Intellectual property in auctions
Holders of intellectual property rights, have claimed that eBay profits from the infringement of intellectual property rights. eBay has responded by creating the Verified Rights Owner (VeRO) program, which provides to rightsholders expedited auction takedowns and private information on eBay users, but has likewise been criticized. In June 2004 the jeweler Tiffany & Co. sued eBay claiming that eBay profits from the sale of counterfeit Tiffany products. As of July 2006, a trial date has not been set. In September 2005, eBay's privacy practices relating to its VeRO program came under scrutiny when WNDU-TV reported that the Embroidery Software Protection Coalition was accusing United States buyers, identified by eBay, of copyright infringement, and demanding monetary settlements. eBay's privacy policy warns that eBay may disclose personal information on the request of any VeRO rightsholder investigating illegal activity; in comparison, competing service Yahoo! Auctions may disclose personal information in response to a subpoena or court order. Although, according to a University of Notre Dame law professor, there is no legal basis, in the United States, for copyright infringement claims against buyers, eBay's VeRO program may have allowed the ESPC to obtain private information without judicial oversight.
Some manufacturers have abused eBay's VeRo program, through which copyright and trademark owners can quickly protect their rights, by seeking to prevent all sales of their products on eBay. In November 2006, a U.K. High Court ruled that a VeRO rightsholder's takedown request to eBay constituted a legal threat under design patent law. Since groundless legal threats under design patent law are unlawful, the ruling holds that groundless VeRO takedown requests based on design patents are also unlawful. Further, the text of the ruling appears critical of the VeRO program in general: "It is entirely wrong for owners of intellectual property rights to attempt to assert them without litigation, or without the threat of litigation, in reply."
Customer support
A source of frustration for some eBay users is that despite the company's size, it offers no customer support by phone, instead referring all ordinary members to its online help features. Apart from a library of self-help resources, these features consist mainly of e-mail contact forms and "Live Help," which lets users chat with customer service representatives via instant messaging. In fact, most visitors to the eBay site will not find any company phone number listed at all. eBay does, in fact, have a phone support department, but that service is limited to members of the rank "Gold PowerSeller" and above, the company's term for members who sell at least $10,000 worth of goods per month on the site. The phone number for that service is kept closely guarded, though ordinary users persistent enough to discover it will usually be offered help as a one-time courtesy.
Other eBay controversies
Other notable controversies involving eBay include:
In May 2000, eBay seller Kenneth Walton auctioned an oil painting on eBay for $135,805, due to speculation that it might be the work of California modernist Richard Diebenkorn. Walton pretended to know nothing about art and claimed to be surprised by the price the painting fetched, and the auction attracted international media attention. In several investigative reports by The New York Times, it was revealed that Walton was in fact an experienced eBay art dealer with several unhappy customers, and that he had colluded with two other eBay sellers to bid up each other's auctions. The Times described this as a "shill bidding ring". Walton and his cohorts were banned from eBay and eventually convicted of fraud by the federal government in the first ever prosecution for shill bidding on eBay.
On 28 May 2003, a U.S. District Court jury found eBay guilty of willful patent infringement and ordered the company to pay US$35 million in damages. The plaintiff was MercExchange, which had accused eBay in 2000 of infringing on three patents (one of which are used in eBay's "Buy It Now" feature for fixed-price sales, 30 percent of eBay's business and growing). The decision was appealed to the U.S. Court of Appeals for the Federal Circuit (CAFC). The CAFC affirmed the judgment of willful infringement, and reversed the lower court and granted a permanent injunction. eBay appealed the permanent injunction to the U.S. Supreme Court, which on May 15, 2006 found an injunction is not required nor automatic in this or any patent case where guilt has been established. The case was sent back to the Virginia district court for consideration of the injunction and a trial on another MercExchange patent the inventor claims covers the remaining 70 percent of eBay's business model. (see EBay v. MercExchange). This case has been particularly controversial since the patents involved are considered to be business method patents. (See also Software patent debate)
On 28 July 2003, eBay and its subsidiary PayPal agreed to pay a $10 million fine to settle allegations that they aided illegal offshore and online gambling. According to the settlement, PayPal between mid-2000 and November 2002 transmitted money in violation of various U.S. federal and state online gambling laws. eBay's announcement of its acquisition of PayPal in early July said that PayPal would begin the process of exiting this market, and was already doing so when the ruling occurred. These offenses occurred prior to eBay's purchase of PayPal.
On 17 December 2004, Avnish Bajaj, CEO of eBay's Indian subsidiary Baazee.com, was arrested after a video clip showing oral sex between two Indian students was sold online. The company denied knowing the content of what they were selling (because it is a venue, not a retailer) and removed the offensive material as soon as they became aware of it. The Indian government attempted to make the case that Bajaj had violated India's IT Act, which forbids "publishing, transmitting or causing to publish" obscene material, even though the actual material was never published on Baazee's servers. eBay supported Baazee's defense.
On 14 June 2005, eBay removed auction listings for originally free tickets to the Live 8 charity auction amid hundreds of complaints about such auctions. Normally, selling of charity tickets is legal under United Kingdom law. In 2005, the Australian National Rugby League tried unsuccessfully to persuade eBay to prevent scalpers from selling Grand Final tickets online. On 18 December 2006 eBay won a court case against Creative Festival Entertainment in Australia, allowing sellers to on-sell (or scalp) tickets for the Big Day Out concert. The case was won due to the big day out organizers not being able to fully enforce an anti-scalping policy printed on the back of the tickets. The presiding judge described the decision as "unfortunate".
Some have criticized the emphasis eBay places on its subsidiary PayPal as a method of accepting payments. eBay discourages sellers from using independent money-wiring companies such as Western Union and MoneyGram (Moneybookers is now allowed instead), stating that it prohibits or discourages certain forms of payment in order to reduce fraud. On the U.S. eBay, while sellers may accept such payments, they are prohibited from advertising them as a payment option. A similar policy applies to mailing cash as a payment option. Certain non-U.S. branches of eBay allow sellers to advertise wire transfers or mailed cash as payment options, provided such methods are not the only payment options the seller accepts.
In late 2006 a change in eBay's policy which showed less information about sellers once auctions reached a certain value has been criticised for making shill bidding much harder to detect. This change is to the potential disadvantage of buyers and of significant advantage to unethical sellers who, sometime with the aid of accomplices, may artificially inflate the price of an auction. An investigation by The Sunday Times in January 2007 uncovered substantial evidence of shill bidding. eBay's decision to hide much information about bidders once an auction reaches a particular price have opened it to accusations of encouraging shill bidders by making them significantly harder to identify. The case has been put that it is in eBay's interests to protect high turnover sellers who profit from shill bidding since they generate substantial income for eBay. There are claims that this change in policy, favouring unethical sellers over buyers, has significantly weakened eBay's reputation both amongst buyers and ethical sellers.
