The move by the auction site is presently limited to Australia only and will hit sellers with extra fees because PayPal charges them a fee of between 1.1 and 2.4 per cent to accept payments - usually using credit cards - via the service. Sellers have already begun revolting by papering eBay's discussion boards and starting a petition, which has more than 3500 signatures.

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MashUp Blog: Is eBay being disingenuous?

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The sellers are sceptical about eBay's claims that PayPal is far safer than other methods such as bank deposit, and say some buyers distrust PayPal. "If consumers want the additional protection offered by using PayPal, they can choose to use PayPal, and eBay's proposed conduct takes away that choice and would likely prevent the emergence of competitors to PayPal in the online payment market," said Dale Clapperton, chairman of the online users' lobby group Electronic Frontiers Australia.

Alastair MacGibbon, eBay's trust and safety director, said the announcement was designed to protect users as one is four times less likely to have a problem on eBay if one pays using PayPal than with other methods. eBay has written to the Australian Competition and Consumer Commission (ACCC) asking for immunity from legal action under the Trade Practices Act, arguing that the public benefits of the move - increased transaction security - would outweigh any detriment to the public that might be caused by a lessening of competition in the online payments market.

The act prohibits companies from imposing restrictions on people's freedom to choose whom they deal with. "While some other payment systems provide some level of customer protection, eBay understands that no other currently available payment method offers an equivalent to either the Buyer Protection Policy or the Buyer Complaints Policy," eBay argued in its exclusive dealing notification. "Furthermore, as related bodies corporate, eBay and PayPal are in a unique position to share users' data, internal risk and dispute data, and to better monitor transaction problems in 'real time' at each point in the transaction process, to help better protect buyers and sellers."

A competition lawyer, who did not want to be named, said the ACCC's analysis would centre on whether eBay was using its substantial market power in the online auction space to leverage into the online payments market, an area where it faces competition. It would also consider whether shifting eBay users on to PayPal was an appropriate, proportionate response to dealing with online fraud.

"The power in the auction market that eBay has is being extended to limit competition in the payment systems market that PayPal operates in - that would be the basic analysis, I think," the lawyer said. A spokesman for the ACCC said the regulator would be inviting submissions from the public on the issue via the exclusive dealing notifications register on its website. Submissions are due by May 2. eBay will seek to placate angry sellers by hosting four Q&A workshops in Sydney, Melbourne and Brisbane on May 5-8 with presentations from its Australian vice-president, Simon Smith.