Windsor Auctions, Inc. and Jewelry Auctions, Inc., filed an unfair competition/antitrust action in December 2007 against eBay. In response, attorneys representing eBay filed a motion to dismiss Windsor/Jewelry Auctions action. In filing their motion to dismiss, eBay’s attorneys have argued that eBay is not subject to the Robinson-Patman Antitrust Act, as they do not offer commodities. Interestingly enough, eBay may have opened the door to writing law, which may have its disadvantages for future litigations to come. 

Does eBay Offer Commodities? 

When the Robinson-Patman Act was drafted over 50 years ago, the act did not take into consideration that technology would be where it is today. In fact, technology has advanced at such a fast pace that laws specific to technology are - to this day - being defined and tested in courtrooms across America. 

What is a commodity? A commodity has varied definitions. A tool such as a shovel or a rake can be deemed a commodity. The operative word is “tool”. In this case, eBay offers “tools” such a Turbo Lister (a management tool which is used by eBay sellers to upload their wares onto eBay).  

On the other side of the coin, we have the example of offering a commodity as offered through a venue (services). We’ll use the local flea market as a way to illustrate just how services offered by a venue may be deemed a commodity.  

John goes to the weekend flea market and pays $20.00 for an empty space in which to offer his wares. His competitor (who operates five booths) pays $20.00 per booth as well, however, also receives a cash register, light fixtures, display tables and chairs at no extra charge. The shelving, cash register, light fixtures, display tables and chairs (received by John’s competitor) are commodities.  

Sellers on eBay have many tools at their disposal. They can elect to pay a monthly fee for an online store and the majority of eBay sellers use PayPal as their cash register (PayPal charges sellers a fee per transaction). Additional tools offered by eBay assist the seller in dressing up their storefront with promotional advertisement boxes and sellers can even select specific store themes, which are applicable to the items that they offer through their eBay store. All of these tools help sellers to compete and thus, create a safe and fair marketplace (as claimed by eBay). 

While Windsor/Jewelry Auctions had the same advantages (as their competitor) in utilizing the aforementioned tools offered by eBay in designing their online stores, the competitor had access to an additional tool, which pushed its listings to the front of eBay core thus, offering the competitor an unfair competitive edge against ALL other live auction sellers.  

Can Downloaded Software be defined as a Commodity? 

There was a time when those seeking to purchase a software program hopped into the car and drove to the nearest mall to pick up a new release of a software program. Times have changed and Internet users can purchase software programs online and download the program upon completion of purchase. Does eBay offer both tools and services, which make them vulnerable under the Robinson-Patman Act? 

On March 28, 2007, outside counsel for eBay filed a reply in support of its motion to dismiss Windsor/Jewelry Auctions’ complaint.  

eBay claims the plaintiff’s (Windsor/Jewelry Auctions) elected to interface with eBay Live Auctions through an intermediary (Live Auctioneers, LLC), while other auction houses elected to interface with eBay directly. Although Live Auctioneers disclosed it entered into a partner agreement with eBay, eBay claims that Live Auctioneers is nothing more than an intermediary, middleman and/or third party provider.  

It is not known exactly how many auction houses interface directly with eBay, however, a quick review of eBayLiveAuctions displays only a handful of auction houses, which do not display the logo of partner providers such as; Live Auctioneers, ArtFact and iCollector.  

According to a press release posted by Live Auctioneers, Live Auctioneers services 670 global auction houses. ArtFact displays a total of 2,396 searchable auction houses (on its web site) and iCollector’s site displays approximately seventeen auction catalogs by various clients. It is not known exactly how many auction houses are serviced by iCollector.

The Auction Duration End Time Tool

In reviewing eBay's answer, it becomes clear that any reference to the "end time duration tool" is missing from the equation. This tool is not accessible through Turbo Lister. In fact, the screen shot of this "tool" clearly shows that it is NOT accessible through the use of Turbo Lister.

The tool is utilized to place a more accurate end time on eBay Live Auction lots. As a Live Auction seller, Windsor Auctions uploaded listings through eBay's partner Live Auctioneers. When a catalog is uploaded in eBay Live, the auction seller is presented with an option to select how long their auction event will last. In the past, all Live Auction events were automatically set to last for twelve hours (no exceptions) however, as the years passed, the option to select a shorter auction duration were offered to clients who were direct to eBay Live .

The option to select the duration of the auction (from a set twelve-hour period) was changed to allow eBay (direct) Live Auction sellers the ability to select the duration of their auction for a minimum of three hours on up to twelve hours. In this case, if a direct to eBay Live Auction seller averages 60 pieces per hour, the seller could initially upload 180 pieces for the first three hours and then upload 60 pieces per hour thereafter.

The complaint filed by Windsor Auctions alleges that a competitor (within the jewelry category) batch uploaded listings into eBay Live using the time duration tool. While the competitor initially set his auction for the twelve-hour duration, he also utilized the same tool to batch upload his products into eBay and timed those listings to flow through core on an hourly basis.

The advantage of flowing hundreds of listings through core (on an hourly basis), while hundreds of live auction sellers must patiently wait, as their listings flow through core (for up to a twelve hour period), places the timed listings of the competitor at the forefront of eBay core.

Who’s Using the End Time Duration Tool?

A review of current live auction sales (March 30, 2007) posted on eBayLiveAuctions.com shows end times displaying on Paramount Auctions/Jewelry Overstock Auctions are flowing through eBay core on an hourly basis. A review of all seventeen auction sales, as displayed on eBayLiveAuctions.com homepage, reveals that all seventeen auction houses (with the exception of Paramount Auctions and Jewelry Overstock Auctions) are displaying end times on lots, which are not flowing through eBay core on an hourly basis.

Windsor’s complaint filed in December 2007 alleges that eBay Live Auction clients had access to a tool, which was not made available to those using eBay partner providers such as Live Auctioneers, LLC. One would most likely question that if all eBay Live Auction clients have access the tool, why is only one live auction seller is utilizing the tool?

Downloaded Software Programs Not a Tangible Good?

Attorneys for eBay contend that such tools are not tangible goods constituting commodities under the Robinson-Patman Act; rather, such tools are merely functions of the intangible services offered by eBay and/or Live Auctioneers. In addition, the technology services allegedly offered by eBay and Live Auctioneers cannot be produced, felt or stored even in small quantities. eBay claims the plaintiffs do not by a quantity of it, store it and resell it to their customers.

Turbo Lister is downloaded onto a users desktop/laptop where it is stored (along with automated updates) within the users desktop/laptop memory. No doubt, Turbo Lister is not delivered in a glossy package, however, Turbo Lister is downloaded onto a users desktop and stored in memory. It is not known how millions of eBay sellers have downloaded and stored Turbo Lister onto their desktop.

The Core of the Matter

The advantage of flowing hundreds of listings through core (on an hourly basis), while hundreds of live auction sellers must patiently wait as their listings flow through core (for up to a twelve hour period), places the timed listings of the competitor at the forefront of eBay core. The ability of every Live Auction seller (direct to eBay or not) to push their listings through eBay core on an hourly basis would undoubtedly clutter core and essentially set both regular eBay listings and eBay Live listings on the ultimate collusion course. 

Is the use of the auction end time tool similar to the auction extender tool? The auction extender tool allowed regular eBay users the ability to extend their auctions if their listing received no bids. The developer of the auction extender tool was Ethical Technologies, which is no longer in business.

In the case of the auction extender tool, all regular eBay sellers were afforded a “known” opportunity to extend their eBay listings beyond their initial end time - if they received no bids on their items. In the case of Live Auction sellers, one seller (maybe more) within the jewelry category (operating multiple auctions, seven days per week, twelve hours per day) flooded eBay core (hourly). In fact, any live auction seller who offered one or more pieces of jewelry (within their catalog), may have been placed at a disadvantage.

One can draw their own conclusions as to the value of flooding core hourly. eBay Live Auctions charges $1500.00 per catalog and a Live Auction seller may upload up to 10,000 lots into the system. eBay Live charges a 5% Final Value Fee on every lot sold through its system (as per eBayLiveAuctions.com). A Live Auction seller pays 0.15 per listing (if the seller lists the maximum number of lots allowed). Non Live Auction eBay sellers can compare their average listing fees to arrive at their own conclusion, as to any disparity in listing fees between regular eBay listings and those paid by eBay Live Auction sellers.

Live Auction fees, unlike regular eBay listing fees, were not increased and/or adjusted during the latest round of fee changes affecting regular eBay sellers on February 20, 2008. Sellers listing items on eBay with a starting or reserve price of $0.01 to $0.99 pay an insertion fee of $0.15 for auction-style listings (comparable to Live Auction sellers).

However, auction-style listing insertion fees for regular eBay sellers increase to $0.35 per listing for items with a reserve/start price of $1.00 to $9.99 and go up to $3.00 per listing for items with a reserve/start price of $200.00 to $499.00 for regular eBay sellers.

If a regular eBay seller elects to purchase add-ons (such as Featured Plus and Pro-Pack) fees are $9.95 for items with a reserve/start price of $0.01 to $24.99 and go up to $19.95 for items with a reserve/start price of $200.00 to $499.99.

Live Auction sellers pushing their lots through core on an hourly basis pay just $0.15 per listing (flat) if they upload 10,000 lots per catalog. In contrast, a regular eBay seller would pay $3500.00 to list 10,000 items with a reserve/start price of $1.00 to $9.99. If a regular eBay seller elected to list 10,000 items with a reserve/start price of $200.00 to 499.99, the cost would be a staggering $30,000.00.

Is eBayLiveAuctions.com a profitable business model?

Live Auctioneers, LLC reported that sales revenues for their company exceeded $100 million in 2007. Live Auctioneers also reported that their site attracted more than 50 million unique visitors during the twelve-month period. In addition, the sell-through rate for online live auction sales was 26%. It is not known how much revenue eBay derives from its relationship with its live auction partners such as Live Auctioneers, LLC, iCollector and ArtFact.com. In reviewing eBay’s SEC filings it appears as though eBay Live Auction revenues are not discernible from revenues achieved through regular eBay listing fees revenues.