EBay's PayPal rule in Australia draws fire

EBay Inc. is exploring whether to require customers to use its online payment service PayPal, a move that has angered users and prompted antitrust scrutiny in Australia, where a PayPal-only rule takes effect next month.

It's unclear whether eBay will institute a similar policy in the United States and other countries. However, the online auction company often tries big changes in smaller markets before expanding them worldwide, and says it is open to that in this case.

"We are going to take learnings from it and apply them accordingly," said eBay spokesman Usher Lieberman.

EBay says it wants to reduce disputes and restore trust in its marketplace with the PayPal-only plan. Because eBay and PayPal can share information on each transaction, eBay says use of PayPal allows it to stop fraud more efficiently than outside payment services. Pressing that safety argument in a heated discussion with Australian users, an eBay executive compared the new rule to banning the sale of heroin on street corners.

But critics lament that PayPal is costlier than other payment options, and they suspect eBay is just interested in increasing PayPal's revenue. Australian banks say the plan will eliminate competition for the sake of exaggerated benefits.

"Competition will be restricted, innovation and development will be constrained, new entry will be discouraged and PayPal will be able to increase fees and charges to eBay users," the Australian Bankers Association said in a filing with regulators Thursday.