Copyright © 2014 SYDNEY SCHUSTER – All Rights Reserved
Note: I will keep updating this post with new developments.
Do you sell your book (or anything else) on eBay? If you’ve had more than zero sales, consider yourself lucky.
eBay sellers have seen catastrophic drop-offs in sales, while eBay steals scads of their dough. WTF happened?
The easy blame is Cassini, the glitch-plagued, useless search engine eBay rolled out in 2013 just when sales started flatlining. (Sellers affectionately call it “Can’tSeeMe.”) Naturally everyone assumed a connection. And there is one, but eBay started doing things that are way more awful than Cassini:
● eBay gives preferential treatment to foreign mass marketers, pushing aside smaller domestic sellers.
● eBay deliberately hides many listings.
● eBay hides your listing descriptions, too. Except when it replaces them with random nonsense phrases.
● eBay interlards the listings you pay for with eBay product promotions and links to competing listings, typically 31 per page not including advertising from external retailers like Target, who pay eBay to skunk up your listings with pop-up ads that redirect buyers away from eBay. Even Amazon considers this practice unconscionable. Schadenfreude points: Those retailers are paying eBay big bucks for ad placement on listings no one can see. LMAO
● eBay launched its Global Shipping Program (GSP) and forced sellers to use it. How it works: You mail your international packages to a Kentucky distribution center run by Pitney Bowes, who removes your packing materials to save money on postage and then ships broken purchases, often to the wrong place, with exorbitant export fees due to buyers (typically 33% of item value) that eBay keeps if customs doesn’t request it. GSP has been caught stealing shipments and reselling them on eBay.
eBay vs Google
● In 2006 eBay rolled out Google Checkout as a payment method, then rolled it back in a few days later.
● Over three days in 2014, eBay rearloaded 97 commercial tutorials onto YouTube, hoping guides on how to buy belly button rings and not lose socks would boost eBay’s presence in Google searches (Google owns YouTube). Mostly it just boosted Google’s pique.
● In retaliation for eBay being dickish, Google minimized the presence of low-quality and/or thin content promotions, like eBay’s poorly thought out AdWords campaign.
● In 2014 eBay sellers also suffered massive cutbacks in their listings on Google Shopping search after Google made the service pay-to-play and eBay didn’t want to so much. eBay punished Google by moving its Internet ad business to Bing, used by no one.
● In 2015 shoppers reported receiving “Suspected Phishing Site” warnings on every eBay page they viewed using Chrome (a Google product).
● Due to eBay’s intransigent reliance on Flash (the program of choice for hackers who implant malware on your computer), Chrome disabled eBay features that utilize it (Auctiva displays, translation options).
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Earth to eBay: Your technology platform blows
eBay is aggressively brainless, or nihilistic, or both. Apparently the company recruits programmers from the local bus station. (Except for the one who also coded Silk Road, which worked great until the Feds torpedoed it.)
● Instead of using dedicated standalone servers to conduct its cavalcade of bad experiments, eBay uses live listings for beta testing. Worldwide, eBay had 16 site crashes in 2014 alone, on top of site hacks resulting from inadequate security.
● eBay tasks its programmers with screwing sellers instead of improving security, resulting in broad downtime outages and the hacking in May 2014 by cyberthieves who stole the unencrypted names, passwords, email addresses, physical addresses, phone numbers, and birthdays of 100, 112, 128, 145 or 233 million eBay users (depending on which report you believe). (Fun Fact: Some theorize there was never actually a hack, just a ruse by eBay to relocate to dormant servers the accounts of everyone who didn’t reset their passwords as requested.) As a direct result, 24% to 49% of customers abandoned the venue.
Fun Fact: So many sellers left, eBay now encourages buyers with complaints to file IC3 Internet fraud reports, thereby relieving eBay of responsibility to refund disappointed scammers out of its own pocket. If you thought selling on eBay sucked before, just wait until your name is on an FBI list.
● eBay’s user database was hacked again in July 2015. eBay won’t say how many accounts were compromised this time. Fun Fact: 149,000 users successfully sued over a data breach in 2008, so you can pretty much assume eBay has no intention of ever fixing this. Paying off claimants is cheaper than investing in encryption to protect its user database.
● eBay’s sells discounted postage to sellers, but the service is frequently ultra-slow or completely down.
● eBay encourages sellers to input “item specifics,” ostensibly for better search visibility. Then Cassini systematically excludes listings from search by those attributes.
● eBay’s popular Magento ecommerce service is a jackpot for cyberthieves using malware to freely steal customer credit card information from independent web stores that use Magento.
● eBay UK was occupied for 3 weeks in September 2015 by hackers. They installed booby-trapped ads on the site that infected millions of users’ computers with malware that steals data. eBay notified no one. “The attacks that are documented publicly are only the tip of the iceberg,” said a representative of the security firm that discovered them.
● eBay’s mobile app is virtually useless. It omits item descriptions and shows all your listings with Free Shipping! If a buyer tries to leave you five-star feedback on his iPhone, eBay’s mobile app will erase it. Plus the shopping cart doesn’t work. ***Update!*** The September 2015 app update is even worse than what it replaces. Among other things, it hides bidder IDs from sellers. ***end update***
● eBay’s Apple Watch app was so abominable, Apple yanked it from its app store — one of only two dumped out of some 3,500 available. The other one belonged to a scumbag who stole cancer charity donations.
eBay’s unwillingness to upgrade its staff, coding, or infrastructure is a big mess of stupid, best exemplified by a market launch on October 9, 2014, when eBay began hosting live auctions with real-time bidding for a consortium of major art auction houses. The highly publicized event crashed eBay’s American servers the first day and its European ones the next. The buyer premiums alone ranged up to 30% of price realized, and eBay didn’t want to forfeit that. So it shut down other marketing operations and/or transferred their databases to foreign servers to free up bandwidth and server space for the live auctions. US sellers found their stores had become Russian or Chinese ones, their PayPal accounts were German, and their auctions had vanished. Some members could only access their accounts by logging in via eBay Canada. US buyers were blocked from making purchases from US sellers because, eBay insisted, one party wasn’t in the US.
Fun Fact: In May 2014 CEO John Donahoe blathered freely to the media that eBay was on the verge of integrating Bitcoin as a payment option. A year later, eBay was banishing sellers who accepted Bitcoin payments.
An Even Funner Fact: On January 27, 2015, eBay announced it had created a new horrible technology division to build a new horrible payment gateway to replace the now-erstwhile PayPal (spun off in July 2015), in spite of a non-compete agreement with PayPal.
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What a shock. eBay is hemorrhaging money.
eBay’s questionable new revenue streams, willful subversion of sellers (more on that below), endless technology failures, and inexplicable customer abandonment caused company revenue to nosedive in 2014 (including a $200 million loss due to the Google debacle alone). Two of eBay’s biggest partners bailed: Toys R Us and Neiman Marcus, who said the partnership “did not meet all our expectations.”
According to eBay’s 2014 Q3 report, the company had $749 million net profit from 128 million users. Sounds like a lot, right? Dogs, that’s $1.95 monthly profit per user. Who needs massive infrastructure for that? Homeless people make more money selling soda cans.
A Seeking Alpha article explains that eBay’s 2014 net income was actually $46 million, down from $2.856 billion in 2013.
Why? Well, at eBay, every problem is someone else’s fault. The company blamed its 2014 spring/summer sales slump on the May data breach (and blamed that on employees). eBay ended 2014 — after partnering with bottomfeeder mega-retailers like Wal-Mart and Sears — by blaming its fall/winter sales slump on food stamp reductions. eBay’s excuse for its 2015 Q1 4% marketplaces revenue dive? The damned US dollar was just too strong!
Dogged efforts to trick new sellers and buyers on board haven’t helped (among other reasons, because eBay failed to fulfill its promises). A July 2015 report by the ecommerce consulting company ChannelAdvisor.com noted that eBay’s Q2 active user growth was 6% – way lower than the 14% growth eBay reported a year earlier.
The upshot: In 2015 eBay is hurriedly liquidating assets of any value. The PayPal IPO was July 17 (eBay bought PayPal for $1.5 billion but won’t reveal the amount raised in the IPO). On July 15 eBay sold Enterprise, its ecommerce services division, for $925 million — at a loss of $1.475 billion. (eBay acquired it in 2011 for $2.4 billion.) Fun Fact: Remember Magento, the eBay service that allows hackers to loot its customers with malware? It’s part of the deal.
eBay is “on life support,” Scott Wingo, CEO of ChannelAdvisor.com, told Bloomberg in April 2015.
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Anyway, here’s how and why eBay limits visibility of (your) listings:
● Rolling blackouts (rotating exposure). eBay’s file management system herds what it considers less-desirable listings (ie, yours) into dead zones. It assigns server locations and listing numbers based on criteria like category and seller volume, allocated regionally, which eBay can manipulate discreetly. So like, if eBay needs you to step off because they got boxcarloads of bad art and Korean Rolexes to fence and you’re hogging their precious bandwidth with your dumb book, they just turn off your whole server and the entire Midwest (or wherever you are) goes dark. Fun Fact: eBay is considering limiting search results to five items and charging fees for access to customer service.
● Restricted visibility of listings to small, distant areas. By forcing you to sell far away, eBay gets a bigger postage kickback. And eBay doesn’t want you selling locally, where buyers can — horrors — pick up for free! But mostly, eBay doesn’t want you competing in desirable markets against its Chinese and big-box darlings.
● eBay physically turns off listings (tap-on-tap-off) without notification (including ending auctions early, often within one minute of the end, to block snipe bidding because it overtaxes eBay’s inadequate infrastructure and bandwidth; eBay uses other means to block sniping, too).
● Secret selling limitations (throttling). No matter what you do, you’ll only be able to sell as much as eBay allows, and not one widget more. (You’ll still be allowed to list things, of course. Buyers just won’t be able to find them.)
Instead of your listing, buyers often see this:
I now invite you to share my horror upon discovering that “a positive user experience” means my eBay listings are visible ONLY in Texas, Louisiana, Mississippi and South Carolina. They’re not big readers of cutting-edge literature there, so I gave up selling my novel Dead Spot on eBay.
Fun Fact: In December 2014 an eBay forum moderator posted an internal company memo explaining nine different kinds of limits to which sellers are arbitrarily subjected, including this one: “Silent limits (limits placed on an account that can’t be seen by the seller).” The post was deleted from the forum immediately, and the mod’s account obliterated. Here’s the deleted memo:
Fun Fact: eBay customer service reps are trained to call 911 in response to the many calls from sellers who are suicidal or having heart attacks.
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This seems like a good time to remind everyone (especially eBay) that even though eBay acts like a retailer, it’s not. It has no inventory, warehouses, fulfillment capabilities, or salespeople. It’s just a brokerage for independent sellers who provide stock and manage their own sales, and pay eBay a commission to use the venue. But for reasons that defy all logic of commerce, eBay has commenced jettisoning the small and mid-sized sellers who made it the 800-pound gorilla it is today.
In 2013 (and reportedly as early as 2008, when John Donahoe became CEO) an anonymous eBay manager posted this chilling warning on the sellers’ forum, accompanied by details of the secret Machiavellian makeover designed to result in exactly what has transpired:
“[Small to mid-sized sellers] are not wanted. Leave. If you stay, you will be crushed. Leave. Go away. You cannot win. … You do not know how much they [eBay] hate you.”
Reports vary, but eBay admitted to (translation: probably grossly understated) 54,000 seller suspensions over just two days in 2013. In addition, ridiculous sales limitations were placed on an undisclosed number of active sellers. And when eBay punishes sellers, it uses their IP addresses to stop their rise from the grave, unlike deadbeat eBay buyers who return again and again like a zombie army.
Fun Fact: Laugh-riot buyer scams include death threats.
Funner Fact: Tired of scammers abusing chargebacks to “rent” eBay stuff, in September 2015 American Express revamped its Return Protection to cover only US purchases returned unused/unopened/undamaged within 90 days (not six months, like PayPal); there’s a $1,000 annual cap and no reimbursement of shipping costs to buyers.
After a tsunami of bad publicity, eBay clammed up about whatever it’s doing. (One possibility: driving disenfranchised sellers into its disastrous Valet selling program.) But on the 20th of every month since, thousands more sellers were kicked out, nominally for “underperformance” (directly caused by listing invisibility, duh).
Your turn will come. In the meantime, eBay doesn’t care if your listings never sell. Why? Because fees, dog.
When buyers can’t see listings, sellers relist perpetually, paying a fee per listing of 50 cents to $2. (By way of example, eBay collects $7.20 in basic fees for one unsold $10 item relisted for two years, compared with $3.63 if it sells once.) If a seller ends an auction early and there were bids on it, there’s a penalty fee. Do you prefer 30-day fixed-price listings? Don’t worry — eBay will convert them to Good Til Canceled without notice (no, you can’t change them back) and bill you monthly in perpetuity. Yes, even after you’re dead.
If you do manage to actually sell something, eBay will relist it without telling you — and charge you a listing fee. If your buyer doesn’t pay or returns it, you ain’t getting your seller fees back. For returns you’ll pay for return shipping, at a specially inflated rate that’s hoovered from your PayPal account against your will along with the refund you’re forced to give, all of which you lose and eBay keeps, including the thing you sold if your buyer doesn’t bother returning it. Yes, even if you use GSP, despite assurances that sellers bear no responsibility for packages GSP loses. Buyers don’t even have to pay for what they “buy” to receive a refund (wrested by eBay from sellers, who have no recourse). When all else fails, eBay blocks buyers from paying you (and keeps the fees). Fun Factoid: eBay reportedly scores an average of $100 for every sale that goes south. Bonus round: Fake sales inflate eBay’s gross merchandise volume (GMV) report to investors.
Now multiply all of the above by millions of unsold/unpaid-for listings to get the big picture.
But wait, there’s more!
● eBay collects store fees — $16-$180 per month. If you signed up for a store and you want out, you’ll pay an early termination fee, from $5.32 to $719.80. Cha ching, sucker!
● When eBay sells postage to sellers, it gets a fat cut from carrier services (a whopping 58% from USPS).
● eBay pushes eBay MasterCards with a vertigo-inducing variable purchase APR of 19.99% or 23.99%.
Fun Fact: For books, eBay limits the shipping fee you can charge to $5 or $6 and then steals 13% of that in fees (10% to eBay + 3% to PayPal). Selling coffee table books? Reference books? Textbooks? Good luck with that!
Agony Update: Per eBay’s 2015 Spring Seller Update, fees have increased up to 500%.
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*** Sucks-to-be-you update:
Here’s a taste of how things will go under new CEO Devin Wenig, who ascended on July 20, 2015:
● July 16: Instead of fixing eBay’s worthless broken search engine, Wenig told sellers to promote their listings their own damn selves on social media.
● July 20: eBay announced it purchased the retread rag business Twice.com to beef up Valet. Then on July 28 eBay announced it’s ending Valet. Then on August 19 eBay announced a big sweepstakes to entice sellers to use Valet. lol
● July 23: eBay announced a grand seller outreach event — that you could attend for just $95!
● Aug. 9: Instead of improving eBay’s virtually nonexistent customer service, Wenig tried to trick Ecommercebytes.com, an independent news site, into carrying eBay’s baggage for free. Nice try, derp.
● Sept. 4: eBay announced more real-time auctions with its new partner, Phillips (the world’s third-largest auctioneer), presumably because of the success of the previous live auctions that crashed eBay’s servers and got it sued.
● Sept. 14: eBay launched eBay Plus, a membership program to compete with Amazon Prime. It provides (for €19.90 annually, the test is in Germany) free two-day shipping and returns. Participating sellers allegedly receive a 15% discount on commission fees. eBay is apparently unaware how little shipping €19.90 actually buys. And you know eBay ain’t covering the difference. Which means sellers will be forced to pick up the slack.
● Sept. 14: eBay’s updated user agreement forbids you from adding your customers’ email addies to your marketing list.
● Sept. 14: It also states eBay will be helpfully translating your emails to foreign buyers into whatever their language is, sort of. Ack ack! What could possibly go wrong?
And since becoming chairman on August 20, here’s how former eBay CEO John Donahoe is crapping up PayPal:
● Aug. 28: eBay announced it would no longer allow sellers to accept ProPay and Skrill payments, only PayPal. The same day, PayPal announced 16-32% transaction fee hikes.
● Sept. 4: Donahoe apparently didn’t get the memo about the US and Cuba resuming diplomatic relations. PayPal is confiscating funds of sellers who sell anything made in Cuba, including empty cigar boxes.
● Sept. 8: PayPal resumed servicing online betting, an activity the US government indicted and fined PayPal for in 2002 as a violation of the Patriot Act.
● Sept. 8: Etsy.com, the marketplace to which so many disinherited eBay sellers fled, announced it will force sellers to accept PayPal.
● Sept. 11: PayPal is found by researchers to have three web app vulnerabilities that allow attackers to bypass login securities and steal user accounts and info.
● Sept. 15: PayPal tells sellers its effective return window is 368 days from purchase (180 days for buyer to request refund plus 188 days for further investigation of claim).
<end of update>***
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And yes — there’s even more!:
● So you think you set your listings to only sell domestically? Bwahahaha! eBay changed them to show you ship to Russia and China, without your knowledge or permission.
● eBay forces sellers to start auctions at 99 cents to attract buyers to the site, then shuts off the auctions from views and late bidding, forcing a sale at the opening bid (or a relist).
● eBay secretly allows preferred sellers to buy their way out of negative feedback (one reported payment: $150) or hide crappy ratings entirely.
● eBay cares way more about your sales if you’re a bloodthirsty international terrorist or fencing shit stolen from Amazon.
● Think your sales are bad now? Just wait. Listings without UPCs are now relegated further in search results (if that’s even possible), even if what you’re selling predates the use of such codes (vintage) or doesn’t have a UPC for any other reason (you know, like a book).
● eBay’s idea of savvy marketing is its grossly insensitive Father’s Day promotional emails stating “Your father called,” regardless of the recipient’s relationship with said father or said father’s current mortality status. And eBay will robocall you at his funeral to survey you about the urn you bought, in violation of federal and state consumer protection regs.
● If you call eBay customer service and the CS rep doesn’t like your attitude after you’ve been on hold for hours, watch out for damaging retribution. Fun Fact: eBay CS reps, who are mostly in the Philippines, are paid $5 per day plus a sandwich.
And then there’s PayPal, which eBay claims to have freed in the wild but is really still part of eBay:
● PayPal, which is not a bank, nevertheless makes what it calls “business loans” to customers—at annualized rates of up to 86.3%. In April 2015 the CFPB indicated a willingness to sue PayPal for excessive finance charges.
● PayPal’s new user agreement, effective July 1, 2015, makes PayPal the owner of all intellectual content of any business or website that accepts PayPal payments. As in non-exclusive, worldwide, perpetual, irrevocable, royalty-free, sub-licensable right to exercise any and all copyright, publicity, trademarks, and database rights on your personal intellectual property.
● PayPal (which eBay forces sellers to use) places 21-day holds on seller funds. The problem (besides the obvious): The length of time a money transmitter can hold funds is regulated by states, and most allow a maximum hold of 10 business days. PayPal hopes you don’t know this.
● PayPal sends you a 1099 stating your annual revenue, and then sends one to the IRS stating something entirely different, and then you get audited.
● In 2010 PayPal froze the account of Markus Persson, developer of the video game Minecraft, threatening to keep his €600,000 without explanation. Funner Fact: PayPal has been doing this forever. In 2005 the company was sued by a computer seller whose funds were held for six months without explanation. When confronted about it by the California attorney general, PayPal lied that the case had been resolved.
● In 2013 PayPal withheld hundreds of thousands of dollars raised in Indiegogo and Kickstarter crowdfunding campaigns by entrepreneurs, including Ouya, GlassUp, and Mailpile.
● In 2014-2015, Paypal froze 5,000 accounts of Chinese sellers scammed by eBay. “We send [manufacturers] data about what people are looking for on eBay and they respond and turn it around incredibly quickly” by knocking off copies, CEO Devin Wenig told The Atlantic. Then eBay busts them for selling counterfeits, US courts sue them, and PayPal confiscates their money. Most can’t afford an American lawyer to fight their case.
So caveat venditor, dogs. eBay is no longer a venue for indie sellers. It’s just that eBay isn’t copping to that because they’re too greedy to blow off that much free dough.
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A brief history of eBay litigation
So if eBay’s not spending its money on programmers, infrastructure, advertising, or customer service, what does it spend money on?
That would be lawsuits. Also golden parachutes and businesses it doesn’t need. (Over 40, according to Wikipedia. Remember Skype?) But mostly litigation payouts.
Sellers are lining up to sue the crap out of eBay, if Icahn (one of the largest stockholders, who owns 46 million shares and the BOD’s balls) doesn’t rip it to shreds first. So far, three state attorneys general (not including New York’s, see below) have started investigations.
Here are some of the rest:
● 2001: Montres Rolex S.A. sued eBay for selling counterfeit Rolex watches. In 2007 the German Federal Supreme Court found eBay guilty of infringement.
● 2001: eBay and Re/Max International settle out of court after eBay used Re/Max’s logo illegally for its own advertising.
● 2005: Then-CEO Meg Whitman, founder Pierre Omidyar, and Goldman Sachs were sued by eBay shareholders for a type of securities fraud called “spinning,” the pre-sale of IPO stocks to pet customers by investment banks. The executives paid $3 million, Goldman $395,000, the amounts they profited from the illegal deal.
● 2006: Net2Phone, Inc. sued eBay for infringement of five Internet technology patents.
● 2007: Netcraft Corporation filed a lawsuit alleging that eBay and PayPal infringed two of its patents for Internet billing methods.
● 2007: An Asian-American eBay employee charged then-CEO Meg Whitman with assault after Whitman shoved her during an expletive-laden tirade. The case was settled out of court for $200,000. Fun Fact: In 2009 Whitman was sued by her Mexican housekeeper for treating her like a slave.
● 2007: Prince (the Minneapolis one) announced he was suing eBay for allowing unauthorized recordings of his music and films to be sold. He succeeded in killing 300 listings.
● 2008: eBay’s Korean subsidiary, IAC, was sued by 149,000 eBay users for a data breach involving personally identifiable information including name, address, resident registration number and some transaction and refund data.
● 2008: To honor the first eBay “live auctions,” the company was sued for bid rigging.
● 2009: A French court fined eBay €40 million on behalf of LVMH, the distributor of perfumes by Christian Dior, Guerlain, Givenchy and Kenzo, which by law aren’t supposed to be for sale at a dump like eBay. LVMH claimed 90% of the Louis Vuitton and Dior-labeled perfumes, watches, and handbags on eBay were fakes.
● 2010: Tiffany & Co. sued eBay after proving 73% of “Tiffany” jewelry sold on eBay was fake, and eBay refused to do anything about it. A federal court ruled that eBay could keep selling counterfeits because how could eBay possibly know?
● 2011: eBay settled a class action for $30 million for overcharging sellers in the Motor Parts and Accessories category.
● 2012: A federal class action was allowed to proceed in which claimants allege eBay’s refusal to allow any payments other than PayPal constitutes an unlawful monopoly.
● 2013: eBay settled a class action for $4.75 million after failing to provide visibility upgrades to sellers who paid for the service.
● 2013: A PayPal program called Bill Me Later was investigated by the federal Consumer Financial Protection Bureau for predatory lending. eBay’s solution: rename it PayPal Credit and resume as before. In 2015 PayPal Credit was fined $25 million by the CFPB for illegally signing up customers and diverting them away from their preferred payment method. PayPal Credit also (among other crimes) failed to honor advertised promotions and charged late fees when website problems prevented consumers from making payments.
● 2013: A DOJ judge allowed a lawsuit against eBay to proceed that charges the company with poaching employees from Intuit.
● 2014: Two technology companies sued eBay for patent infringements. (US patent numbers 7,296,033 and 8,195,569). In 2001 a third company, MercExchange LLC, sued eBay all the way to the Supreme Court for patent infringement of three technologies, resulting in a 2011 landmark technology ruling and a $30 million settlement.
● 2014: A class action was allowed to proceed in which eBay is accused of unfair policies toward sellers that enable buyers to defraud them.
● 2014: A class action was filed in a U.S. federal court in connection with the May 2014 data breach.
● 2015: eBay settled a class action seeking damages for unauthorized charges to sellers for Good Til Canceled listings. Gross settlement amount: $6.4 million. Fun Fact: Payouts will be made as credit to claimants’ eBay accounts—after the eBay/PayPal split, just in time for eBay’s rumored bankruptcy filing.
● 2015: PayPal was compelled to pay $7.7 million to the US Treasury for 486 economic sanctions violations including the Weapons of Mass Destruction Proliferators regulations.
● 2015: A seller is suing eBay in Spain for kicking her out after she auctioned off 1-meter-square plots of the sun. Turns out there’s precedent (John Travolta and Ronald Reagan, among others, own stuff in space, plus there’s the International Star Registry), and she has legal standing to challenge eBay for breach of contract in violation of its seller agreement.
● 2015: Mary Kay Inc. sued eBay in Texas courts to force eBay to reveal the identities of people selling Mary Kay cosmetics illegally. Mary Kay won initially but lost on appeal.
● 2015: eBay and PayPal are being investigated by the New York Attorney General and the FCC for violations of the Telephone Consumer Protection Act in their user policies. FYI, NYS takes such abuses very seriously.
● 2015: Wimo Labs, a maker of Apple accessories, is suing eBay and some of its Top Rated Chinese sellers for selling counterfeits on the site. The lawsuit accuses eBay of racketeering. Wimo Labs called eBay’s counterfeit oversight program “a sham.”
● 2015: eBay Australia and New Zealand is being investigated by the tax office there for cheating on its income tax payments for the past 12 years.
● 2015: Fair Isaac Corp. (FICO, the credit rating company) sued eBay for $45 million for “intentional and willful” breaches of strategic partnership contracts involving data management products and services.
● In 2011 the DOJ launched a criminal investigation after eBay stole confidential data from Craigslist in 2004, and used it to start a rival classifieds site, Kijiji, that eBay charmingly nicknamed the “Craigslist Killer.” eBay has yet to be indicted. eBay attempted a hostile takeover of Craigslist and ran bait-and-switch Google ads redirecting Craigslist searches to Kijiji. Craigslist sued eBay for 14 crimes including deceit, breach of fiduciary duty, securities fraud, and negligent misrepresentation. The case ended in 2015 when eBay sold its stake in Craigslist back to Craigslist.
Despite plenty of complaints, there’s no action yet against eBay by either the SEC or FTC. The SEC at least still pretends to prosecute insider trading. You’d think they’d look into eBay’s vast off-the-books slush fund, called the black budget, that eBay uses to finance illegal activities.
The most plausible reasons why eBay has dodged greater regulatory scrutiny should make you think, and squirm:
1) Boardroom bully Icahn makes generous political contributions to Mitch McConnell, John Boehner, Mitt Romney, Orrin Hatch, John McCain, and other cash-before-Constitution carpetbaggers who endlessly block cabinet appointments and kill meaningful regulatory legislation; plus, he has successfully evaded SEC investigations himself;
2) John Donahoe contributed $35,800 in 2011 to President Barack Obama’s reelection campaign and $15,200 to the DNC in 2009. Donahoe was recently appointed a member of the President’s Export Council, an international trade advisory committee. Draw your own conclusions.
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Which brings us back to the seller purge that’s destroying millions of small businesses…
Giant fees from big box retailers and generous government payments for member records (e.g., the Feds pay Verizon $775 each and AT&T $325 each; Facebook pays no taxes in exchange for providing records) mean eBay doesn’t need your pathetic little sales commissions anymore.
Arguably the most disturbing thing about eBay’s death march is this: Instead of just outright banning all the small sellers it no longer wants, eBay elected to painfully drag out and monetize their exodus. Rest assured that’s part of a larger heinous plan you’ll discover the hard way.
Scuttlebutt is rampant in eBay forums and elsewhere concerning what that might be. Pick your fave:
1) fewer members means fewer payouts from upcoming lawsuits
2) fewer members means fewer claimants from a rumored bankruptcy filing
3) easier reincorporation of eBay in another country. In the UK, the company paid a paltry £620,000 income tax for 2013 sales of over £1.3 billion (eBay US paid $6.1 million on $2.86 billion net revenues). eBay Australia and New Zealand paid only $6.2 million in income tax on billions in revenue over the past 12 years, and wrote off goods and services taxes it didn’t collect.
4) prep eBay for sale to another company, like Alibaba.
FWIW: On September 30, 2014, eBay announced it would part ways with PayPal in 2015. (PayPal constituted 45% of eBay’s value.) The next day eBay assumed $7.5 billion of PayPal’s debt (ie, all of PayPal’s debt). Then on December 10, eBay announced layoffs in the thousands. According to the Wall Street Journal: “Analysts have said an independent eBay would be a candidate for a buyout, and job cuts would help lower operating costs, a key metric for buyout firms.”
When eBay released its Q3 report on October 1, 2014, its stock sank 20% on downgrades by analysts who consider a clusterfuck a bad investment.
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Anatomy of a trainwreck
It’s been nearly a decade since eBay’s profit machine comprised buyers and sellers of stuff. Now it’s pump-and-dump and flat-out theft.
For years, eBay has unlawfully goosed the price of its stock by planting acquisition/spinoff rumors in the media. (Google to buy eBay! Carl Icahn to buy eBay! eBay may accept Bitcoin! eBay to sell off PayPal! John Donahoe going to PayPal!) Every time eBay’s share price spikes, board members and top execs sell theirs, then buy them back low (via company discount), and resell them at the jacked-up market price for huge profits. (eBay execs and Icahn own 12% of the company’s shares.)
eBay dragged its ass for six months before divulging the exact PayPal spinoff date, in order to head off the massive sell-off destined to accompany it. Multiple analysts advised dumping eBay stock as soon as the split completed on July 17, 2015, at which time stockholders received one share of PayPal for every eBay share they already owned — pretty much the only reason anyone held on to the garbage.
Before the breakup with PayPal, eBay stock eternally hovered between $50 and $60. Even with a last-minute buying frenzy by opportunists taking advantage of the stock split, the price never rose above $66.
On July 20, the first trading day after the split, eBay’s share price sank to $28.57. Compare that with rival Amazon’s shares: $466 on a regular old day the same week eBay and PayPal split.
Where’s the beef?
In short, it’s at PayPal. Back on February 11, 2015, eBay’s then-CFO Bob Swan revealed at the Goldman Sachs Technology and Internet Conference that PayPal would receive a $5 billion cash divorce settlement from eBay, a gift that would “more likely than not” be parked offshore. (Which corporations do to evade tax liability.) Let’s be clear: $5 billion is 80% of eBay’s entire 2014 end-of-year cash position. And eBay openly admits hiding money in Switzerland and Luxembourg.
So let’s just say it: eBay transferred all its cash and assets to PayPal and offshore banks, and absorbed all of PayPal’s financial liabilities, obviously in preparation for (one way or another) The End.
Donahoe left eBay for PayPal the day of the split, with a $23 million retention bonus for “helping out.” Swan received an obscene retention bonus, too, $12 million.
Also not much of a surprise is how many other top eBay executives cashed out and bailed, most recently CTO Mark Carges, VP of merchant development Michael Jones, board director and Netscape co-founder Marc Andreessen, PayPal president David Marcus, SVP for eBay North America Christopher Payne, PayPal VP Stan Chudnovsky, North America CMO Richelle Parham, eBay chief lobbyist Tod Cohen, and PayPal head retail exec Don Kingsborough.
Along with the first PayPal spin-off announcement on September 30, 2014, eBay also announced the imminent departures of the much-despised Donahoe and CFO Swan. As per usual, the announcement caused the share price to spike 7.5%.
Wow, what a coincidence! On September 30 Donahoe just happened to own 660,748 eBay shares that he no longer needed. His golden parachute just happened to include acceleration of all his restricted stock unit and stock option awards.
On November 17, 2014, Donahoe bought 297,573 eBay shares at $25.85/share for $7,692,262, and sold them the same day at $55/share for $16,344,000. The next day it was publicly reported that he dumped another 485,665 of his shares for $26,672,721. These numbers have since been cooked to show he instead sold 188,092 shares on November 18 for $10,346,940 at $55/share, and repurchased them that same day at $25.85/share for $4,862,178.
Donahoe did the same thing in 2015, selling (for $6,865,815 on Feb. 2), buying (for $3,227,063 on Feb. 10), and then selling (for $7,119,475 on Feb. 10) the same 129,445 shares. Donahoe’s one-day profit on Feb. 10: $3,892,412. Feel free to assume these figures are creatively underreported. And take a picture, eBayer. You know how. It’ll last longer.
Donahoe is hardly the only dumper. Other eBay insider sell-offs in November 2014:
CFO Bob Swan sold 148,000 shares for $6,015,482
SVP Alan Lee Marks sold 6,750 shares for $369,427
SVP Michael Jacobson sold 94,000 shares for $5,124,880
SVP Elizabeth L. Axelrod sold 241,250 shares for $13,222,912
Director Thomas J. Tierney sold 10,120 shares for $295,200
CTO Mark Carges sold 11,392 shares for $600,358 just before resigning in November, after unloading 37,421 shares for $849,861 in July.
eBay corporate culture in a nutshell
Under the stewardship of Donahoe (the former Bain & Company CEO who calls eBay sellers “noise”), eBay became an easy road to huge piles of money (i.e, yours) for rich insiders. Especially Donahoe.
Not for nothing, but if you hire a corporate raider to run your company, this is what you get: a CEO who milks you for multimillions, spends his time manipulating company stock instead of managing its marketplace, robs mom-and-pop businesses with impunity, perpetuates a marginally functional ecommerce platform, and secretly sells its customer database to a rich buyer guaranteed not to squeal.
In a 2014 letter to shareholders, Carl Icahn wrote: “The CEO seems to be completely asleep or, even worse, either naive or willfully blind to these grave lapses of accountability and stockholder value destruction.”
Few Nasdaq companies need to be investigated more than eBay does. In the meantime, eBay still laughably promises sellers better visibility in exchange for sellers providing 24-hour turnaround, free shipping, generous return policies, and of course lots of fees. But in reality seller compliance doesn’t buy blackout immunity, and eBay penalizes sellers for things they can’t control. eBay forums are clogged with complaints from cooperative sellers whose stuff is still deadweight at the ass end of search results (when it’s visible at all) behind thousands of duplicate listings for Chinese counterfeits and other dreck that don’t even have the search terms in the titles.
Make no mistake: You are the product being sold. When I logged in for 10 minutes on June 23, 2015, eBay injected 127 advertiser-paid cookies into my computer. (I deleted them immediately. Everyone should.)
In other words, eBay’s current business model is you giving eBay money for nothing and eBay pimping you out to advertisers, not you selling stuff on eBay.
My advice: RUN LIKE HELL! Don’t bother selling your book (or anything else) on eBay. Short of worldwide famine or collision with a comet, eBay is your worst nightmare.
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