Should eBay split itself up?

Posted Nov 7th 2007 3:10PM by Zac Bissonnette
Filed under: Rumors, Management, Newspapers, Internet, eBay (EBAY), Technology

Any savvy eBay (NASDAQ: EBAY) seller will tell you that oftentimes items sell better together. For instance, a set of 1959 Topps baseball cards would likely fetch more than the individual cards.

But other times, especially in the case of items that aren't really related, you'll get more listing them separately. For instance, The Backstreet Boys new CD probably wouldn't sell well packaged with Kurt Cobain's Journals.

Given the wide variety of business that eBay now has under its umbrella -- Skype, PayPal. StubHub, and others -- some are suggesting that it might be time for eBay to split itself up, or at least divest a few non-core assets. According to The Wall Street Journal [subscription]:

So why aren't investors giving eBay proper credit? Ms. Whitman's big $3.1 billion purchase of Skype and subsequent need to write-down that business's value left a lingering impression that she is an empire builder. One way to show that isn't the case would be to push some of eBay's businesses out of the tent.

PayPal might find independence handy. Rivals Amazon or Google might reconsider their aversion to using Paypal's services if it wasn't run by a competitor. Spinning it off or selling a stake in a public offering also might reduce the conglomerate discount attached to eBay. Selling may not be as fun as shopping, but it usually is more lucrative.

But The Journal already summed up the problem: All the indications would seem to be that Meg Whitman is an empire-builder, making any strategic changes unlikely without outside pressure.

Tags: eBay, ecommerce, inthenews, meg whitman, MegWhitman, paypal, skype, stubhub

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Reader Comments (Page 1 of 1)

11-08-2007 @ 1:09PM

Mike said...

I don't think your question "should Ebay split itself up?" hits upon all of the issues that entity is dealing with right now.

The better question is: "Will Ebay be forced to split itself up?" Why do I say this? Well, I have a legal education, and the story below strikes me as just the kind that only a court can deal with.

Let me ask you a question. Can a bricks and mortar mall-operator tell one of the vendors in the mall "you must accept Master Card, you may not accept Visa." No I don't think so. The store may choose what payment systems it will accept, and the mall cannot dictate to a store what payment systems a store can accept.

Well the law hasn't caught up to Ebay yet. Ebay Seller's must accept Paypal (on-site). Google Checkout is banned. See the similarities. The seller should be able to accept whatever payment system that the seller desires to accept.

If this line of attack succeeds... well, it will be interesting thats for sure. Depends on whether Ebay is forced to offer a settlement. Personally, I hope the class plaintiffs don't settle. Personally, I want this to go to a jury. Its time to put and end to this crap.
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Auctionbytes-NewsFlash, Number 1531 - May 04, 2007 - ISSN 1539-5065
eBay's Payment Policies Spark Two Antitrust Lawsuits
By Ina Steiner
AuctionBytes.com
May 04, 2007

Two antitrust lawsuits were filed against eBay in April 2007 and have been assigned to the same judge because they are related, according to court filings. The plaintiffs in both parties have complained of eBay's practices with regard to its online payment service PayPal. The same judge had presided over a PayPal-related class-action lawsuit that was filed in 2002.

AuctionBytes previously reported on the recent antitrust lawsuit filed by Michael Malone on April 4, 2007 (http://www.auctionbytes.com/cab/abn/y07/m04/i06/s01). Malone's lawsuit alleges that eBay "utilizes its nationwide monopoly of the on-line auction market to monopolize the available forms of payment that sellers can use on eBay."

eBay restricts which payment methods its sellers advertise in listings and bans sellers from accepting cash, wire transfer services like Western Union, as well as several competing products, including Google Checkout. And in January of this year, eBay eliminated buyer-protection for non-PayPal transactions, while doubling coverage for qualified transactions in which PayPal is used (http://www.auctionbytes.com/cab/abn/y07/m01/i10/s01).

The second class-action complaint was filed by Ann Farmer and Todd Van Pelt on April 23, 2007. That lawsuit alleges that eBay possesses monopoly power in the online auction market, estimating it controls over 90 percent of the market in part due to the "network effect."

The complaint goes on to cite eBay's alleged anti-competitive activities, saying the company acquires its competitors; forces sellers to use PayPal; and blocks competitor Google from online auctions. It alleges that, as a result, actual and potential competition has been restrained and that eBay sellers who accept PayPal "have paid or are likely to pay artificially inflated and supra competitive fees."

The Justice Department gave the green light to eBay's acquisition of PayPal in 2002, despite the fact that PayPal itself had complained to the government about eBay's practices after the auction marketplace had acquired the BillPoint payment service.

Both antitrust lawsuits are assigned to Judge Fogel in the US District Court, Northern District of California. Judge Fogel had ruled in 2002 - before eBay acquired PayPal - that PayPal's mandatory arbitration policy was unfair to customers. He also refused to dismiss a class-action lawsuit against PayPal filed by thousands of its customers. PayPal settled the case in 2004.

Update 5/4/07: On Monday, the two cases were consolidated: "The Court finds that Malone v. eBay Inc., Case No. 07-01882-JF and Farmer, et al. v. Ebay, Inc., Case No. C-07-02209 are related actions and such cases are hereby consolidated into Malone v. eBay Inc., Case No. 07-01882-JF, and are referred to herein as the Consolidated Action."

11-08-2007 @ 10:11PM

tomgar said...

EBAY DOES NOT REQUIRE ANYONE TO ACCEPT PAYPAL. NO SELLER OR BUYER IS MANDATED BY EBAY TO USE PAYPAL. AS AN EBAY SELLER, I DO NOT ACCEPT PAYPAL OR ANY OTHER TYPE OF ON LINE PAYMENT SINCE THE SELLER HAS NO PAYPAL PROTECTION AT ALL AND CAN SO WHATEVER IT SO DESIRES WITH THE SELLERS FUNDS.

GARY
TOMGAR CORPORATION

11-08-2007 @ 2:37PM

Mike said...

"EBAY DOES NOT REQUIRE ANYONE TO ACCEPT PAYPAL. NO SELLER OR BUYER IS MANDATED BY EBAY TO USE PAYPAL."

Well than I stand corrected.

11-25-2007 @ 7:23PM

mike_the_idiot said...

Mike (aka Gary E Sattler) goes on a ebay tirade like the nutty iran president but his whole arguement falls like a house built with tooth pics!

Why? He stupidly assumed sellers don't have a choice!