The Australian Competition and Consumer Commission (ACCC) has issued a draft notice proposing to revoke a notification lodged by eBay on 11 April 2008 regarding the use of PayPal for almost all transactions on the eBay site.

ACCC chairman, Graeme Samuel, said in a statement that the ACCC is concerned that the notified conduct will allow eBay to use its market power in the supply of online marketplaces to substantially lessen competition in the market in which PayPal operates.

"PayPal currently competes with a range of other providers to supply online payment services to users of online marketplaces. If the notified conduct is allowed to go ahead, there will be no competition for the supply of such services to buyers and sellers using eBay,” he said. “Given eBay's position as Australia's leading online marketplace, the notified conduct will substantially reduce competition to supply online payment services to users of online marketplaces more generally.”

According to Samuel, the ACCC acknowledges that having PayPal as the only payment provider has the potential to deliver some benefits to users, such as increased buyer protection insurance in certain circumstances. However, the government body believes that consumers are in the best position to decide which payment method is most suitable for them.

"The notified conduct denies them that choice. Accordingly, the ACCC considers that these benefits do not outweigh the anti-competitive effects of the conduct," Samuel said.

In April eBay proposed to implement the ‘PayPal only’ proposal in two stages, starting from 21 May 2008, all sellers on eBay were required to offer PayPal as one of their accepted payment methods. The second stage of the conduct is due to commence on 17 June 2008, with the requirement that all transactions on eBay must be paid for using PayPal or cash on pickup.

"In light of the serious competition concerns raised in the draft notice and the significant concerns raised by interested parties, I have asked eBay to delay implementation of the second stage of the conduct until a final decision is made by the ACCC," Samuel said.

However the ACCC will give eBay and interested parties time to lodge submissions in response to the draft notice, before the ACCC decides whether to issue a final notice revoking the notification.