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Does eBay Truly Fail Free-Market Lovers?

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

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