Last week, PayPal e-mailed auction sellers who use its online payment services, charging that eBay had changed some of the sellers' preferences without their knowledge and had begun to add a Billpoint logo to many of their auctions without consent. In the message, PayPal touted its own service and told customers how they could cancel their Billpoint accounts.
"Unauthorized Billpoint logos can result in confused buyers using Billpoint to pay you, and this in turn can hurt your bottom line," the company said in its e-mail. "The only sure way to protect yourself from future unauthorized Billpoint logos is to close your Billpoint account."
Billpoint spokeswoman Ann Ruckstuhl criticized PayPal for sending out the letter, calling it "very inflammatory."
"They were really misguided in their interpretation of what happened," Ruckstuhl said. "I think they really hyped this thing up big time."
eBay spokesman Kevin Pursglove denied that the company changed user preferences. The Billpoint logos had begun to appear on sellers' auctions because of a bug and also because of a change made to the form sellers use to list their auctions, he said. Sellers have a Billpoint logo on their auctions because they have registered for Billpoint and indicated to eBay that they want to use the service, Pursglove said.
"PayPal is not making clear the distinction between an 'opt-in' feature that users have always had and eBay changing preferences without contacting a user," Pursglove said. "Why PayPal would mislead eBay users is beyond us."
eBay's moves to change settings have drawn criticism before. Earlier this year, the San Jose, Calif.-based company enraged many of its members by changing some of their privacy settings, resetting the default answer from "no" to "yes" on questions such as, "Do you want to receive calls from telemarketers?"
In modifying the form that sellers use to list items on its auction site, eBay changed the default setting for sellers who have Billpoint accounts, Pursglove said.
Previously, sellers had to choose to use Billpoint every time they listed an auction. Now, the form assumes that sellers registered with Billpoint want to offer the service.
"The assumption is that once you register for Billpoint, you want to use Billpoint," Pursglove said.
But the change also led to a bug that automatically added a Billpoint logo when sellers re-listed items that did not sell the first time around, even if they had not asked for the logo originally, Pursglove said. eBay sellers have complained about the re-listing problem since last month. eBay fixed the bug last week, Pursglove said.
PayPal spokesman Vince Solitto said his company had received "hundreds" of phone calls and messages from sellers who were upset about discovering the Billpoint logos on their auctions.
"Many large eBay sellers are at their wits' end. They don't know what to do," Solitto said. "Many made the conscious choice that they don't want to use Billpoint."
But some sellers think Palo Alto, Calif.-based PayPal went too far by sending the e-mail to its customers. Todd McCormick, an auction seller in Vancouver, British Columbia, who accepts both Billpoint and PayPal, noted that PayPal itself does not have a great reputation with sellers. PayPal announced earlier this month that it plans to increase the fee it charges to sellers, upsetting many of them.
"The letter was inappropriate," McCormick said. "It's not good business practice."
On the AuctionWatch message boards, some members were even more critical of PayPal.
"I, for one, am very disappointed with PayPal and their attempts to undermine the competition," one AuctionWatch member wrote. "They have the nerve to try to enlist the support of their members after repeatedly increasing their fees."
eBay bought Billpoint in May 1999, but did not fully launch the service on its site until spring of 2000. Although it sold a 35 percent stake in Billpoint to banking giant Wells Fargo and signed a two-year marketing agreement with Visa to promote the payment system last year, Billpoint has struggled to win market share against PayPal.
PayPal estimates that two-thirds of auctions listed on eBay accept PayPal as a form of payment. Although the bulk of transactions on eBay are still conducted via check or money order, one in four auctions that close with winning bids on eBay are completed using PayPal's payment system, Solitto said.
Billpoint representatives declined to give statistics on the use of its services.