Sunday, July 01, 2007

Webopolies & anti-trust laws

Just as the legal system reacted to the injustices of the robber baron monopolies by enacting antitrust laws, we are now seeing a reaction to the “unfair” advantage of the webopolies. Webopolies have “life or death” control over those who rely on them to earn their livelihood.

Here is a book on webopolies that addresses this issue.

eBay cracks down

With all of the fraud and nastiness associated with buying from anonymous people, I don’t buy much on eBay anymore. Consumer Reports issued a consumer alert on eBay in their August 2007 issue:

“Buyers indicated that some sellers took their money and ran, failed to disclose key details about the merchandise, or overstated the item’s condition. However, deceptions weren’t the only pitfalls for folks to avoid when participating in an online auction. Although eBay prohibits trade in illegal goods, buyers can end up with unsafe products.”

Evidently, I’m not alone in being wary of buying on eBay, and eBay is trying to get us back by developing an algorithm to suspend “bad” sellers. It’s a great idea, but it brings-up an important legal issue.

Just last week, eBay suspended or restricted over 15,000 sellers in their program, citing that any low feedback percentage (less than 95% positive) would not be tolerated!

This is a welcome move, but it makes me wonder if the algorithm for tossing-out buyers may be unfair? As a programmer, I’ve worked on sophisticated rule-based algorithms, and “analyzing” eBay’s data to determine the correct “bottom 2%” of buyers is tricky. However, it’s clear that some of the suspended sellers should not be selling on eBay (IMHO).

Does negative feedback constitute a Breach of Contract?

Technically, they say that the seller has breached their eBay agreement ("breach of non performance policy"), specifically the “seller nonperformance” clause. eBay also claims that “1% of sellers are responsible for 35% of bad buyer experiences."

“Making the site safer by cracking down on sellers sounds like a sensible idea, but eBay sellers know that unscrupulous buyers can give them unjustified negative feedback.

The eBay agreement reads:

“Without limiting other remedies, we may limit, suspend, or terminate our service and user accounts, prohibit access to our website, delay or remove hosted content, and take technical and legal steps to keep users off the Sites if we think that they are creating problems, possible legal liabilities, or acting inconsistently with the letter or spirit of our policies.”

By going purely on raw feedback, and not taking into account circumstances like deadbeat and newbie buyers, some good sellers may get caught in the net. And as usual, sellers are left wondering if eBay exempts their top sellers from such crackdowns.”

For a great example, consider this suspended eBay seller. I checked their feedback myself, and noted that their “negative feedback” was by a bad buyer (with a -1 feedback score!). The feedbacks make it clear that this seller was just the victim of “deadbeat bidders”, something that could happen to any seller.
“- No repley to my E-mails regarding invoice/ No combined discount shipping

- E-mailed several times(no answer) no combined shipping as stated”

This is not a “perfect seller”, but there are clearly some mitigating circumstances here.

Legally, which is true? Has this seller been tortuously damaged because of a flaw in the eBay algorithm, or does eBay have the absolute right to say who uses their system?

Remember, webopolies can kick-out someone who simply writes a negative blog post about them. They don’t need a reason, it’s their sandbox.

Now, these acts can only be conducted by “webopolies”, vendors whose products are indispensable, and which have no close competitors. eBay is the 800-pound Gorilla of eCommerce. Others have tried to compete, but the “barriers to entry” are impossible to overcome. Also, being a monopoly has created the “habit” of associating “eBay” with online auctions, just like people used to associate “Ma Bell” with telephones.

Some assert that these “webopoly” companies hold a “life or death” grip on their user communities. Being banned from Google has ruined many businesses, and legal challenges thusfar have ruled that Google can accept or reject anyone they want, for any reason, or no reason at all. It’s their right.

Now, here are the core questions:

- Do webopolies have an obligation to keep criminals from using their products? For example, does eBay have a responsibility not to become a “thieves market”? US law has strict prohibitions against aiding and abetting a criminal. It’s not just webopolies at-risk, especially for web sites that are dedicated to serving the felon community.

- Given that the webopolies have this public safety obligation, do they also have an obligation to be “fair” to their community, especially when it indispensable to the jobs of tens of thousands of corporations?

Are webopolies aiding and abetting criminals?

According to the FindLaw entry on criminal aiding and abetting a criminal:

"A criminal charge of aiding and abetting or accessory can usually be brought against anyone who helps in the commission of a crime, though legal distinctions vary by state.

A person charged with aiding and abetting or accessory is usually not present when the crime itself is committed, but he or she has knowledge of the crime before or after the fact, and may assist in its commission through advice..."

In sum, it’s clear that webopolies are facing many of the same antitrust issues as the early 20th century monopolies.