PayPal Gets Itself Into Hot Water

Online payment service PayPal is at the center of two controversies, including a new lawsuit filed by NoBidding, the owner of auction site Bidville.com.

The lawsuit accuses PayPal of reneging on an agreement made in December to provide Bidville — formerly known as AuxPal — with its payment services. The suit also alleges that PayPal sent libelous messages to AuxPal customers stating that the site was a fraud.

“The suit is without merit, as there was no contract with NoBidding,” PayPal director of communications Vince Solitto told the E-Commerce Times. “PayPal acted entirely appropriately in all its contacts with Auxpal. Accordingly, we will contest this suit quite vigorously.”

In a statement on his company’s Web site, NoBidding president Ed Orlando said that he was hoping for a settlement of the lawsuit.

“I’m certain that playing hardball will cost PayPal much more money in attorneys’ fees than it would cost for them settle with us,” Orlando said. “If they realize that, we’d love to end this and move on.”

Media Ploy?

According to numbers posted on Bidville, the site currentlyholds over 680,000 online auctions. NoBidding merged with Bidville in February.

Interestingly, Orlando told his site’s users that the PayPal lawsuit wouldgenerate significant press for the growing company.

“I guarantee that we could not have purchased the type of advertising thatthis story should bring,” he said. “I’m not sure how much [the recentnews coverage] would have cost but it’s more than a few premier memberships.”

For his part, Solitto commented that “considering the matter is already being pursued through the legal process, one has to wonder what the intent of this press release is.”

Taking on eBay

An e-mail from PayPal has also gotten the company into hot water with online auction house eBay and PayPal’s online payment rival, Billpoint.

On July 7th, PayPal sent an e-mail to eBay sellers, saying that eBay “may have changed” seller preferences without their knowledge by adding a Billpoint logo to many of their auctions without their consent.

“It turns out that eBay had in fact changed their members’ preferences with regard to payment service of choice, whereas before members had to opt in to using that service,” Solitto said. “eBay recently changed it so it would automatically be placed in their auction unless they consciously chose to opt out.

“This was done without any notice or warning to eBay sellers, and in factchanging these preferences is now being called a feature by eBay. Because wewere contacted by our users, we warned our users this was being done to themso they could take the steps they needed to change it.”

Time Dissonance

However, eBay posted an announcement to its site regarding the problem July2nd, almost a week before the PayPal e-mail.

According to eBay’s announcement, the problem arose from a bug in the “Relist Your Item” process that caused the online payments option to be the default choice when asked for a form of payment. In addition, the statement said that due to a change in a Billpoint feature, sellers who previously used Billpoint must now opt out of the service if they do not want it to appear as their default method of payment.

Early Thursday morning, eBay posted another announcement about how to change the default setting for the online payment options.

Mad Sellers

eBay’s announcement “obviously wasn’t effectively communicated,” Solitto said, when asked why PayPal’s e-mail went out five days after eBay’s posting.

“We still received hundreds of calls after the announcement was posted,” Solitto said.

Both PayPal and Billpoint are under considerable criticism on the message boards of eBay and AuctionWatch.

“Billpoint has its problems,” one poster said. “PayPal has its problems. They all have their problems.”