was not in fact cross-border – but of course the challenge of remediation remains. In fact, the issue of consumer contracting and on-line dispute resolution is increasingly an area for government focus, because cross-border trade will happen – and indeed is encouraged – for example within the EU or the OAS, neither of which today offers consistent legal systems. That is why even governments are looking with interest at commercial sector mechanisms that might offer an alternative to costly and slow legal systems. Indeed, within OAS there is currently a proposal to set up a specific arbitration body for this purpose.

  2. And so the Global Legal body should be comprised of lawyers specializing in business law. As we have “Cloud Computing”, a “Cloud Council” would be appropriate for this endeavor. The concept of borders and continents would be nonexistant. However, there remains the concern of American Wealth being syphoned off away from Domestic coffers.
    Not a goog thing in the long run. But if Global Trade could insure, to some extent, a building (or rebuilding rather) of domestic American wealth, then it would be welcomed, I’m sure.

  3. pcallioni permalink

    I must say that my experience with eBay has so far been positive – sellers have been honest and reliable, matching their feedback profile, with one exception and in that case, I received a full and prompt refund from eBay/PayPal. One suggestion I would offer to eBay users is to read the comments, not just the score, and, if you are not sure, email one or tow of the people who have left comments, to make sure all is as it appears. As for legal remedies (I am a lawyer), I should say that when small amounts of money are concerned, the law, domestic or otherwise, is of little use – it costs too much. Prevention is far better than the cure, in such cases. Lastly, may I remind our American friends that these days their wealth depends on the rest of the world and not the other way around and that without international trade we will all be poorer 🙂

  4. You are correct that this is not an isolated incident. I recently had a similar but reverse situation with eBay/PayPal: I was the seller scammed by an unscrupulous buyer and was further penalised by the so called dispute resolution system. Others I know have experienced these situations and have vowed to avoid eBay in future.

    In my blog on this topic I focused on how this compares to the customer service experience at other retailers, but agree that this centres on trust.

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