eBay's clever fee increase plan

Here's a novel method for raising fees without actually raising fees -- stop issuing refunds.  That's what eBay did to some of its sellers recently. 

Raising fees is an annual rite of spring for the mammoth online auction marketplace.  Since eBay is really the only game in town for sellers who want the best price, eBay faces few real limitations to price hikes -- normal market forces don't apply. Even last year, when an online protest was sparked by fee increases of 50 percent in some areas, eBay weathered the storm with little damage.

Emboldened by that experience, eBay once again announced it would be plucking extra nickels and dimes from sellers in January.  Some of those price hikes were revealed in an announcement in January.

Other increases were, let's say, more subtle.

First, a bit of background.

For those unfamiliar with eBay fees, they are complex and cumbersome. eBay gets a cut of all items sold on the site  -- multiple cuts, actually.  In the simplest eBay transaction, the seller pays once when an item is listed on the site (an insertion fee), and then a second time when the item is sold.  Both fees are a percentage of the item's value. Sellers also pay a cornucopia of other fees -- for picture management, for placement, for running an eBay store, for accepting PayPal payments. That makes it hard to peg an overall rate for eBay's annual fee increase -– in the same way that it's often hard to know how much an airline has raised ticket prices.

While the sellers pay the fees, increases obviously impact buyers, too, who indirectly face higher prices as sellers recoup their costs.

A surprise $1.20 increase
Now, for that new, not-so-improved refund policy. For years, eBay would issue refunds to sellers who dropped the price of an item after it was listed. Not any more.  And to make matters worse, this "no-more-refunds" fee increase was not part of the fee increase announcement eBay made in January. In some cases, the increase is a stiff 50 percent.

Here's an example: A seller lists a pair of boots with an initial starting price of $55, and pays $2.40 as an insertion fee.   But let's say soon after the boots are listed, another seller puts up several similar pairs with a starting price of $40. Naturally, the initial seller gets few bids and then lowers the initial price to $45.

The listing fee for a $45 item is $1.20 -- half the $2.40 fee for a $55 item. Until now, the seller who changed the price would get a refund of $1.20.  Not now.

Again, this end of the refund policy is nowhere to be found in eBay's fee increase announcement. Only an eagle-eyed reader of eBay's help pages would spot a clue suggesting the change.  On a page titled "Revising Your Listing," eBay has added several parenthetical expressions hinting at it. In a section explaining how to revise the price of an item, there's this new phrase: "(You will not receive credit for the difference in your insertion fees.)"

Seller: Price revisions are necessary
Eli, an Israeli who sells jewelry on eBay, said he changes his prices constantly because the marketplace is so "dynamic."  Last week, he was shocked to notice dozens of fee refunds missing from his account. He asked for anonymity because he makes his living by selling on eBay, and he fears reprisals from the company if he speaks publicly against it.

"This is one of those things they just kind of slip in," he said. "This change is fishy. It looks like they are trying to hide it.  We found it out for ourselves without any announcement about it."

Eli says he is one of many merchants who often revise prices on whole inventories of items -– and those $1.20 fees can add up quickly.  In fact, on March 1, eBay released a new software tool that makes batch price revisions easy -- up to 200 items at a time. Eli thinks that's no coincidence.  eBay does take additional fees for items that are revised upward. And remember, now, the site loses nothing if prices are revised downward.

eBay: Necessary for a fair market
eBay spokeswoman Catherine England said the change is consistent with its user agreement terms. It was posted on its revised listing page more than 14 days before the change was enacted on Feb. 22.  She also said the change was not designed to raise revenue, but rather to make eBay's auctions more fair.

"The spirit behind this is it's about ensuring that the marketplace is a level playing field. We don't want people to manipulate their starting prices," England said.  Sellers are encouraged not to change their initial price by the change, she said.  "It's about the health of the marketplace."

She also said such revision fees aren't common and didn't think the change would impact many users.

"In the land of eBay I don't think they are a significant concern for our community," she said.  "Most people are pretty thoughtful about their starting price."

But eBay watchdog Rosalinda Baldwin, who runs The Auction Guild newsletter, said she was particularly disturbed that the end-of-refund change didn't end up on eBay's fee increase press release. 

As for why, she has her suspicions.

"(I) wonder if this fee increase ... was even too sleazy for eBay to mention in public, or if eBay felt they could slip it in without anyone noticing," she said.

One can see why Baldwin is wondering. Clearly, eBay's massive fee structure makes notification for all changes a bit cumbersome. The fee announcement from January is already complex.  But that's no reason to not spell out each and every change that leads to nickels and dimes flying from a consumer's pocket into eBay's coffers.

Perhaps the revision change is minimal. While Eli was spitting mad, he did say the change so far has only cost him about $10 a week.  Still, eBay has a privileged position as the Internet's 800-pound gorilla market. Adding a parenthetical expression to a terms of service page is no way to announce a fee increase -– even one that might be euphemized as an end-of-a-refund plan.