PayPal have set out initial terms of the operating agreement with eBay.
How long will the agreement last?
The operating agreement will initially last until 2020 renewable by mutual agreement for successive 1 year terms. This gives some certainty that nothing much will change for eBay merchants for the foreseeable future. Don’t expect to see an alternative third party payment system become the defacto standard on eBay any time soon, PayPal is here to stay.
Can eBay set up an alternative payment method or PayPal set up a marketplace?
The agreement prohibits eBay from setting up their own rival payment system, it also prohibits PayPal from setting up a rival marketplace offering. As buyers and sellers on eBay we should be largely unaffected.
However there is a “Get out of Jail free” card which enables eBay to terminate the agreement if PayPal is acquired by a one of certain hostile (unspecified) companies. In this case eBay could leave the agreement within 18 months and become the single merchant of record for transactions, in effect setting up their own payment system – We could see the return of the much loved eBay Billpoint yet!
Will we see PayPal rate changes?
The operating agreement will require PayPal to offer eBay merchants pricing in line with rates charged to comparable merchants, as defined in the agreement. PayPal rates for eBay merchants will remain largely consistent with today’s pricing relationship.
The operating agreement will also provide for eBay and PayPal to enter into data sharing agreements for risk, trust and fraud modeling and customer service operations. However neither company will be allowed to use the data shared under the agreement for marketing or divulge the data to third party companies.
eBay/PayPal affiliate referral payments
The agreement references payments in respect of referral services by eBay and the usage of PayPal’s payment services and PayPal Credit by eBay consumers and merchants on the eBay Covered Properties.
This could give eBay a continuous income from PayPal payments after the split, so hopefully eBay won’t see the need to ramp up fees as soon as they’re no longer sharing in PayPal’s profits.
Will payment development on eBay be stunted?
eBay and PayPal are to be bound by a joint development plan for optimizing the PayPal experience on eBay and required to invest in development.
Which companies does the agreement cover?
The joint operating agreement will cover the core eBay marketplaces worldwide. What’s more interesting is which companies the agreement does NOT cover.
Companies excluded from the operating agreement includes StubHub, eBay Enterprise, Magento, Classifieds, eBay Motors, Shopping.com, Gmarket, Half.com or eBay Local. None of the above provisions apply to these properties.
The above information was disclosed in a filing with the SEC by PayPal Holdings, Inc. the company which will be spun off from eBay. If you’d like to read the entire 109 page document with a further 39 financial statements plus images it’s all available online.