Select Committee on Science and Technology Minutes of Evidence

Memorandum by eBay UK Ltd


  1.  eBay welcomes this opportunity to comment on the House of Lords Science and Technology Committee's Inquiry into Personal Internet Security. was launched in the UK in October 1999 and is now the UK's largest online marketplace with over 15 million registered users.

  2.  PayPal Inc. was acquired by eBay in October 2002. PayPal (Europe) Ltd is a private limited company incorporated in the UK, and authorised by the Financial Services Authority as an electronic money institution.

  3.  The eBay group of companies operate 33 websites around the world. In total these websites have over 212 million registered users, with over 15 million in the UK alone. At any one time there are approximately 105 million items listed for sale on these websites globally, and over 10 million of these are listed by UK registrants on the UK website.

  4.  eBay is a key enabler and driver of UK e-commerce, providing a means for tens of thousands of UK small businesses to get online and trade within the UK and globally. A survey conducted for eBay in February 2006 by AC Nielsen International Research for eBay found that over 68,000 people in the UK and over 170,000 people in the EU depend on eBay for at least one quarter of their income. eBay users range from private individuals, through sole traders all the way up to some of the largest companies in the world, such as IBM, HP and Vodafone.

  5.  eBay is often referred to as an online auction house, but this term can be misleading and is actually inaccurate. In fact, eBay is neither an auction house, nor an online retailer in the traditional sense.

  6.  For example, eBay is not:

    —  involved in the actual transaction between buyers and sellers;

    —  in control of the quality, safety or legality of the items advertised;

    —  in control of the truth or accuracy of the listings or the ability of sellers to sell items or the ability of buyers to buy items;

    —  at any time in possession of the goods listed;

    —  able to inspect the goods listed.

  7.  eBay instead provides an online marketplace where practically anyone can buy or sell practically anything. And as a marketplace of buyers and sellers, eBay has an interest in ensuring both strong consumer protection and light touch, proportionate regulation for our sellers.


  8.  eBay empowers consumers by:

    —  increasing choice in terms of the wide selection of goods available in over 50,000 categories;

    —  providing a safe environment in which buyers and sellers can trade as well as advice on how to trade safely;

    —  providing detailed information about the reputation of the seller through its unique Feedback Forum (see below);

    —  making the comparison of price and services easier for the consumer through greater price transparency;

    —  making inefficient markets more efficient, in many cases reducing prices; and

    —  by empowering SMEs to access global markets and compete with larger, more established companies and traditional "bricks and mortar" businesses.


  9.  Feedback remains a key driver of both trust and safety on eBay by establishing a virtual reputation that can help protect buyers and sellers alike. Based on each unique trading experience, buyers and sellers leave feedback on other members. Members are then able to view in a member's profile their overall rating and positive, negative and neutral feedback left by both buyers and sellers. As of September 2005, eBay members worldwide had left more than five billion feedback comments for one another regarding their eBay transactions. If buyers have a question about a particular item, they can also email the seller and all other buyers will be able to see their answer.

  10.  A recent Ofcom survey on Online Protection cited eBay's Feedback System as "an example of an innovation to address potential consumer fears about inadequate protection" and as "an example of successful consumer action in tackling rogue traders on the internet".


  11.  The vast majority of eBay users enjoy a perfectly safe trading experience. eBay uses leading edge technology and employs more than 2,000 employees—with backgrounds in law enforcement, customer support, advanced computer engineering and analysis—to help ensure a safe online trading environment for our users.

  12.'s commitment to "Trust and Safety" can be divided into three main areas: education; prevention and detection; and protection and resolution.

  13.  eBay is committed to educating our users on how they can trade safely on eBay and elsewhere. Tips on safe trading can be found on eBay's Safety Centre, where users can also contact our 24/7 Customer Support representatives and receive advice on any problems they may encounter. Our Safety Centre can be accessed from every single page on the website—as can our Help pages. More interactive tips, advice and tutorials are available on "eBay Explained".

  14.  In addition to being a member of the Government's Internet Crime Forum, eBay is also a major sponsor of "Get Safe Online"—the UK's first national internet security awareness campaign for the general public and small business. Get Safe Online is a joint initiative between the Government, the Serious Organised Crime Agency (SOCA) and private sector sponsors from the worlds of technology, retail and finance—including BT, Dell, eBay, HSBC, Microsoft, and SecureTrading. Get Safe Online (GSOL) provides free, simple, clear advice to encourage the general public to protect themselves and their electronic devices when online.

  15.  A recent GSOL survey found that:

    —  21% of people rated internet crime the type of crime they most feared, compared to 17% last year;

    —  24%, 21% and 18% of respondents have been deterred from internet banking, online financial management activities like arranging a loan and shopping on the web respectively, while 17% say safety concerns have stopped them logging on altogether;

    —  72% of people said they would like further information about internet safety, compared to 78% last year;

    —  when looking for internet safety advice, 35% would go to friends or family, a quarter would go to an internet safety website such as and a fifth would turn to their ISP;

    —  40% are still not sure where to go for this advice, an improvement from 48% last year;

    —  51% of people use the same password for more than one website and 17% use personal information about themselves in passwords, leaving themselves more at risk from hackers;

    —  83% of people now have anti-virus protection on their PCs, but a fifth haven't updated it in the last three months;

    —  Less than one quarter (24%) of people think it's their own responsibility to safeguard themselves online. Forty one per cent think the big online companies should insure their customers against fraud;

    —  52% of internet users questioned do their banking online, nearly a third (32%) pay their utility bills online and almost a quarter (23%) buy their groceries online.

  16.  An industry wide safety concern which affects not just eBay but the financial sector relates to identity theft or account takeovers where fraudsters attempt to gain access to eBay and PayPal members' accounts. Our systems detect and remove most account takeover listings before any harm is done, and we now offer a Live Chat facility to provide urgent assistance for users who suspect that their account has been taken over.

  17.  eBay regularly runs "Spoof Protection" campaigns on how to avoid spoof emails and offers online tutorials to help users identify spoof.

  18.  We have also developed a groundbreaking new Toolbar—which users can download for free from the eBay site—with an Account Guard which warns eBay members when they are on a potentially fraudulent (spoof) website. This feature also enables members to report a spoof website. Once a site has been verified by eBay to be fraudulent, that information is then automatically distributed to all other eBay Toolbar users, warning them about the spoof website.

  19.  eBay also led the way in adopting the Sender Policy Framework (SPF) industry standard which helps spam filters detect forged email more reliably. This not only increased members' actual level of protection, but also helped the standard achieve rapid penetration in the industry. SPF is now adopted by most prominent Internet sites and anti spam products.

  20.  Finally, we have introduced "My Messages"—a means for eBay users to send and receive eBay-related communications inside "My eBay", similar to a web-based email inbox. In contrast to regular email systems where many users find it difficult to recognise forged email, users can be assured that any information found in My Messages is legitimate.


  21.  Safe online payment mechanisms are essential for consumers in an online environment. Offering online users the ability to send and receive payments securely, easily, and cost-effectively is essential to the development of e-commerce. eBay members can pay for items using a variety of different options such as PayPal, credit cards, debit card, personal or bank cheques, postal orders, and other methods. However, it is now eBay policy that sellers may not ask buyers to send cash through instant money transfer services (non-bank, point-to-point cash transfers) such as Western Union or Moneygram. This is because of concerns about the safety of this type of payment mechanism.

  22.  PayPal can be considered a secure online payment system for a number of reasons:

    —  PayPal never shares buyers' bank account, debit card or credit card information with sellers;

    —  PayPal maintains the world's leading fraud prevention system and the industry's most advanced detection techniques to minimise losses, protect members' accounts and preserve customer satisfaction. As a result, PayPal maintains a very low loss rate due to fraud—0.33%;

    —  PayPal offers Buyer Protection of up to £500 for qualified purchases plus Seller Protection which gives protection from chargebacks due to fraud on qualified transactions (see below);

    —  PayPal is safer than money orders, because money order companies do not offer fraud protection services or recourse when fraud occurs;

    —  PayPal allows buyers and sellers to send and receive money quickly and allows merchants to receive payments almost immediately;

    —  it is always free to send money via PayPal—and for sellers, PayPal has lower transaction fees than most credit card merchant accounts;

    —  PayPal is also cost effective in cross-border and multiple currency transactions, enabling buyers in 103 markets to easily pay for items and services and allowing customers to send, receive and hold funds in a total of 17 currencies worldwide;

    —  regulated by the FSA as an e-money institution, PayPal complies with UK and EU regulations governing its business and relation with its customers;

    —  PayPal users can avail themselves of the Financial Ombudsman Service.

  23.  PayPal is available as a payment option on eBay as well as on other e-commerce sites.


  24.  Where things do go wrong, credit card companies typically provide identity and purchase protection, whether buyers are paying with your credit card through PayPal or directly to the seller.

  25.  Users may also benefit from eBay or PayPal's Buyer Protection Programmes. eBay Standard Protection covers items that are not delivered or that are "significantly not as described" for up to £120 (minus a £15 administration fee). PayPal Buyer Protection also covers non-delivery of tangible items that are received "significantly not as described" for up to £500, and sellers can enjoy PayPal Seller Protection to protect themselves against chargebacks.

  26.  Where there are disputes between buyers and sellers, eBay also provides an online dispute resolution facility through third party mediators like Square Trade.

  27.  Finally, both eBay and PayPal have a specific fraud investigations team who work extensively with official online fraud experts such as SOCA e-crime, and liaise closely with the Police to fight internet fraud. also has a dedicated police liaison officer with over 30 years experience at Scotland Yard who works closely with the police in their efforts to apprehend any perpetrators.


  28.  eBay only permits legal items to be sold on the site. Items that infringe legal regulations or eBay rules and policies may not be offered for sale on eBay.

  29.  In many areas, eBay guidelines exceed UK or international legal regulations. For example, it is permissible to buy airguns in the UK subject to certain legal restrictions, but eBay prohibits any kind of trade in these weapons. Similarly, the trade in live animals is basically permitted by law—but, with very limited exceptions, eBay prohibits any kind of trade in live animals on the market place.

  30.  eBay complies with all laws related to notice and takedown and we provide intellectual property rights owners, users, law enforcement and other interested third parties with the means to report items of concern to eBay. But with over six million new items listed for sale every day, it is not possible for eBay to monitor and check every item on our site either because of the volume or the expertise required for each and every item. In fact, under the E-Commerce Regulations 2002, companies like eBay who are "information society service providers" generally do not have a legal obligation to independently screen the content hosted on their sites for legality.

  31.  However, as a responsible corporate citizen, we invest heavily in reviewing reports from third parties and in proactively searching through items—to the extent that we can do so. Because we are not an expert on the many hundreds of thousands of different items offered for sale, we cannot search based upon item specifics.

  32.  When searching through items, eBay uses leading-edge technology to assist in finding references to certain prohibited items such as firearms, drugs, pornographic material or blatantly counterfeit material (such as items which state that they are counterfeit or replica). As soon as these are identified they are promptly removed from the site.

  33.  Items that are prohibited may appear on the site on occasion because no searching technology can be 100% effective when run against six million new items a day. It is not feasible to manually review every item and no technological searching process can work instantaneously when these millions of new items that appear on eBay the instant they are listed by sellers—24 hours a day, seven days a week.

  34.  It has not proved possible to pre-search through items or to automatically end items (without manual review) because of the overwhelming and debilitating cost and the large number of wrongly ended items ("false-positives") which will result. Reporting parties should not expect items to be removed from eBay immediately after they are reported.

  35.  eBay follows industry best practices when investing in search technology and developing actual filter rules. However, searching technologies are not perfect—they need to be reviewed and modified regularly. It is much easier to identify an individual problem item than it is to convert the item specifics to a rule that excludes false positives. eBay will continue to invest heavily in improvements in this area.


  36.  eBay is strongly committed to help protecting the intellectual property rights of rights owners and to providing our users with a safe and enjoyable place to trade. For this reason, eBay has created the Verified Rights Owner (VeRO) Programme so rights owners can report listings that infringe their rights. Any person or company who holds intellectual property rights (such as a copyright, trademark or patent) which may be infringed by listings or items sold on eBay is encouraged to participate in the VeRO Programme. Currently, the VeRO programme has over 17,000 participants and every week eBay removes thousands of listings at their request. eBay is also a member of the UK Anti-Counterfeiting Group.


Mobile Phones

  37.  eBay recently partnered with the National Mobile Phone Crime Unit (NMPCU) to ban listings for "blocked" or "barred" mobile phone handsets on the site, clamping down on the sale of stolen phones. The partnership follows a successful joint-operation in Greater London to identify and arrest eBay users trying to sell blocked or barred phones. The joint investigation by NMPCU and eBay's Fraud Investigations Team led to the execution of 20 warrants and 13 arrests in the Greater London area. Forty-five stolen mobile handsets were seized as part of NMPCU raids carried out on the basis of information supplied by eBay.

  38.  eBay has now introduced a ban on the sale of blocked/barred mobile handsets on the site. Any reported listings for blocked/barred mobile phones will be taken down as they are in breach of eBay's policy on encouraging illegal activity. eBay also works closely with the National Mobile Phone Crime Unit to eliminate the sales of stolen mobile phones within its marketplace. eBay has also launched an on-site campaign to communicate its policy against the sale of blocked or barred mobile phones to its users. The activity also includes a guide written jointly by NMPCU and eBay to warn buyers of the dangers of buying stolen handsets, as well as advice about how to ensure that a handset is not stolen. eBay also provides links to the NMPCU website and sites like immobilise.com and checkMEND.


  39.  eBay has also recently signed a Memorandum of Understanding with the Metropolitcan Police, the British Museum and the Museum Libraries and Archives to ensure that antiquities found in the UK are being sold legally on its site.

  40.  In order to prevent illegal sales of treasure, the Portable Antiquities Scheme (PAS, which is managed by the British Museum on behalf of the MLA) has set up a team to monitor antiquities sold on eBay and to ensure that sellers have the right to trade them. Where the listing is illegal, PAS will report it to the Art and Antiques Unit of the Metropolitan Police and eBay, which has committed to end illegal listings. eBay is the first website to reach an agreement with the British Museum and the MLA banning the illegal sale of treasure over its trading platform.


  41.  A key security issue for consumers when shopping online is privacy. Since 2004, eBay has consistently been ranked as one of the ten Most Trusted Companies for Privacy, according to TRUSTe:

    —  eBay has always been an industry leader in providing appropriate privacy disclosures to members and obtaining appropriate consent, including, among other things, requiring them to read the privacy policy before they can register to use the website;

    —  eBay does not share, rent or sell personally identifiable information to third parties for their marketing purposes without a member's explicit consent;

    —  eBay continuously reviews its privacy practices and modifies its privacy policy regularly to keep up with best business practices and new legislation globally in close co-ordination with its members and privacy authorities;

    —  eBay also uses encryption, anti-fraud tools, secure socket layers (SSL), and firewall technology to protect consumer accounts and personal information.

    —  Finally, eBay promotes its privacy practices throughout the website via easy-to-read summaries, charts, principles and its privacy policy. eBay also clearly indicates to members that all questions and discrepancies should be resolved by referring to the privacy policy located at the bottom of every webpage or by contacting our Customer Support department.


  42.  eBay fully complies with all relevant legislation affecting e-commerce. In addition, we provide detailed advice on relevant legislation affecting our buyers and sellers.

  43.  For example, we provide advice to business sellers of their legal obligations to consumers—for example, in relation to the Sale of Goods Act, Distance Selling Regulations and the Trades Description Act—and link to other sources of advice on consumer rights offered by the Government and Trading Standards Departments. We also provide advice to traders to help them understand the implications of trading internationally and the need to comply with laws in the country to which they are shipping goods, in particular the various import and export restrictions which are in place.

  44.  However, it is often difficult for small sellers to deal with the compliance costs created by a patchwork of legal rules in different EU jurisdictions. For example, the Distance Selling Directive follows the minimum harmonisation approach, giving all Member States the option of maintaining or introducing a higher level of consumer protection. This approach means for example that "cooling-off" period in which the consumer can withdraw from the contract is seven working days in the UK but 14 Days in Denmark, Finland, Germany, Portugal and Sweden. Similarly, consumers bear the direct costs of the return of non-defective cancelled goods in most Member States, but not in Germany and Finland where sellers are liable for such costs.


  45.  Contracts concluded at an auction are excluded from the Distance Selling Directive (97/7/EC). Although online auctions on eBay have an auction style, they differ from traditional auctions in a number of key respects. Unlike traditional auctions, eBay does not conduct the bidding process using a human agent, nor does it make an assessment of the value or condition of the goods or take possession of any goods to be sold by eBay sellers to buyers. Furthermore, eBay is merely a trading platform for both sellers and consumers, and it is not involved in the conclusion of the contract between the seller and the buyer. Accordingly, eBay is not an "online auctioneer" contrary to what is often assumed. This view has been confirmed by the Germany Federal Supreme Court (BGH).

  46.  In many Member States however, it is not clear whether online auctions are subject to the exception of auctions in the Distance Selling Directive. This creates legal uncertainty which needs to be resolved.


  47.  eBay welcomes the House of Lords Science and Technology Committee's Inquiry into Personal Internet Security. We are committed to ensuring a safe trading environment for all our users and to supporting initiatives designed to promote online security.

17 October 2006

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