Thursday, November 7, 2013

Be Very Careful When Selling Your Digital Goods on eBay

Back in December 2011, I detailed a harrowing journey which started with my offering digital goods for sale on eBay, and resulted in my losing both my digital goods and the money that was paid to me for said goods. Now that my losses are a matter of public record, I can come out and say I lost 486.4 bitcoin, and have nothing to show for it other than a grim, and ultimately fruitless for me, journey with eBay through the courts. My long ordeal with eBay finally came to a less than positive conclusion yesterday morning, when the commissioner presiding over my small claims trial, Lisa Steingart, ruled against me while court was still in session, saying that based on what she had heard from me and from the defendant eBay (represented by a paralegal who introduced herself to me as Stephanie), the defendant eBay did not owe me, as the plaintiff who had brought suit against eBay, anything, because the eBay user agreement that I allegedly agreed to when I created my account in 1999 states sellers cannot sell "intangible currency".

My main argument in court was that eBay is talking out of both sides of their mouth, because the user agreement may state that sales of digital goods are prohibited, but eBay continues to reap massive financial reward by allowing sales to continue, even encouraging sales of so-called prohibited items, and collecting commissions on successful sales of cellphone ringtones, music, movies, domain names, software, electronic books, electronic currency, financial and cash services, video game accessories and characters, electronic gift certificates and coupon codes, and much more. To this day a thriving market for digital goods exists (I contend to rival Amazon, Netflix and Apple), and eBay does nothing about it other than to say that eBay will take down individual listings when people report violations of the User Agreement.

Note that even though eBay says their User Agreement states that sales of intangible currency are prohibited, they have a category for sales of "Virtual Currency", which gives lie to the idea that eBay prohibits such sales:

eBay bitcoin sales virtual currencyThe crux of my argument is that I had created four separate listings to sell my digital goods, and during that entire time, eBay never once warned me, or anyone else who lists digital goods for sale, that doing so could result in the eBay seller being doubly damaged, meaning, the eBay seller could lose both the item being offered for sale, and the money paid for said items. I told the commissioner that eBay benefits from sales of prohibited items (and upon further analysis, even encourages sales of prohibited items), and eBay does not provide adequate safeguards to protect eBay users who are vendors and sellers.

How eBay deals with eBay users who sue eBay:

  1. eBay has a paralegal attempt to contact you to dismiss the case in your county, and refile in Santa Clara County, where eBay headquarters is, and where eBay hopes to have home field advantage. In Santa Clara County, the commissioners or pro-tem judges who you appear before will likely be unfamiliar to you as plaintiff, but more likely to be familiar to the eBay legal team. eBay then sends legal documents to your home county, arguing the motion for change of forum from your home county to Santa Clara County, and in my case, the commissioner decided in eBay's favor.
  2. eBay points to their User Agreement which states that in matters of contention, you agree to file in Santa Clara County, and that you also agree that sales of digital goods are prohibited.

Someone will have to successfully hold eBay accountable, and that someone has to be other than me. I feel my strongest arguments for why eBay owes me monetary damages for the loss I suffered are:

  1. eBay is saying that they have proof an unauthorized third party accessed the eBay buyer's account (please keep in mind that the eBay buyer is claiming his eBay, Paypal, AND personal email accounts were all compromised by this unauthorized third party) and bid on my items without the account holder's permission, but eBay won't tell me what this evidence is, let alone, let me examine this evidence. I am simply supposed to take eBay at their word.
  2. even if what ebay is saying about the compromised accounts is true, there was a time window of 24 hours between when the item in question was first purchased by the buyer, and when eBay notified me that the buyer account was accessed by an unauthorized third party. Why didn't eBay let me know sooner, if they had evidence that the buyer's eBay, Paypal and email accounts had been compromised?
  3. when I was creating the listings, why didn't eBay warn me that my digital goods, and what I paid for them, and could sell them for, could potentially all be lost, and unrecoverable, and that digital goods auction listings were not covered by eBay or Paypal?
  4. Paypal says that if you receive payment for an item, you are covered by Paypal seller protection; you only need to provide proof of shipping, and that you sent the item to an address that is verified by Paypal. However, this protection does not cover digital goods, even though I have the evidence to show I sent the items and the buyer received them.
  5. when it comes to high value transactions, eBay can set up an escrow system, just like it does for eBay Motors, where a disinterested third party, perhaps an eBay employee, can make sure that the buyer is who he or she says s/he is, and that the seller actually has said goods and they are the value claimed by the seller, before payment is released and goods are delivered, as overseen by the third party.
To pour salt in the wound, after I lose my bitcoin and the money paid for them, my Paypal account is limited until I send in a notarized document agreeing not to buy or sell bitcoin using Paypal. When I tried to resolve this by contacting an eBay seller advocate, I was told that in the future, if I want to sell digital goods, to list said goods using eBay Classified Ads, for which you pay a flat fee of $9.95:

Here again, I feel eBay is being a bit disingenuous, because while eBay may not necessarily get more money in each and every auction sale, 11% (eBay and Paypal fees combined) of a large number of digital goods auctions or Buy It Now transactions, even if many of those transactions are where the buyer claims their account was hacked, is much better than a fixed fee of $9.95 per Classified Ad transaction. That is my theory for why eBay doesn't force, or even automatically notify, sellers listing digital goods to go to eBay classifieds. The seller may lose out on money and goods, and eBay may have to refund the fees, but eBay suffers no additional loss, other than the small percentage of people who successfully sue eBay and collect.

Ultimately, I feel that the fact that eBay continues to allow and encourage digital goods auctions to take place, to allow people to see what said goods can sell for, presents a sort of attractive nuisance, much like a clean, well-lit pool on private property with an invisible fence around it, in an area with lots of families with children and young people.

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