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For What It’s Worth, The Topic Is Restraint of Trade

by Mark on May 26th, 2008

I think this is worth passing along because it might be useful in a number of online situations currently being discussed…

Restraint of Trade

The people who wrote the Sherman Anti-Trust Act were purposefully vague because they apparently wanted to leave many decisions about this up to the courts and it worked. Since 1890, “the courts have come up with three different legal standards to be used in determining restraint of trade.” This is one;

Rule of reason

“‘Rule of reason’ is the traditional test and the one most often applied in antitrust cases. It emanates from a number of cases including: Standard Oil Company of New Jersey v. United States (1911), American Tobacco Company v. United States (1911), and Board of Trade of City of Chicago v. United States (1918). In the first two cases, the U.S. Supreme Court found that not all but only unreasonable restraints of trade were illegal. In reaching a decision in the 1918 case the Court stated: “Every agreement concerning trade, every regulation of trade, restrains. To bind, to restrain, is of their very essence. The true test of legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition.” The Court went on to say that the condition of the particular business, both before and after the imposition of restraints, must be examined and a determination of the actual and probable effect of the restraint realized. Inherent in rule of reason cases is the ability of the violator to manipulate output or prices beyond the threshold that would be imposed naturally by the marketplace.”

Having read this my question becomes: If eBay were to attempt to restrict its U.S. sellers to only be able to use PayPal as a payment processor, would it be restraint of trade? I see above that the criteria appears to be whether competition is suppressed or damaged, and whether prices have been manipulated beyond a vague threshold “imposed naturally.”

Having no experience, using only what knowledge I’ve gathered by a bit of reading, it seems to me that were sellers restricted to using PayPal they would be charged both final value fees and PayPal fees on transactions. Because eBay owns PayPal is seems to someone unfamiliar with this intimately, that eBay might be manipulating prices beyond a “natural threshold” if they were to impose this requirement.

Yes, I know they said they weren’t going to but…

What do you think?

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POSTED IN: Online Money, Personal Thoughts, Worth Passing Along