Does eBay Truly Fail Free-Market Lovers?

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In
the past two weeks, you’ve seen my first two articles of this 3-part
series about eBay. The first one, All
Hail eBay — The Third Leg of Low Prices
, explained how
eBay was very much responsible for keeping prices in check the past
few years in the face of rising home and energy costs. Last week’s
FreeBay?
When eBay Works Well
explored eBay’s free market aspects and
reasons that eBay often works well.

This
article… well, it might not produce many eBay fans, especially
for LewRockwell.com readers.

eBay
isn’t a free market.

Why
Am I Sitting on the Fence?

In
spite of its problems, I’m an avid eBayer. As a high-level PowerSeller
(one of the "frequent flier" tiers of busy eBay sellers)
who runs from 100 to 200 auctions each week, my family has turned
a part-time hobby into a fairly serious business.

(I
haven’t promoted our auctions in these articles only because I wasn’t
writing them to generate auction traffic. Nevertheless, I’ve received
several requests from readers asking for our eBay ID so they can
see what we do. Our Auction Catalog is at www.BidMentor.com
and although we happen to be running low on listings this week,
you can see that we generally sell a lot of items.)

Given
how well eBay works for us, I’m not about to turn my back to it
just because it’s not the perfect free market system Hayek or von
Mises would have designed. I can boycott it due to its problems
(and I’ll discuss its problems below) or I can take advantage of
its benefits. I choose the latter. In addition, I’ll continue to
write books about eBay that teach others how to leverage it to maximize
a family’s income. Writing books and eBay selling are what I do;
we naturally have a soft spot for our bread-and-butter career, especially
since it’s our career that puts the bread and butter on the
dinner table.

The
Big Freedom Erosion Continues — eBay Banned Guns

A
few years ago, eBay created new rules and banned the sale of all
firearms, shortly followed by ammo, from its auctions.

In
doing so, the gun grabbers fired a shot across our bow.

This
single act was eBay’s most serious violation of free marketing that
could have been possible. All the clichés apply here:

  • When only
    the police have guns, it’s a police state.
  • Liberals
    (which includes both houses of Congress) don’t want guns in
    the hands of law-abiding citizens but they want to give China
    all our military secrets.
  • Welfare
    kills more people each year than guns do (through the destruction
    it naturally creates).
  • (My personal
    favorite) Guns don’t kill people, Abortionists kill people.

Anyway,
this was truly the hardest-hitting thing eBay could do to us.

For
those of you who despise the fact that eBay no longer lets you auction
firearms, my hat’s off to you for your determination if you refuse
to use eBay. A boycott doesn’t have to be complete to be effective.
You might make a difference. For an example of this, you might recall
how K-Mart went downhill a few years ago when Don Wildmon’s American
Family Association and other Christian groups boycotted them for
being the largest seller of pornography (through their 7-11 stores).
Agree or disagree, that isn’t the point here. The point is that
boycotts can be effective and just as eBay can allow whatever they
want to allow, you can choose to spend your dollars elsewhere.

How
seriously do I take the right to bare arms? You might get an indication
of how strongly I feel here from my Lew Rockwell article entitled
This Advice
Might Save Your Life: Don’t Take Ayn Rand to a Gun Fight
. If
you skim that writing, you’ll see that I’m all for giving the freedom-hating
gun grabbers my guns as long as I give them my bullets first.

I
would like to analyze eBay’s reasoning for banning the sale of firearms.
I don’t recall exactly how they worded it, but I seem to remember
eBay citing "safety reasons" for banning the sale of weapons.
That’s malarkey and we all know it. That’s being politically correct
and we all know it.

eBay
stopped the sale of weapons because they feared lawsuits.

eBay
was wrong — from any free market viewpoint — in banning those sales.
Having said that, I want to offer a different angle to this. Was
it really eBay’s fault — or the fault of our gun-grabbing, freedom-hating
lawyers in our [in]justice system?

I
suggest it was the latter’s fault. If I participated in an activity
that would put the entire justice system breathing down my throat
the second someone misused something that I brokered, I would think
twice about being the broker for that item. And I probably wouldn’t
give my customers the true reason, "I’m afraid of the lawsuits."
Face it, you wouldn’t do that either.

So
on the gun issue:

  • I truly
    understand eBay’s policy.
  • I truly
    hate eBay’s policy.
  • I truly
    don’t completely blame eBay for wearing a skirt — instead of
    pants — on this issue.

Tip
if You Make Your Own Ammo

By
the way, for those of us who reload our own ammo, eBay still allows
the sale of most reloading supplies. For brass, cracked pecan shells
(for cleaning the brass), scales, dies, holding trays, and other
reloading supplies, you can often use eBay to beat prices found
elsewhere. Most of the cost is in shipping given that these kinds
of supplies are on the heavy side at times. You can perform some
local-area searches for sellers in your area who might let you pick
up any reloading supplies that you buy from them to save a large
part of those shipping costs.

You
can take a look at eBay’s current reloading auctions (more than
4,400 items at the time of this writing) here.

eBay’s
Lack of Protection

Another
bane of contention about eBay (and its daughter company PayPal)
is its weak support for people who get ripped off. Sellers who don’t
send what’s been paid for and buyers who don’t pay for what’s been
won.

My
family has about 3,000 transactions behind us. Of those 3,000, most
have been sales and perhaps 14 have been with buyers we never heard
from again. I cannot help but imagine that is a lower non-payment
percentage than any traditional store on earth, but still it hurts
when it happens.

eBay
lets me file a "non-paying bidder" alert on those buyers.
When buyers get three of these alerts, they are supposedly banned
from eBay. So they have to create a new ID and start again which
doesn’t take a brain surgeon to do. eBay does have some technical
ability in place to monitor network addresses to keep banned users
from signing up at the same network location (and to keep family
members from bidding on other family members’ auctions to force
totals higher (called shill bidding)) but generally being
banned from eBay isn’t a total loss and is nothing much to fear
for those who actively seek to get as many auctions through fraudulently
before getting kicked off.

The
bottom line is that eBay’s protection of sellers is fairly weak.
Yet it’s all a numbers game just as any business activity is. I
hope to have far more paying buyers than non-paying buyers. I’d
take a non-paying rate of 14 out of 3,000 for the next 100 years
and be happy. Consider how many traditional brick-and-mortar stores
have theft from shoplifters, theft from employees, damage occur
to merchandise, employee timeclock abuse, and all the other costs
that eBay sellers don’t face on a regular basis. Thinking that through
clearly shows that eBay’s selling risk isn’t high at all.

As
a buyer, I’m taking a slightly higher risk than the sellers. Sellers
don’t generally ship until payment is in hand. Through some dancing
around, some can use PayPal to fraudulent pay sellers and get items
shipped before the fraud is revealed, but that isn’t easy to do
and PayPal is getting far smarter about it. Nevertheless, as a buyer
I’m the one who must take the biggest chance when sending sellers
money in hopes of getting what I won.

eBay’s
feedback system (described in detail in last
week’s article
) helps protect buyers by giving them a history
of a seller’s track record. Buyers can limit their purchases to
those sellers who show a good customer service history. In addition,
certain protections for buyers go into place after a seller reaches
certain status levels at eBay and at PayPal. To become a PowerSeller
for example requires that a seller have an exemplary selling track
record and just this month eBay announced more strenuous requirements
to become PowerSellers.

Yet,
it’s not eBay policing this feedback activity, it’s the eBay members
themselves. Buyers rate sellers and sellers rate buyers. In that
light, it’s a nice free market activity. And yet as the broker of
these deals (and especially as the owner of PayPal) eBay doesn’t
like to get their hands dirty when someone is defrauded. They offer
some protection programs, they offer ways that buyers and sellers
can demonstrate their honesty and history above and beyond feedback
(through verification programs) but eBay won’t be your knight in
shining armor most of the time if you get taken.

PayPal,
for example, will remove money from your PayPal account if one of
your buyers turns out to have paid you, via PayPal, with a phony
credit card. I would say that PayPal has an implied responsibility
to check the validity of a credit card at the time of purchase and
if PayPal approves that purchase, PayPal should let me keep the
money. This is what happens for traditional merchants who call to
get a credit card payment verified at stores — if the credit card
company approves the charge and provides a confirmation code, the
store gets to keep the money.

Some
might say that PayPal and eBay are private companies and can do
what they want. Well of course that’s true, but there are still
some implied responsibilities in any business transaction that may
not be legally binding, but that might help with handling liability
issues that buyers and sellers face. eBay and PayPal don’t want
it widely known that their desire to go to bat for you is lacking
because that would be bad press especially in light of today’s privacy
issues.

If
you’re a buyer who pays with a credit card, either directly from
the buyer or through PayPal, you generally have the ultimate protection
of issuing a chargeback to PayPal for a purchase that went sour.
I have it on fairly good authority that PayPal doesn’t like it when
you do this — obviously. I don’t know for certain that PayPal will
close your account once you file a chargeback on them, but the chargeback
would have to be extremely high for me to risk going this route.
I suppose that’s a sell-out on my part because I’d rather continue
to accept PayPal payments than risk being cut off from them.

eBay
Privacy? I Don’t Think So

I
mentioned privacy in the previous section and I’d like to expand
on that a moment.

Many
people think that eBay and PayPal would spill their computer guts
if and when approached by IRS agents about one of their customers.

I
agree that eBay would do that. If I was issued such a subpoena I
would too. You would too. (Yes, you would too.)

One
reader told me that eBay doesn’t even require a subpoena to hand
over your data. I’m not convinced of the veracity of that statement,
but let’s face it. When the government specifically asks eBay for
information, without a subpoena, if eBay refuses how long do you
think the jack-booted feds will take to obtain a subpoena? You could
measure the time it takes in nanoseconds. eBay knows that they’ll
have to supply whatever is requested eventually. I’m not praising
eBay for this — I’m just stating what is probably taking place.

One
way around this would be for eBay and PayPal to scrub all their
customer data once a transaction is concluded. That would certainly
make eBay and PayPal safer for those concerned with privacy. It
would also make it safer for those fraudulent buyers and sellers
to repeat their activities over and over until they eventually got
around to stealing from you and me.

In
addition, scrubbing transaction data would make eBay and PayPal
far more difficult — and expensive — places to transact business.

Having
to re-enter all my data each time I transact business would be a
nightmare I wouldn’t want to face. I suppose I could get software
to make all the entries for me automatically each time I bought
or sold. Sounds like work to me and I’m lazy, I like the fact that
with one click I can pay for something through PayPal once I win
an auction because they already know about me and how I pay. Again…
I suppose this makes me a sell-out.

In
spite of the fact that people don’t wish their personal information
to be used in marketing systems, eBay does analyze this data and
learn what sellers prefer and what buyers prefer and they do have
a much better system due to this ability.

Can
I be frank? If the signers of the Declaration of Independence were
like many of today’s Libertarians, they would have refused to sign
the document. Yet, they had far more to lose by putting their names
to that document than credit card number theft or IRS audits. They
put their lives and their families’ lives on the line with those
signatures.

I’m
not saying that privacy shouldn’t be a concern. The threat of your
personal information being misused is higher today than ever before.
Computers make this possible. The threat of the government snooping
on your activities is higher than ever before. I could use a cliché
that says if you’re doing nothing wrong then you shouldn’t worry.
But the truth is, it is because you are doing nothing
wrong that you don’t want your privacy invaded. I understand
that.

I
don’t think I fully grasp why someone uses their fear of privacy
invasion to avoid transacting ordinary business in the world we
live in. I’m sure I’ll hear a myriad of reasons why I am completely
wrong on this and I welcome those comments.

But
for this article, the bottom line about eBay is, you certainly give
up your privacy to whatever data you give them. No question about
it. Yet, I suggest — as I did with the weapons ban above — that
this isn’t inherently eBay’s fault but the government’s intrusive
nature these days.

I
like the government being able to have all the information they
need at any time to go after the bad guys. Yes, our government today
is one that could use anything against us, especially if we’re innocent.
That doesn’t mean they shouldn’t have crime-fighting tools. We let
them have warships and we don’t worry about them using them against
us (I know… some of you do).

A
Leftist Agenda?

I
recently received an email that read:

"eBay
is not a free market, as they exercise political, thought-police
control over what you buy or sell. If you offer politically incorrect
merchandise, they will yank the auction and your access. eBay is
driven by a leftist agenda."

I
agree they do and I hate those policies. I’ve already discussed
eBay’s most blatant freedom-loving violation in their ban of firearms.

I
understand what the writer is saying. eBay’s system of buying and
selling is not a hands-off, laissez-faire system.

I
say eBay is a separate company who can make its own rules. If, however,
we agree that eBay can do what they want with their own assets,
then we must praise eBay’s ability to do that because we are free-market
people.

Just
this week I heard a popular radio hostess (they don’t like it when
you call them a radio hostess but I don’t see the need to eliminate
descriptive nouns from the English language) complain that the Republicans
lost the border patrol issue to Democrats who are now calling for
tighter borders. She was angry that she’s been calling on Republicans
to do something about this for years and they ignored her and now
the Democrats are making the issue their own.

(This
relates to eBay…)

Let
me be clear — I’m no fan of Demoncrats — but shouldn’t she be praising
them? Finally, somebody in Congress is talking about it besides
Ron Paul. She’s more concerned with politics and Republicans getting
ahead than results. I care more about the tightening the borders
than who tightens them. If I truly want the borders closed
then I’ll be glad that anybody begins to do something about it.

In
the same way, if we consider ourselves to be free market people,
then we shouldn’t knock eBay when it does things we don’t like them
doing. Well, I mean it’s great to knock them all we want because
as consumers and freedom lovers our concerns should be able to be
heard. But it’s a free-market aspect that enables eBay to ban whatever
they want to ban. There are auction sites out there that sell weapons
(such as www.auctionarms.com
and www.gunbroker.com),
they just aren’t eBay. eBay can do whatever they want with their
own assets and we can do the same. We can choose to transact business
on eBay or look elsewhere.

As
for me and my family, we’ll be on eBay for a long time, in spite
of its warts and in spite of its lack of a true free-market structure.
Perhaps the definition of "sell-out" is my looking at
benefits and not the costs. But I believe I’ve stated the costs
of eBay very plainly in this series and I’ve shown that it comes
with some steep costs depending on your perspective. So I don’t
think I’m blind to its problems. I think there are ways to make
it work to our advantage in spite of those problems.

You
can and should leverage eBay to bring lots of extra money to your
household, and at least save money when you learn some of the ways
to find the deals that are still out there if you know how to make
eBay work for you.

September
6, 2005

Greg
Perry [send him mail] might
be the earth’s most prolific computer book author with more than
75 titles but his passion is eBay. That’s because he’s so successful
there. If you’ve ever considered eBaying something, you’ll make
far more money when you read his newest book, eBay
eXtasy — The “Secret” to Why Buyers Will Happily Pay an EXTRA 99
(or More) for Each Item You Sell
.]

Greg
Perry Archives

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