Hoang V Ebay Complaint

Case 2:10-cv-08207-RGK -JC Document 1 Filed 10/29/10 Page 1 of 83 Page ID #:8
FILED
Tristram T. Buckley [SBN 187754]
LAW OFFICES OF TRISTRAM BUCKLEY
426 S. Rexford Drive, Suite 12
Beverly Hills, CA 90210 10 OCT 29 PN1 2:29
Telephone: 310-980-1842 T 'KT
-"
Facsimile: 888-315-9188 i. r: -
www.EbayLawsuit.com
■; _
Attorney for Plaintiffs
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF CALIFORNIA
VY HOANG on behalf of
herself and all others similarly
situated,
CASE
C
A
Nrl P Q7
At ON COMP A NT FOR:
(1) RACKETEERING (RICO)
PLAINTIFFS, (2) LARCENY
VS. (3) EMBEZZLEMENT
(4) FRAUD & DECEIT
EBAY, INC., MARGARET C.WHITMAN (5) CONVERSION
PIERRE M. OMIDYAR, JEFFREY SKOLL, (6) ILLEGAL MONOPOLIZATION OF THE
AND DOES 1-100, INCLUSIVE CONSUMER TO CONSUMER INTERNET
MARKETPLACE.
DEFENDANTS. (7) ILLEGAL MONOPOLIZATION OF THE CONSUMER
TO SMALL BUSINESS INTERNET MARKETPLACE
(8) MONOPOLIZATION OF THE INTERNET PAYMENT
SYSTEM
(9) INTERFERENCE WITH CONTRACT
(10) INFLICTION OF EMOTIONAL DISTRESS
(11) VIOLATION OF THE SHERMAN
ANTITRUST ACT
(12) VIOLATION OF THE CARTWRIGHT
ACT
(13) UNFAIR COMPETITION
(STATUTORY AND COMMON LAW)
(14) VIOLATION OF THE CONSUMERS LEGAL
REMEDIES ACT (CLRA)
(15) NEGLIGENT MISREPRESENTATION
(16) NEGLIGENCE
(17) BREACH OF CONTRACT
(18) QUANTUM MERUIT UNJUST ENRICHMENT
(19) FALSE ADVERTISING
JURY TRIAL DEMANDED
COMPLAINT
1 Tristram T. Buckley [SBN 187754]

LAW OFFICES OF TRISTRAM BUCKLEY
2 426 S. Rexford Drive, Suite 12
3 Beverly Hills, CA 90210
Telephone: 310-980-1842
4 Facsimile: 888-315-9188
www.EbayLawsuit.com
5
6 Attorney for Plaintiffs
UNITED STATES DISTRICT COURT
7
FOR THE SOUTHERN DISTRICT OF CALIFORNIA
8
VY HOANG on behalf of CASE NO:
9 herself and all others similarly CLASS ACTION COMPLAINT FOR:
situated,
10 (1) RACKETEERING (RICO)
11 PLAINTIFFS, (2) LARCENY
vs. (3) EMBEZZLEMENT
12 (4) FRAUD & DECEIT
EBAY, INC., MARGARET C.WHITMAN (5) CONVERSION
13 PIERRE M. OMIDYAR, JEFFREY SKOLL, (6) ILLEGAL MONOPOLIZATION OF THE
14 AND DOES 1-100, INCLUSIVE CONSUMER TO CONSUMER INTERNET
MARKETPLACE.
15 DEFENDANTS. (7) ILLEGAL MONOPOLIZATION OF THE CONSUMER
TO SMALL BUSINESS INTERNET MARKETPLACE
16 (8) MONOPOLIZATION OF THE INTERNET PAYMENT
17 SYSTEM
(9) INTERFERENCE WITH CONTRACT
18 (10) INFLICTION OF EMOTIONAL DISTRESS
(11) VIOLATION OF THE SHERMAN
19 ANTITRUST ACT
20 (12) VIOLATION OF THE CARTWRIGHT
ACT
21 (13) UNFAIR COMPETITION
(STATUTORY AND COMMON LAW)
22
(14) VIOLATION OF THE CONSUMERS LEGAL
23 REMEDIES ACT (CLRA)
(15) NEGLIGENT MISREPRESENTATION
24 (16) NEGLIGENCE
(17) BREACH OF CONTRACT
25
(18) QUANTUM MERUIT / UNJUST ENRICHMENT
26 (19) FALSE ADVERTISING
27 JURY TRIAL DEMANDED

28
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COMPLAINT
1 I.
2 ALLEGATIONS
3 *Class members may log into www.EbayLawsuit.com for case information and updates.
4 1. Ebay and the Ebay Defendants have, by scheme and design, become the archetypal
5 monopoly Sir Thomas Moore warned of when he wrote: "Suffer not these rich men to buy up all, to
6 engross and forestall, and with their monopoly to keep the market alone as they please."
7
2. If not for Ebay’s predatory and illegal conduct, Ebay would not have become the
8
monopoly it is today nor would Defendants Omidyar, Whitman and Skoll have become the greatest
9 overnight multi-billionaires in history nor Ebay the fastest growing company in history. (E.g.,
10 Whitman acquired her billion plus dollars within a year of joining Ebay.)
11
3. If Ebay were a country, its quarter billion registered users would have Ebay
12
competing with Indonesia for the fourth most populated country on earth behind China, India and the
13
United States.
14
4. Defendants Omidyar, Skoll and Whitman generated the largest and fastest
15
accumulation of wealth in U.S. history and with the least amount of effort and actual achievement.
16
Almost overnight, these three Defendants pocketed some $14,000,000,000.00 (fourteen-billion
17
dollars).
18
5. To put this figure in perspective, with this same money 2,000,000 (two million)
19
students could have their full college tuition paid for four years; or alternatively, 312,000 firemen,
20
policeman and school teachers could be hired (a significant number as there are currently in the
21
United States, in total throughout the entire country, approximately 456,000 teachers.)
22
6. What took Bill Gates more than a decade of hard work and foresight to accomplish
23
(creating BASIC, DOS and Windows and years thereafter becoming a billionaire) took Meg
24
Whitman just one year to financially achieve. In fact, Whitman, Omidyar and Skoll’s overnight rise
25
to unimaginable riches make Bill Gates’ rise look long and arduous by comparison.
26
7. Where there is smoke there is fire. Evidencing abuse, exploitation of the
27
“Community” and corruption, the Defendants amassed fortunes at a faster and greater rate than
28
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COMPLAINT
1 anyone else in modern history while Ebay, a company that neither designs nor manufacturers any
2 product whatsoever, became the fastest growing “company” in history.
3 8. Plaintiffs seek the disgorgement of more than 14 billion dollars from the individually
4 named Defendants and forty-billion dollars from Ebay, Inc. This sum represents monies wrongfully
5 converted and extorted by these Defendants from the Ebay Community, as shown hereinbelow.
6 These funds should be distributed amongst the Ebay Community that was and remains responsible
7 for the creation, operation and proliferation of Ebay, as the Defendants have already admitted.
8 9. The exploitation of the internet has benefits as well as disadvantages not fully
9 understood nor appreciated by our society. Without question, the internet causes substantial
10 collateral damage. For instance, in moving from traditional “brick and mortar” business
11 establishments to the internet, no longer are businesses renting the same commercial properties, but
12 also, the industries associated with that traditional brick and mortar enterprise are impacted as well,
13 including the people who maintain, design and build those properties, including electricians,
14 plumbers, construction workers, the people who maintain the premises such as janitors and painters,
15 as well as sign makers, local newspapers that no longer carry the once local merchants classified
16 advertisements, as well as the local cafes, restaurants and shops that would provide meals and
17 shopping opportunities for the “brick and mortar” employees. Instead, as evidenced herein,
18 hundreds of billions of dollars have gone to enterprises, most notably Ebay (but also, e.g., Amazon,
19 etc.) who don’t manufacture anything or add real value to the economy while paying their
20 executives literally hundreds of millions to billions of dollars a year, effectively siphoning countless
21 billions from the mainstream American economy.
22 10. For the protection and welfare of the American public, as will be shown hereinbelow,
23 the monopolistic Ebay Defendants must go the way of AT&T and Standard Oil, for their threat to
24 our evolving economy is unprecedented in American history and far greater than was AT&T or
25 Standard Oil.
26 11. The editors of BusinessWeek noted “Unlike most traditional companies, eBay
27 presides over an expanding ecosystem -- one whose limits are still unknown.”
28
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COMPLAINT
1 12. Defendant Whitman was the architect of Ebay’s illegal and inequitable actions while
2 other Defendants, most notably Omidyar and Skoll, endorsed and profited from Whitman’s
3 schemes. Schemes which included, in Defendants’ own words “buying” countries (infra),
4 “conquering” the United States and “dominating” the global market.
5 13. Ebay is the unhappy Consumer to Consumer (“C2C”) monopoly it is today as a direct
6 result of Defendant Meg Whitman’ (Ebay’s CEO’ from 1998-2008) predatory schemes and actions
7 and market-abusive tactics. The Ebay Defendants, with Whitman as their leader, intentionally acted
8 in a malicious and predatory manner with the design and intent to thwart and either acquire or
9 destroy all competition in order to fully and unfairly exploit the national and ultimately international
10 consumer to consumer sales and auction marketplace.
11 14. Whitman, Ebay’s CEO during its illegal rise to power as a monopoly and architect of
12 the illegal actions undertaken and strategies employed, admits that Ebay is an “indispensable”
13 “marketplace” (as opposed to a business), stating:
14 "Everyday the eBay marketplace becomes indispensable to more people and
15 small businesses around the world."
16 15. Whitman is correct in that Ebay is not a business but a “marketplace” and the internet
17 marketplace is indeed “indispensible” to people and business around the world. As something that
18 is indispensible, like water, electricity, etc., Ebay, that is, the internet “marketplace”, must be
19 recognized for what it is, a public utility.
20 16. Businessweek Magazine noted that Ebay is not a business but “a nexus of economic
21 activity, a new and vibrant hub for global commerce.”
22 17. That Ebay is not a business but rather a marketplace explains why Ebay was the
23 fastest growing company in history. When one considers all the companies in the world, including
24 powerhouses such as Microsoft, IBM, Walmart, or Exxon, the meteoric and indeed exponential
25 growth of Ebay, a company that neither designs, manufactures nor builds anything, is only
26 astonishing until one realizes the fact that Ebay is not a business but a marketplace: A marketplace
27 that grew not because of Ebay was a business with an amazing product but because the internet and
28 the number of people using it was growing exponentially from its infancy.
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COMPLAINT
1 18. Ebay was created over Memorial Day weekend in 1995. At the time of Ebay’s
2 inception, the internet had barely just begun to reach the public. In fact, there were only 14 million
3 people in all of North America using the internet. Of those 14 million users, a third (1/3) of those
4 persons (nearly 5 million people) had been using the internet for less than six months while more
5 than half the 14 million users had been using the internet for less than a year, showing the
6 internet’s limited utilization in 1995. Today, approximately two billion people make use of the
7 internet.
8 19. “Ebay was created by a community of people based on the notion that since they were
9 a community, they would labor on behalf of the community and all benefit from the success of Ebay.
10 Instead, Ebay exploited the community, and turned it into a commodity, to be slaughtered like sheep
11 as Ebay saw fit. The concept the community held, was of a global marketplace where every player,
12 rich or poor, advantaged or disadvantaged, able bodied or not, regardless of any of the factors that act
13 as discriminators in society, would get to play on a level playing field. It was created, not by Pierre
14 Omyidar and not by Ebay, but by the community that built Ebay, one person at a time. Ebay is a
15 travesty of that community ideal, a company whose only goal is to make as much money possible in
16 the shortest amount of time to make a few people obscenely wealthy. It chatters about the community
17 in order to keep its stock price artificially tempting, all the while destroying the lives and livelihood
18 of any who dare to expose the rot behind the shiny facade.” (Rosalinda Baldwin, The Auction Guild
19 (TAG).)
20 20. The Ebay Defendants’ “obscene wealth” came at the direct expense of the community.
21 Consumers, buyers and sellers, are not stupid. They realize that such services are typically free to
22 use on the internet as they generate income from advertising revenues . For instance, Yahoo
23 provides free email addresses, accounts and unlimited email storage. Facebook offers its
24 networking services for free. Likewise, search engines such as Google and Bing will scour the
25 electronic universe, all for free. Youtube offers free video uploading and viewing. HuLu lets you
26 watch your favorite television programs for free while Mapquest will provide travel directions and
27 more. There are even language translator services on the internet operating free of charge. In China,
28 one of the largest auction websites is profitable and its service is free to users. While Plaintiffs are
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COMPLAINT
1 not stating Ebay should be free, Plaintiffs are charging Ebay with exploiting a captive market
2 through its monopoly of the C2C and C2SB (Consumer to Small Business) internet marketplace.
3 21. As the internet’s de facto C2C marketplace, it is necessary for the public welfare, just
4 as would be the case for any other utility, that Ebay be regulated as a public utility in order to
5 prevent the illegal and disproportionate profiteering and unjust and arbitrary abuse of those who
6 participate in the 21st Century’s marketplace.
7 22. The fact that Whitman’s own supporters recognize Ebay’s public utility function, and
8 correspondingly, that Ebay’s success was inevitable and not the result of Whitman’s leadership, was
9 aptly put by one Ebay employee who stated “A monkey could run this thing.”
10 23. Whitman was also correct when she noted most of the best ideas for Ebay’s
11 development came from the community and “In essence, customers are Ebay's de facto product-
12 development team, sales and marketing force, merchandising department, and security detail
13 all rolled into one.”
14 24. Whitman admits that she did not build Ebay but that Ebay, excluding the monopolistic
15 predatory tactics, was built and fostered by the Ebay Community itself. “It’s our Customers who
16 have built Ebay” admits Whitman.
17 25. Whitman described Ebay as a "self-regulating marketplace" and an “economy that
18 manages itself.”
19 26. Whitman admits, time and again, that the ideas that made Ebay successful came not
20 from management but from the Community. “Our users are on to the next idea, the next hot
21 thing faster than we could ever be as a company. … They have built this small economy” and
22 “we have a partner in building this business, and that partner is the community of users.” Of
23 course, the Ebay Defendants have never shared the profits with those that actually built Ebay but
24 instead, converted the Community’s interests as their own while excessively charging the
25 Community for the services the Community created.
26 27. Harvard Business School professor David B. Yoffie noted the benefits to the
27 Defendants from the Ebay Community’s contributions: "You get the incredible leverage of other
28 people doing all your work for you."
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COMPLAINT
1 28. Despite the Ebay Community’s contributions, contributions that literally “built” Ebay
2 into the successful and goodwill generating company it was originally and before Whitman’s tenure
3 as CEO, Whitman exploited the Community to her own personal advantage, as outlined hereinbelow.
4 29. Even Whitman’s supporters have stated Ebay’s success was inevitable and not the
5 result of Whitman’s business or leadership skills. “A monkey could run this thing!” commented
6 one Ebay employee with an MBA directly to Whitman.
7 30. Intuit founder and then Ebay Board member Scott Cook stated Whitman found “a
8 parade and ran in front of it”.
9 31. Fortune Magazine noted before joining Ebay, Whitman “was hardly a superstar.”
10 32. Making a profit, even an exceptional one, is encouraged and respected in our capitalist
11 society. For example, after several years of software development (e.g., BASIC and DOS), Bill
12 Gates co-founded Microsoft in 1977 and nearly a decade later he become a billionaire thanks to his
13 developing the operating system that would run most of the computers on the planet.
14 33. On the other hand, people instinctively realize that an overnight unprecedented
15 generation of unimaginable riches carries with it the implied assumption of ill-gotten gain. Ebay’s
16 Whitman, Omidyar and Skoll, provide history’s case in point.
17 34. Omidyar did little more than found Ebay as a simple, single-page website. Ironically,
18 and unlike Bill Gates, Omidyar didn’t write the code for this single page website. Instead he used
19 freeware, software created by others with the expectation of payment if the software is put to a
20 commercial use. Omidyar never paid for use of this freeware that would become Ebay. (Before
21 becoming “Ebay”, the website was called AuctionWeb which was later changed to EchoBay.
22 However, the name EchoBay was already taken and so it simply became known as Ebay.)
23 35. Omidyar repeatedly informed members of the new “Ebay Community” that he “didn’t
24 want to get involved” and that users of the bulletin board would have to “work out their own
25 problems.” According to a Time Magazine interview: “Omidyar's routine when he received an e-
26 mail with a complaint about another user was to tell them both, ‘You guys work it out’."
27 36. Omidyar’s lack of involvement is what led to the self-sufficient “Community.” For
28 instance, the Feedback System originated with the Community as a means by which the Community
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COMPLAINT
1 could effectively police itself by rating the reliability of Community members. This most
2 fundamental Ebay idea, the Feedback system, came from the community, not the profiteering
3 Defendants. Moreover, it was implemented by the Community directly. Unfortunately for the
4 Community, the more Ebay’s management sought to boost their profits by manipulating the
5 Feedback system, the more inefficient the system became, hurting buyers and sellers alike.
6 37. Likewise, the Community provided its own “Customer Service” via a message board,
7 called the “Bulletin Board.” Ebay Users provided ideas and suggestions on how to develop the
8 Ebay website as well as answering Ebay Users questions. Like the Feedback Forum, the Bulletin
9 Board was intended by Defendants to limit their actual involvement with Ebay and to place Ebay’s
10 administration in the hands of the community.
11 38. Omidyar’s investment of time and energy was relatively minimal and his success
12 fortuitous. Omidyar’s singular objective was to create a simple website where his girlfriend could
13 find PEZ Dispensers, which she collected. Omidyar was neither planning nor investing, time nor
14 resources, into creating some great website, much less did he create a manufacturing enterprise, find
15 a cure for cancer or even write software that the world would come to rely upon. Omidyar is no Bill
16 Gates or Steve Jobs. Rather, his investment was commensurate with what his girlfriend was looking
17 for: PEZ dispensers that typically cost a dollar or less.
18 39. Yet, within a few years of starting the bulletin board that was AuctionWeb and later
19 renamed Ebay, Omidyar was the youngest, richest billionaire in American history. For instance, in
20 1999, Fortune Magazine listed 31 year old Omidyar’s wealth at $7.8 billion, making Bill Gates a
21 pauper by comparison at that age. It would take Bill Gates more than 13 years to accumulate $2.5
22 billion at the age of 35. To put this in perspective, Omidyar’s wealth was greater than Steve Jobs
23 (founder and CEO of Apple Computers), Donald Trump (age 57) and Steven Spielberg (56)…
24 combined! Even Facebook’s founder is worth roughly half what Omidyar was worth back in 1998
25 when a billion dollars was really a billion dollars. (One billion dollars in 1998 had the purchasing
26 power of $1.32 billion dollars today.) In today’s money, Omidyar’s wealth was over 2.5 times
27 greater than the already phenomenal, made for a Hollywood movie, wealth of the founder of
28 Facebook.
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COMPLAINT
1 40. Ebay’s first president, then 34 year old Defendant Skoll, saw his wealth rocket to $4.8
2 billion in 1999. The only younger-richer billionaire than Skoll was co-Defendant Omidyar.
3 41. Defendant Whitman, the mastermind behind Ebay’s predatory conduct and
4 monopolistic misdeeds and ultimate monopolistic success, joined Omidyar and Skoll’s party
5 whereupon she became an overnight billionaire as well.
6 42. According to SEC documents, Whitman received $1.2 billion while Ebay’s CEO for
7 less than a year. Put another way, in less than a year Whitman pocketed roughly half of what it
8 would take Bill Gates a decade to achieve, ten years after he co-founded Microsoft and more than a
9 dozen years after he began working on the DOS operating system.
10 43. Plaintiffs’ research fails to reveal another CEO in history, who did not found the
11 company but whom took home more than a billion dollars in their year with a company. Like feudal
12 lords from the medieval period, Whitman and the Defendants earned their phenomenal riches from
13 the modern day serfs: Individual sellers and buyers participating in and bound to the internet’s new
14 marketplace.
15 44. This obscene and unjust accumulation of wealth, taken at the direct expense of
16 millions of Ebay users (i.e., the “Community”), catapulted Whitman from relative obscurity to
17 Fortune Magazine’s “Most Powerful Woman in America.” With her billionaire status and fame, the
18 previously unknown Whitman is now a breath away from securing the Governor’s office in the sixth
19 largest economy in the World. She’s able to spend a million dollars a day of her own money (which
20 is nothing compared to the approximately $1.5 billion dollars she made while at Ebay) on campaign
21 advertising for the Governor’s Office. From there Whitman could reasonably have her sights set on
22 the Whitehouse. And it all began with massive unjust enrichment premised upon illegal and
23 unethical practices.
24 45. As the CEO of Ebay, Defendant Whitman’s agenda was to maximize her share values.
25 Whitman achieved this by repeatedly raising the fees charged to the Ebay community in order to
26 further boost Ebay’s PE ratio, thereby increasing the stock value which in turn directly enhanced the
27 personal wealth of each Defendant.
28
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COMPLAINT
1 46. In addition, as CEO, Whitman engaged in predatory conduct designed and intended to
2 thwart all competition in order to maintain Ebay’s monopoly status. By maintaining Ebay’s
3 monopoly status over the Consumer to Consumer auction marketplace, Whitman could force the
4 Ebay community to pay fees that were substantially higher than would be charged in a free market
5 economy.
6 47. Not content with just dominating the global internet marketplace, Whitman sought to
7 control and monopolize the Consumer to Consumer and Consumer to Business online payment
8 industry by purchasing Billpoint and just five months later Paypal (for $1.5 billion dollars) while
9 mandating that Ebay Community members use Paypal and at the same time blocking the use of
10 competitors’ online payment services.
11 48. Whitman schemed and effected the monopolization of the online payment methods
12 which could be used by Ebay by (1) acquiring the competition, (2) mandating the use of Paypal as a
13 payment option while (3) forbidding members of the Ebay community from using other services such
14 as those from Citibank’s C2iT, Yahoo’s PayDirect, Western Union’s BidPay, Google’s Checkout,
15 etc. Monopolization of the online payment system would prove Ebay’s one-two punch, as set forth
16 hereinbelow in paragraphs 332 through 371.
17 49. Among the people using Ebay, that is, the “Community”, it is common and
18 indisputable knowledge that Ebay is a monopoly. Says Dwayne Rogers, who sells vintage fruit crate
19 labels on Ebay from his home in Chico, California: ''They just don't have any competition.''
20 50. Ebay is a predatory and illegal monopoly and the individually named Defendants have
21 been unjustly enriched at the expense of the Ebay Community, the American Consumer and to the
22 detriment of the American taxpayer.
23 51. All of which begs the question: How was this unprecedented accumulation of wealth
24 possible? The simple answer has two components.
25 52. The first component is inherent in what Ebay actually is and what it is not: Ebay is
26 not a business so much as it is modern day digital marketplace.
27
28
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COMPLAINT
1 53. In fact, Ebay originally called itself “The World's Personal Trading Community”
2 before calling itself “The World's Online Marketplace.” A marketplace is a place where people do
3 business, not a business per se, in and of itself.
4 54. That Defendants are unjustly profiting from Ebay is irrefutable. Ebay was conceived
5 by a “Community” and the Ebay website was largely created and refined by the Ebay Community.
6 The Ebay Community itself policed the community, provided customer support, marketing, created
7 the listings of items for sale, and provided the direction and ideas for the website’s evolution that
8 made Ebay originally the venue that led to its success.
9 55. In her current advertisements for the Governor’s office, Whitman falsely represents
10 she was responsible for creating Ebay’s success. In fact, Whitman’s self-promoting profiteering
11 motivated policies have lead to the downfall of Ebay’s goodwill and positive public sentiment
12 thanks to her exploitation of the Ebay Community. The Community that provided the ideas that
13 made Ebay great would be the Community that Whitman would exploit, both for its ideas and
14 money, charging ever higher fees to the Community for use of the website literally built by the
15 Community.
16 56. To boost the stock values to the benefit of the Defendants and to the direct detriment
17 of the community, fees charged to the Community were routinely and unjustifiably increased, so
18 much so, that the Community members began calling the marketplace under Whitman’s control
19 “FeeBay” and its payment service “PreyPal.” A quick Google search of the world “FeeBay” yields
20 some 16,000 hits, evidencing the profiteering views of Ebay are anything but unique.
21 57. A typically reoccurring news headline reads: “Two days after posting record earnings
22 and revenue, Ebay said Thursday that it is raising fees and will charge for a popular free feature.”
23 Ebay’s spokesman, Ken Pursglove acknowledged that Ebay doesn’t have any real competition but
24 denied that fact plays into the never ending fee increases.
25 58. Profit even motivated Whitman’s Ebay to acquiesce to rampant fraud on the website.
26 Ebay intentionally failed to crackdown on fraud for years while Ebay built its war chest and boosted
27 its stock values (most of which were held by the Defendants themselves, holding 98.1% at one
28 point) because Ebay profits from fraud! A fraudulent seller would falsely advertise as real a fake
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COMPLAINT
1 Rolex watch or Gucci purse and sell it through Ebay. Ebay would earn profit from the seller’s listing
2 of the item and a commission from the illegal sale. When the Ebay Community and its victims
3 complained Ebay and its army of attorneys and lobbyists argued successfully in court and before
4 legislators that Ebay wasn’t really an auction and thus could have no liability as would other auction
5 companies, giving Ebay yet another unfair advantage. Absolved from any and all responsibility,
6 Ebay was free to profit from fraud, which it did freely.
7 59. Not only does Ebay profit from its fraudulent listings but it also profits from illegal
8 shill bidding while suspending whistleblowers (shill bidding is when bids are placed by people
9 familiar with the seller in an effort to artificially raise the price of an item), as this Ebayer explains
10 in his own words:
11 “The FBI did an investigation, using the same data Ebay has, brought charges and
12 convictions, while ebay's own "investigation" found nothing wrong! Why didn't eBay's own
internal "investigation" stop this? Because ebay profits from shill bidders and bidding rings!
13 Ebay is incapable of policing itself, and if you buy on ebay, you could be paying way too
14 much on some auctions due to shill bidding. This is finally one case making national
headlines. But we know of others from our users here, and they have been reported to ebay,
15 but just like in this case, ebay has done nothing. They have not solved the shilling problems.
16 They have made concerted efforts to cover them up, attack and suspend the whistle-blowers,
lie to the "ebay community" regarding outages and policy, ignore even the most basic
17
fundamental rights of their users, all the while, they just keep finding new ways to raise the
18 fees. Oh, and the TERRIBLE way they handle these types of complaints! You get ignored.
You get canned email replies. You get suspended. That's what happens to you when you try to
19
warn others about scams and frauds on eBay. That's also what happens to you when you are
20 critical of eBay publicly, even if it's on another website, or even your own home page!
21
60. While Ebay falsely advertised its site as being virtually fraud-free, that lip-service was
22
designed to boost the Defendants’ share values. Allowing the fraud increased Ebay’s Price/Earnings
23
ratio which directly boosted the Defendants’ wealth.
24
61. Failing to implement then readily available safety and security measures saved Ebay
25
even more money, thereby further boosting its bottom line. However, these costs were then passed
26
on to the taxpayers as law enforcement agencies around the country were called into investigate the
27
now completed fraudulent acts.
28
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COMPLAINT
1 62. In addition, consumers paid for the rampant Ebay fraud as Ebay would tell its Users to
2 “contact your credit card company” about the fraud. The credit card companies were then forced to
3 absorb millions of dollars in fraudulent charges, the costs of which were passed onto all consumers.
4 63. Ebay defrauded sellers as well as buyers. For instance, if a seller sold an item and the
5 buyer’s payment failed to materialize, for whatever reason (bounced check, falsely deposited
6 counterfeit cashiers’ check, etc.) Ebay would refund the commission (the “final value fee”) but Ebay
7 would keep all the other fees paid by the defrauded seller (listing fees, photo fees, gallery fees, “buy
8 it now” listing fees, etc.), thereby profiting from Seller’s misfortunes.
9 64. Thus, whether the sale was legal or not, completed or not, the Defendants’ profited.
10 65. Fortune Magazine (10-18-2004) noted Ebay’s revenues were nearly all profit as Ebay
11 “has no factories or inventory, but also because its customers do all the work.”
12 66. Whitman’s Ebay used its war-chest to lobby for laws that would benefit Ebay while
13 harming the community. In one day, Whitman with her supporters had 36 meetings with politicians
14 in their ongoing lobbying effort. “We need to make sure the government understands and supports
15 what we’re doing” said Tod Cohen, Ebay’ head of “Government Relations.”
16 67. Ebay not only spends millions of dollars lobbying politicians to advance its own
17 interests while also having its own permanent lobbying office in Washington D.C., but Whitman
18 uses the unsuspecting community to advance Ebay’s interests to their own detriment, as reported by
19 the New York Times in a story entitled How eBay Makes Regulations Disappear. “EBay
20 combines its politics-as-usual approach with more creative grass-roots tactics. It keeps its
21 membership informed about regulatory issues as soon as they crop up, using mass e-mail messages
22 and a year-old Web-based initiative called ‘eBay Main Street,’ which sends out ‘legislative alerts’
23 and provides letters that users can send to government officials. Bowing to the traditions of ward
24 politicos adept at turning out the vote, eBay routinely summons its sellers and sends them on
25 personal visits to statehouses around the country to meet with legislators.” The author then noted
26 120,000 million people voted in the last presidential election and that (currently) Ebay has nearly
27 250,000 registered users. The emails the Ebay community members received are written in a
28 slanted manner in Ebay’s favor in order to generate support. Ebay’s lobbying efforts, including
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COMPLAINT
1 maintenance of its monopoly, sidestepping laws that would make it accountable for counterfeit
2 goods like any other auction company, etc., ultimately hurt the Community while benefiting Ebay’s
3 profiteering management.
4 68. An example of Ebay’s lobbying efforts that directly benefited Ebay’s bottom line but
5 hurt the community was Ebay’s successful lobbying efforts that all but made scalping event tickets
6 legal. Ebay lobbied to have States revise their laws regarding licensing requirements so Ebay could
7 compete with licensed ticket brokers (who are regulated and pay fees to the States) by allowing
8 internet sellers to charge over face value (“scalping”) for event tickets online. Prior to these lobbying
9 efforts, the Community could buy tickets from other consumers paying face value or less for the
10 tickets. After Ebay’s efforts, the overcharging for tickets (scalping) industry mushroomed. No
11 longer would shady sellers who purchased blocks of tickets have to hide in the shadows outside
12 events where States such as California and New York make selling tickets above face value at
13 events illegal. Now these opportunists were free to buy up event tickets and then resell them at
14 much higher prices on the internet, bypassing State license and scalping laws. Overnight scalping
15 tickets became a major business for those who didn’t want to stand outside venues slyly selling
16 tickets. Now this shady business could be conducted over Ebay from the privacy of their own home
17 in Eastern Europe, Asia, Africa, etc. Perhaps Ebay relates to the scalpers as they too make their
18 money by virtue of their being first and at the expense of others. This scalping practice which results
19 in artificially inflated ticket prices and needless middlemen, is condemned in European societies
20 where access to cultural and entertainment events for low-income groups is still considered an
21 important aspect of society.
22 69. Despite raking in billions, Defendants failed to implement basic security measures
23 and, if a problem arose, the Defendants failed to provide telephone support. How many multi-
24 billion dollar corporations don’t have a way for their customers to contact the company for support
25 or customer service? For nearly all of Ebay’s existence, Ebay has never provided a phone number
26 for contacting Ebay. Of course, not having to employ any customer service telephone agents saves
27 Ebay even more money and yet again boosts Ebay’s Price to Earnings ratios and the Defendants’
28 wealth.
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COMPLAINT
1 70. To boost its Wall Street value, Whitman schemed to sanitize Ebay's public image,
2 going so far as to suspend users for posting comments complaining about Ebay. Ebay claims the
3 censoring is done strictly to “maintain decorum”. On one occasion, the Ebay website was off line for
4 several hours after a major server crashed. When Ebay finally came back on-line, outraged Ebayers
5 posted messages on the support board. Whitman’s Ebay responded first by suspending the customers
6 for 24 hours, then by killing the live board completely, freezing access to instant customer support.
7 71. While Ebay’s Customers “do all the work” and while Whitman admits the Community
8 built Ebay and that all the great ideas that made Ebay what it is came from the Community,
9 Whitman and the Defendants have bilked tens of billions of dollars from the Community “built”
10 Ebay and “Does all the work”: A community the Defendants effectively hold captive and exploit.
11 72. Plaintiffs, that is, members of the Ebay Community, seek the return of $14 billion in
12 damages from the individually named Defendants as monetary damages to compensate the
13 Community and disgorge the unjust enrichment enjoyed by the Defendant Whitman, Omidyar, Skoll
14 and others unjustly enriched at Ebay.
15 73. Plaintiffs seek damages in excess of $40 billion from Ebay, a sum which compensates
16 the Ebay community for excessive fees charged by Ebay since 1998. Plaintiffs believe Ebay’s
17 revenues greatly exceed $40 billion and this sum constitutes a return of unjust exploitation of the
18 community.
19 74. Plaintiffs seek a judicial determination that, not only is Ebay a monopoly, but one that
20 must be regulated as a public utility.
21 75. As explained herein, the very premise that Ebay is a “business” is itself, false, and in
22 large measure, explains why Ebay and the Defendants have enjoyed unimaginable and unjustifiable
23 riches.
24 76. Reporter Daniel Roth wrote, “[I]n Whitman's drive to make Ebay a conduit for
25 merchants, some of Ebay's old clientele is finding that doing business on the site has become a
26 trying, unhappy experience. A two-year veteran, who requested anonymity, persuaded her husband
27 to give up his job to help her sell full-time over Ebay. As the company grew, she grew with it. She
28 grosses $120,000 a year on the site and says she pays Ebay $1,000 a month in listing fees [plus
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COMPLAINT
1 commissions]. But now, she says, Ebay is ignoring her in favor of a fancier breed of client. Even
2 though she has been enlisted in the PowerSeller customer-service program for big-ticket sellers, her
3 e-mail and phone calls regularly go unanswered. Is she being taken for granted? 'I feel like I'm in a
4 co-dependent relationship,' she says. 'I write to them, I get no response. I e-mail them, nothing. I'm
5 being abused.' So why not go to Amazon? Because she still gets the highest price for her auctions at
6 Ebay--a function of the 'network effect' that Defendant Whitman herself says creates a kind of
7 snowball phenomenon as both sellers and buyers seek out the largest market under one roof.
8 77. 'This might be one of those businesses where the big actually get bigger through the
9 natural benefit of a larger market,' says Whitman. In other words, Ebay got there first, and there's
10 no stopping it now”.
11 78. And so it did: The marketplace known as EBAY now has nearly a quarter billion
12 registered users and this number is increasing daily.
13 79. Having amassed a vast fortune from exploiting the Community, the Defendants
14 would, in their worlds “buy” countries. In fact, Ebay and its managers talked of “buying countries”
15 as an Ebay strategy. For instance, when Ebay wanted to extend its reach into India, Whitman and
16 her staff would say “let’s buy India,” whereafter Whitman’s Ebay purchased Baazee.com, India’s
17 largest on line trading company for $50 million.
18 80. Like a fictional villain from a James Bond film, Ebay’s Chairman, Defendant
19 Omidyar, proclaimed Ebay’s goal was to “conquer the American market” with his ultimate goal
20 being the domination of the global market.
21 81. Effectively admitting Ebay was not a business, Whitman and Ebay proclaimed Ebay
22 was “the world's personal trading community.” Which begs the question, who appointed Ebay as the
23 despot over the community? Which begs the answer, a trading community is a service that is for the
24 “community’s” (i.e., the public’s) benefit and must be regulated as such.
25 82. Defendants further stated “eBay has created a new market: an efficient, one-to-one
26 trading site in an auction format.” This statement is false. Ebay did not create a new market.
27 Rather, the creation of the internet, funded by the U.S. taxpayer, created a new means, a new venue,
28 by which people could conduct business in an electronic marketplace.
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COMPLAINT
1 83. Like our interstate highways of asphalt and concrete, the United States Government
2 (i.e., the U.S. taxpayer) funded the creation of the internet. However, once this newly created digital
3 superhighway was ready for public use, Ebay claimed the “marketplace” as its own, posting its
4 tollbooths on what is essentially the public domain and claiming the superhighway’s marketplace as
5 its domain.
6 84. But Ebay did not create this marketplace. It would have developed with or without
7 Ebay. While Windows might never have developed without Bill Gates, auctions on the internet were
8 a certainty. Trading places and auctions have been part of human commerce for thousands of years,
9 even pre-dating human history. The only new development to the equation was the birth of the
10 internet, the information super highway, which Ebay had nothing to do with. Had the Defendants
11 invented this technology (i.e., the internet) or mode of trade (i.e., auctions), perhaps they could claim
12 rights to the control of this marketplace that exists via this technology. However, Ebay had
13 absolutely nothing to do with the creation of this technology (the internet) and can make no claim of
14 right thereon.
15 85. Despite Ebay’s not having constructed the internet and the resulting internet
16 marketplace, Ebay now holds the “Community,” that is the public, captive. If a consumer wants to
17 sell an item or if a consumer wants to purchase an item from another consumer and they want to tap
18 into the internet and participate in the primary C3C marketplace they must go through Ebay.
19 86. Throughout and even before recorded history, people would meet to exchange their
20 goods in the village square. In this age of the internet, the village square’s market has been replaced
21 by the internet and Ebay is the portal through which consumers must pass to access the marketplace.
22 87. Whitman may have put it best, that Ebay is not a business but rather simply a
23 marketplace where people meet, when she declared:
24 “Ebay is by the people for the people.”
25 88. Notwithstanding this fact, that “Ebay is by the people for the people”, Whitman, Skoll
26 and Omidyar unjustly and unfairly exploited the marketplace and the Community, directly pocketing
27 more than $14,000,000,000.00 (fourteen billion dollars) from “the people”, that’s, nearly half the
28 market value of the entire Ebay company. With approximately 100 million Americans paying
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COMPLAINT
1 Federal income taxes, the fourteen billion dollars these three Defendants have pocketed amounts to
2 $1,400.00 for every single taxpayer in the United States and thousands from every registered Ebay
3 user.
4 89. Unlike a traditional marketplace, or even a modern shopping mall, Ebay makes money
5 on every item listed for sale on the website, whether it sells or not! For example, listing a motor
6 vehicle for sale on Ebay for a few weeks typically costs $85 or more, whether it sells or not.
7 However, approximately 96% of the vehicles listed on Ebay are not selling. Thus, for every 1000
8 vehicles listed on Ebay, approximately 40 sell while Ebay pockets more than $85,000 or roughly
9 $2,200.00 per each vehicle sold.
10 90. To put this in context, if a merchant was selling in a market or shopping mall, this
11 would be akin to the Landlord not only charging a fee for being present, but then also charging a fee
12 for every single item offered for sale then taking a percentage for each item actually sold as well. If
13 this happened in “the real world”, sellers would leave those premises and relocate to a more
14 competitive location. But with Ebay being the only “personal” or C2C marketplace, consumers
15 can’t just leave if they want to offer their items for sale to a national (internet) marketplace. The
16 reality of this situation is reflected by this Community member:
17 October 20th 1999 – “Welcome to my story. You are about to read a story that started over 3
18 years ago. You see, I was one of the early "ebayers" as they are now called. Back then there
was no such thing as ebayers, NARU, DNF, or other terms that have now become household
19 words associated with online auction site known as "eBay." What I learned 3 years ago
20 [1996], finally the rest of the online community is learning now. That eBay is managed by
people who only care about one thing: the all mighty dollar. That's it. Fairplay, honesty,
21 integrity, and "doing the right thing," are all alien to these people. I have been waiting for 3
22 years for someone, ANYONE, to come along and topple these people. Instead of anyone
coming along and giving eBay some real competition, eBay went public, their stock went thru
23
the roof, thru the clouds, past the moon, and on it's way to Mars. With this bottle rocket of an
24 initial public offering came even more attention and even more money for eBay. I'm sure
Pierre, Jeff and the rest are rolling around naked in $100 bills toasting themselves. But as
25
greed usually does, it continues to grow and grow without limit and finally it can no longer
26 contain itself and its ugly face is seen. The events of the past year have exposed ebay for what
27 it is; e-evil. Finally, after arbitrary, hard-handed, and goon-like killing of auctions in the name
of "copyright infringement", hard outages and "unscheduled maintenance" outages for hours
28
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COMPLAINT
1 at a time, and most recently the "it's only a dollar" response to complaints about the $1
2 surcharge for reserve auctions, people now see the monster behind the curtain. "Hallelujah!"
.... what eBay doesn't get, and you don't know, is that the people that make up the trading
3 community on eBay are, for the most part, fed up w/eBay beyond words, and are just
4 waiting, looking, for an alternative. Once someone comes up with a site that mimics eBay,
but w/o the problems, you'll see the greatest max exodus since the Israelites left Egypt.”
5
6 91. Sadly, the Community’s salvation never materialized thanks to Ebay’s predatory
7 conduct .
8 92. Ebay’s heavy handed-handed tactics have lead to censorship of communications even
9 down to the most basic of levels. For instance, it is “illegal” in the Ebay ruled marketplace to
10 advertise that an item is “like” another item. For instance, listing an item for sale by stating “MVR
11 brand wheels for BMWs, they are like the BBS brand” will result in Ebay’s cancelling the auction,
12 suspending the User until the take a “tutorial” and, if such “violations” are repeated, Ebay may
13 permanently suspend the user. The “tutorial” is a series of online instructions followed by a
14 multiple choice test. The Community member must pass the test in order to be permitted access to
15 the marketplace. Ebay also warns it may suspend the Community member while still keeping or
16 “forfeiting” the fees he paid to Ebay for the listing! Here’s an actual email from once such incident
17 following the use of the world “like”.
18 Dear Mr. Smith: [Not actual name]

You recently listed the following listing:
19
170474264716 - FERRARI SEATS LIKE RECARO SEATS
20 Unfortunately, we had to remove your listing because the following information violates our
policy: In Title: LIKE RECARO
21
Including a brand name used by a company other than the manufacturer or producer of an
22 item can be misleading and make it harder for buyers to find items they're looking for. That's
23 why we don't allow sellers to use any brand names that aren't directly related to the item being
listed. Here's more information about this policy: http://pages.ebay.com/help/policies/search-
24 manipulation.html
25
You need to take a tutorial. The next time you sell, you may be asked to take the tutorial, if
26
it's required. Once you've completed the tutorial successfully, please review your account
27 status for any other possible concerns. If there are no other issues, you should be able to sell
again.
28
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COMPLAINT
1
2 Please note: violation of this or other eBay policies may result in forfeit of eBay fees on
cancelled listings, limits on account privileges and account suspension.
3
4 93. Ebay even has the audacity to unilaterally control and censor how often members of
5 the Ebay Community communicate with each other. If a person communicates by email too many
6 times in one day Ebay will jump in and block the sender’s communication and provide the following
7 message:
8 My Messages: Contact Member
9
10
11 We are unable to submit your question. You have reached the daily limit of emails you can send
12 using the Contact eBay Member function.
13 {e11061-160107-10006683}
14
15 94. The second reason for the Defendants’ outlandish profiteering is the illegal conduct
16 engaged in by Ebay, spearheaded and formulated by Defendant Whitman. Rather than letting the
17 marketplace evolve naturally, Ebay engaged in predatory conduct with the specific intent to
18 eliminate all potential competition, domestic and international, while Ebay moved to solidify its
19 place as the internet’s person to person auction marketplace.
20 95. The Defendants control over the marketplace is akin to the feudal system where the
21 serfs worked upon the landlord’s domain. A portion of everything the serfs earned would go to the
22 Landlord. The serfs didn’t want to give the landlord a portion of their earnings but had no choice for
23 they were trapped within the Landlord’s domain.
24 96. As a result of Ebay’s predatory actions, consumers, like the serfs, realize they are
25 effectively trapped.
26 97. So too it is with the Ebay community. Most will state they have a “love hate”
27 relationship with Ebay. They “love” the internet and the idea of a global marketplace thanks to the
28 information superhighway. No longer do they have to trek to a flea market or swap meet or
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COMPLAINT
1 advertise in their local newspapers classifieds. Instead, they can simply go to the internet’s version
2 of a swapmeat/flea market/classifieds with hundreds of millions of people from around the world.
3 98. However, they hate Ebay’s heavy-handed and arbitrary over the marketplace and
4 Ebay’s taking more than 15% of all their earnings and substantial profiteering.
5 99. Users of Ebay are literally at Ebay’s mercy. Do something Ebay doesn’t approve of
6 and a consumer, without any due process protections, can be banned from participating in the
7 “world’s market place.”
8 100. Companies generating hundreds of millions of dollars in revenue offer their services
9 to consumers for free because the reality is providing software driven, internet services have very
10 little overhead. These online companies make literal fortunes through advertising and other related
11 revenue generators. For instance, Yahoo provides free email addresses, accounts and unlimited
12 email storage. Facebook offers its networking services for free. Likewise, search engines such as
13 Google and Bing will scour the electronic universe, all for free. Youtube offers free video uploading
14 and viewing. HuLu lets you watch your favorite television programs for free while Mapquest will
15 provide travel directions and more, while language translator services on the internet translate
16 dozens of languages free of charge.
17 101. In China, a new and emerging marketplace where Ebay has not yet fully conquered
18 the market, a competing website offers its auctions for free while turning a profit.
19 102. Ebay’s real overhead is di minimus like most internet-based operations.
20 103. However, unlike nearly all other internet companies, Ebay charges substantial fees for
21 those who wish to participate in the “personal marketplace” that was created when the U.S.
22 government (i.e., the American Taxpayer) created the information superhighway.
23 104. Unlike Yahoo, Google, Youtube, Hulu, etc., Ebay effectively charges substantial tolls
24 to use the public’s superhighway.
25 105. Auction websites have tried to compete with Ebay, offering their services for free as
26 well.
27 106. For instance, Up4Sale.com was an auction website that didn’t charge sellers to list
28 their items nor did it charge for items that actually sold. What happened to Up4Sale.com? At the
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COMPLAINT
1 infancy of the internet auction market development, when Ebay had well under a million users, Meg
2 Whitman and Ebay bought Up4Sale and its parent company Jump. The days of “free” consumer
3 listings were nearing an end.
4 107. At the time of the acquisition, Whitman stated “The founders and employees of
5 Up4Sale share eBay's vision of what it takes to be the world's personal trading community. We
6 believe that the long-term relationship between eBay and Jump will ultimately bring a great deal of
7 value to our communities."
8 108. The story of Up4Sale.com would be repeated time and time again as Ebay sought to
9 dominate and control the “Community.”
10 109. The only “value” boasted by Whitman was brought to the Defendants’ pocketbooks.
11 The “Community” would now face ever increasing fees to participate in the “world’s personal
12 trading community.”
13 110. Ebay’s wealth and riches were not the result of some genius invention or unique
14 software development. Instead, Ebay reaped its extreme profits by charging for a basic service that
15 would have evolved naturally on its own, with or without Ebay, Whitman, Skoll or Omidyar.
16 111. The Defendants themselves admit Ebay’s ideas and fundamental operations are the
17 direct result of the Community itself: A Community that currently consists of approximately a
18 quarter of a billion registered users.
19 112. While Whitman profited to the tune of $1.2 billion dollars in her first year with Ebay
20 and paid herself $120,000,000 in her last year with the company (despite a dip in company
21 revenues) Whitman has admitted that the best ideas for Ebay came not from her nor her co-
22 defendants but from the Ebay Community itself, stating “I would say between 75% and 85% of
23 ideas germinate within the user community. Sometimes we veer off from that, and it's
24 usually not as successful as we thought... What we have is millions of entrepreneurs who make
25 small changes to the marketplace. That adds up to an optimized marketplace. It is far better to have
26 an army of a million than a command-and-control system that tries to make the decisions.”
27 113. While the Defendants credit the “Community” for the ideas that made Ebay
28 successful, these Defendants have excessively and unjustly profited at the direct expense and
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COMPLAINT
1 exploitation of this same Community while extorting the Community it now holds hostage through
2 its monopolization of the national and even international consumer to consumer marketplace.
3 114. Ebay’s profits mushroomed at record shattering rates, frequently doubling or even
4 tripling the previous quarter’s revenues.
5 115. Ebay’s profit as a percentage of revenues has dramatically exceeded some of
6 America’s most profitable corporations. (E.g., Ebay’s profit ratio has been approximately seven
7 times greater than Walmart (ranked the largest or near largest and most profitable corporation in
8 America) with a greater PE ratio than even ExxonMobile (the World’s largest corporation).
9 116. What these Defendants did do, without the Community’s consent, while lead by
10 Whitman, was to shunt and extinguish the natural evolution of the community’s marketplace,
11 thereby ensuring Defendants’ unjust profiteering. A perfect case in point is Ebay’s history with
12 Bidder’s Edge.
13 117. That Ebay is not a “business” was recognized years ago by financial analysts which
14 noted Ebay was a “no risk” operation with a “monstrous” market. “Ebay simply acts as a broker
15 between buyers and sellers, taking a [percentage]cut of merchandise sales. Net revenues are almost
16 pure profit - Ebay's gross margin was 85% in the first quarter of 1999. Plus, Ebay is growing
17 incredibly fast. Its net revenue climbed to $34 million in the recent quarter compared to $19.5
18 million in the fourth quarter, and $6 million a year ago -- a 74% quarterly increase quarter-to-quarter
19 and a 469% gain over first quarter 1998….We believe the market opportunity is monstrous. The
20 business model is much more profitable than almost any other on the Web. And the stock may each
21 unprecedented levels.''
22 118. Ebay has become the monopoly it is today for two simple reasons. The first reason
23 arises from Defendant Whitman’s orchestration of an illegal monopoly which arose from predatory
24 and abusive practices which were intentionally and strategically designed to thwart all competition
25 from the marketplace. The second reason for Ebay’s success is not due to any great management
26 leadership or innovation. Rather, the success is inherent in an internet based auction website: By its
27 very nature and what’s described by economists as the “Network Effect”, an auction site such as
28 Ebay can become a monopoly simply by virtue of being the first auction website in the marketplace.
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______________________________________________________________________________
COMPLAINT
1 In fact, Ebay’s original name reflected the then relative smallness of the internet. Ebay was simply
2 called AuctionWeb. Meaning, this was the auction website for the newborn internet. The Network
3 Effect works as follows as explained by a leading economist:
4 “Ebay's size and popularity make it a perfect example of what [we] call a
‘network effect.’ That is, the value of the Web site to each individual buyer and seller
5
increases as more people use the Web site. That's because buyers are more likely to
6 find what they want as the number of sellers increases. And sellers are more likely to
7 find a high bidder as the number of buyers increases. And so on. But "network effects"
also give sites like Ebay a type of monopoly power-which will only increase as the
8 site becomes more popular. That is, it is very hard for a competing site to displace the
9 original. This of course describes any Web business-take Amazon.com, which has
gotten a lot of mileage out of being first. But it's doubly true for a site like Ebay,
10
since Ebay benefits not just from brand recognition but also from its very size. Only
11 Ebay can promise sellers [225] million registered buyers. And it can retain those [225]
million buyers, because it attracts the best sellers. To take one example, Yahoo! offers
12
an almost identical service for free-yet sellers still choose Ebay. So Ebay's monopoly
13 power would, in theory, allow it to raise sellers' fees to the point where much of the
14 Web's cost-savings are erased.
In the case of Ebay, this “network effect” is taken to the extreme. “Imagine
15 that each of your five best friends has a party on the same night. Assuming you like
16 each equally well and have invitations to all five events, how do you decide which to
attend? If you're like most people, the answer is you'd probably head for the party
17
everyone else is going to.”
18 This sort of scenario underlies what economists call a network effect or a
winner-take-all effect. It is a feedback phenomenon that says whenever it is in
19
people's best interests to be where everyone else is, then that's where they'll be. So far,
20 we have seen simple examples: Amazon.com gets oodles of visitors because people
21 hear about it more than other online booksellers. E-Trade, too, gets big traffic because
it is better known than many of its competitors. And because both are widely
22 recognized, the process feeds back on itself. But these are subtle effects, what we
23 might call first-order feedback. Why? Because I get no direct benefit from buying at
Amazon or trading at E-Trade just because other people do. The feedback effect, in
24 other words, doesn't really feed on itself for very long.
25 There are, however, instances in which the feedback effect operates on
another plane altogether. Consider, for example, Ebay. There is a fundamental
26
reason for Ebay's popularity: Consumers are not rubes. We like to buy and sell
27 things where we think we can get the best prices. And we know, at least intuitively,
28 that we can get the best prices, whether buying or selling, where there are the most
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COMPLAINT
1 buyers and sellers. The result is a classic feedback effect: We all go to Ebay because
2 that's where everyone else is. We avoid other auctions because we can see right on
Ebay's front page, which now boasts nearly 10,000,000 items for sale in 1,627
3 categories, that it is far more popular than also-ran auctioneers like Amazon and
4 Yahoo.
This is wonderful, quintessential second-order feedback that is great for Ebay's
5 share price. But the phenomenon has a dark side. When the feedback effect gets
6 strong enough, there is no stopping more people from coming, whether to a party or
a Web site.”
7
8
119. It is impossible for any player or potential player to compete with Ebay. Put simply,
9
sellers will list their items for sale where they know they will have the largest market of buyers
10
which in turn will generate payment of the highest prices due to the heightened competition.
11
120. Likewise, buyers will turn to the marketplace with the greatest number of items for
12
sale and hence greatest likelihood of finding what they are looking for.
13
121. Support for the “natural monopoly” and its effects is found in a news report
14
concerning Ebay’s January 2002 Fee increases: “This second increase in as many years reaffirms
15
Ebay's strength in the marketplace. Sellers once again will grumble and threaten to leave (one
16
message board headline screamed "MASS PROTEST BY EBAY SELLERS!") but in the end most
17
will stay because it has far and away more potential buyers than all other sites combined.”
18
122. Further evidencing the determinative power of the “network effect” is Ebay’s
19
experience in Japan, the only market Ebay does not control. Instead, the Japanese marketplace is
20
dominated by Yahoo. In fact, Ebay gave up even trying to compete with Yahoo and closed its
21
operations in Japan in 2002. But why would Yahoo dominate the Japanese market and fail to even
22
challenge Ebay in the world’s other marketplaces? For the same reason Ebay has a monopoly in the
23
United States and much of the rest of the world; simply because Yahoo was first to establish its
24
auction site in Japan.
25
123. Yahoo’s site was up only a few short months prior to Ebay’s launch of its site. Yet,
26
notwithstanding Ebay’s unlimited resources, Ebay was effectively shut out of the Japanese market.
27
28
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COMPLAINT
1 124. According to Yahoo’s founder and President, “[we] understood it was critical to be
2 first. We knew catching up with a front-runner is hard, because in auctions, more buyers bring more
3 sellers." Masayoshi Son, CEO of Softbank Corp., which owns 51% of Yahoo Japan, drove home
4 the message. "If auctions are not a success, that's O.K. But if they are, and we're late, we'll be too
5 late.”
6 125. Ebay’s head of Japanese operations, Ms. Okawara, herself attributed Ebay’s failure to
7 impact the Japanese market was their late launch, stating: "When we arrived last year, the 800-
8 pound gorilla was already positioned."
9 126. Prior to her current election claims, where Whitman now proclaims she was
10 responsible for the success of the internet auction website, Whitman acknowledged, as she must,
11 that she became a billionaire in 1998 as a direct consequence of her exploitation “Ebay
12 Community”.
13 127. Whitman’s greatest “contribution” was her strategy to engage in predatory and illegal
14 commercial practices in order to thwart and exterminate all potential competitors from the
15 marketplace in order to fully exploit and take advantage of a captive Ebay Community.
16 128. Financial analysts agree that Ebay’s success was self-assured. When speaking of
17 Ebay’s management and Ebay’s success, experts note “the company's Internet-friendly business
18 model has played perhaps the largest role. In the simplest terms, EBay's success depends directly on
19 the proliferation of a community of buyers and sellers, and the Internet has become the most
20 efficient and ubiquitous community-building medium ever conceived. What is more, EBay has used
21 its first-mover advantage to build a critical mass of global buyer.”
22 129. While Whitman, prior to running for the Governor’s office, admitted it was the
23 Community who provided the ideas and participation that made Ebay successful, that
24 acknowledgement didn’t stop Whitman from financially exploiting the Community. Defendants
25 Omidyar, Skoll and Whitman kept for themselves more than 98% of Ebay’s shares of stock. For
26 instance, in one year alone Whitman was given the option to buy 14.4 million split adjusted shares at
27 $03.5 cents each while the public was paying $60-$80 per share. By comparison, Ebay’s total initial
28 public offering (IPO) of stock on the Nasdaq Market was only 4.025 million shares. Thus,
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COMPLAINT
1 Whitman’s options alone were nearly four times the total interest offered to the entire public. This is
2 how Meg Whitman went from being just another executive to being one of the richest and most
3 powerful women in the world.
4 130. Other Ebay insiders directly profited at the expense of the Ebay Community as well,
5 albeit not to the surreal extent of Whitman, Omidyar and Skoll. Defendant Jacobsen was perhaps the
6 highest paid in-house attorney in America. Not including his six figure salary, in short order
7 Jacobsen redeemed substantially more than $33 million of Ebay stock given to him by his co-
8 Defendants. Likewise, Defendant Bannick, exclusive of his salary, has cashed in more than $15
9 million of Ebay shares while Defendant Rajiv liquidated more than $14 million.
10 131. With these kinds of profits and rewards, one might presume these Defendants found a
11 cure for aging, aids, cancer or world hunger. Instead, Defendants reaped unjust profits from
12 exploiting a naturally arising marketplace; a marketplace that was developed and refined not by the
13 profiteering Defendants, but by the very users of the marketplace itself, the Ebay Community. A
14 community held hostage by the Defendants illegal predatory actions designed to keep the
15 Community captive by eliminating all other real competition.
16 132. Plaintiffs seek the disgorgement of the billions of dollars taken by the Defendants, and
17 each of them. These funds should be rebated to the Ebay Community and sellers.”
18 133. AuctionWeb (Ebay) is by definition a utility, a “privately owned business entity
19 subject to government regulation that provides an essential commodity or service. The law must
20 keep pace with technology and its societal advancements.
21 134. As a utility providing the essential service of the consumer to consumer national
22 auction marketplace, Ebay should be regulated.
23 135. A regulated Ebay would reduce the cost to consumers for access to the marketplace by
24 approximately 80%, thereby greatly increasing commerce, fostering greater marketplace
25 competition while simultaneously boosting revenues.
26 136. A regulated Ebay would provide consumers with due process protections, thereby
27 shielding consumers from Ebay’s history of unjust and arbitrary actions, of which there are tens of
28 thousands of Ebay victims.
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COMPLAINT
1 137. First, Ebay became the C2C monopoly it is today as a result of Ebay’s illegal actions.
2 Were it not for these actions, planned and orchestrated by Defendant Whitman, the marketplace
3 would have developed substantially different from what it has become.
4 138. The true story of Bidder’s Edge (infra) is but one example of how Whitman’s tactics
5 forever changed the internet auction arena and solidified Ebay’s position as the monopoly it is
6 today. Bidders Edge ultimately collapsed under the war of attrition waged by Ebay. But before it
7 did, the Federal Judge, in denying Ebay’s Motion to Dismiss the anti-trust claims made by Bidder’s
8 Edge, suggested that Ebay’s measures may well be evidence of anti-trust activities.
9
139. Bidder's Edge was an auction aggregation site designed to allow bidders to search for
10
items across numerous online auctions without having to search each host site individually.
11
Bidder’s Edge was like Google for auction websites. You’d simply go to the Bidder’s Edge website
12
and type in whatever item you may be looking for and Bidder’s Edge would search all auction
13
websites and display all the results simultaneously.
14
140. This efficiency and convenience threatened Ebay’s planned monopoly and so Ebay,
15
headed by Whitman, took action to kill Bidder’s Edge, and in the process, eliminate consumers’
16
opportunity for choice and alternative options to Ebay.
17
141. "If you are in an almost monopolistic position, you prefer not to let anybody know
18
about any other site other than your own," James Carney, Bidder’s Edge’s president said. "They
19
obviously think a dumb consumer is the best one."
20
142. “At Bidder’s Edge our strategy is to offer an auction portal site that makes it quick and
21
easy for users to simultaneously search hundreds of auction sites. . . . This approach not only
22
benefits users but also auction site owners. Consider how difficult it would be for the owner of a
23
small auction site to compete with eBay. . . Through Bidder’s their goods are exposed to potential
24
customers who otherwise might not ever have discovered them. . . . Almost anyone can establish an
25
auction site.”
26
143. Whitman correctly realized Bidder’s Edge would foster a free market economy and
27
competition, thereby defeating Ebay’s monopoly and monopolistic strategies. Whitman would not
28
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COMPLAINT
1 permit this threat to Ebay’s monopoly. Whitman set a course to destroy Bidder’s Edge and all
2 others who might follow in Bidder’s Edge’s footsteps.
3 144. The marketplace was about to spread like wildfire. Software was being developed and
4 marketed that allowed anyone desirous of establishing their own internet-based auction website to
5 do so while Bidder’s Edge level the playing field.
6 145. In response to this about to rapidly expand market, Whitman proclaimed Ebay would
7 not allow Bidder’s Edge or other similar search engines to search its auctions. She claimed these
8 search engines were “trespassing” on Ebay’s website. This was perhaps Whitman’s greatest threat to
9 her monopolistic ambitions and she would not let the free marketplace sidetrack plans.
10 146. The very foundation of the internet was premised upon the spread of information.
11 Ebay’s actions restricting access was tantamount to an outright rejection of the open information
12 environment upon which the Web was created.1
13 147. "We're a $9 million company, they're a multibillion dollar company," explained
14 Bidders Edge Vice President of Marketing George Reinhart. "We think we would ultimately win a
15 court battle, but in the meantime they would probably do all sorts of nasty legal things and we don't
16 have the resources to fight them."
17 148. Although successful in court, the legal fees were mounting to insurmountable levels
18 and Reinhart’s prophetic words became facts of history. Unable to afford the litigation, Bidder’s
19 Edge folded, taking with it the potential for a truly free and open marketplace while setting a scary
20 example for all those that might think of following in its footsteps. Lessons were learned: Tangle
21 with Ebay, the 800 pound gorilla, and suffer the consequences. With the road to Ebay’s continued
22 monopoly cleared, Ebay solidified its market position.
23
24 1
The Internet, was started by the U.S. Department of Defense in the 1960s and developed through
the 1970s and 1980s as an open network known as Advanced Research Projects Agency Network
25
(ARPANET). The users of the ARPANET nurtured it by allowing a free exchange of information. As
26 ARPANET matured, the government allowed the commercial exploitation of its federally funded
research project. As businesses began to utilize the technology developed for ARPANET, the Internet
27 was born. Thus, the very development of the internet was founded upon the free flow of information.
28
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COMPLAINT
1 149. Just before running out of necessary resources to battle Ebay in Court, the federal
2 court judge (Judge White) issued a ruling in Bidder’s Edge’s favor and indicated Ebay may well
3 have been guilty of anti-competitive behavior, stating: “If (Bidder's Edge's) automated crawling of
4 Ebay's website is determined to be lawful, Ebay's alleged blockage of (Bidder's Edge's) search
5 activity may also provide a basis for an antitrust violation,"
6 150. Tom Johnson, co-founder of RubyLane.com, a small niche auction site focusing on
7 antiques and collectibles, told a similar story. According to Johnson, eBay refused to re-new its
8 contract with RubyLane allowing the site to search its database. Johnson acknowledged this was
9 Ebay’s way to defeat competition.
10 151. "They [eBay] feel that if they can successfully stop every search engine from taking
11 their data, they will have to go to eBay to find eBay items," Johnson speculated. "We feel they have
12 no legal grounds to say you can't put public content on another site. That's the whole purpose of a
13 search engine."
14 152. G. Pat Hughes, marketer for a now forgotten eBay competitor, Auction Universe.com,
15 stated: "eBay is pretty predatory in their marketing, and their efforts are a way of forcing buyers to
16 come to their site and a way of maximizing in terms of their product selection,"
17 153. Auction Universe was just the sort of company, a smaller-than-Ebay auction website,
18 that would have benefited from auction search engines. Hughes explained “Auction Universe is
19 generally appreciative and understanding of the benefits global search provides the consumer. They
20 have a value in this marketplace." Auction Universe was just one of many such companies that
21 perished along with and in the wake of Bidder’s Edge.
22 154. Another auction search engine attempting to list Ebay auctions in its search results
23 was AuctionWatch.com. They too were effectively driven out of business by Ebay.
24 155. Had Bidder’s Edge survived Ebay’s attack, Ebay’s control over the marketplace via
25 “network effect" would have been minimized and possibly even eliminated. If Ebay buyers could
26 have searched all auctions via a third party website /secondary aggregator, Ebay’s stranglehold over
27 the market would have ended at its infancy and before Ebay became the war chest-rich powerhouse
28 it is today.
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COMPLAINT
1 156. With a third party website search engine, the Network Effect motivation weakens or
2 disappears entirely as it no longer matters nearly whether a seller lists their item for sale on Ebay or
3 a mom and pop auction site. Buyers and sellers would find items for sale, no matter where listed, as
4 they’d be equally exposed and available to the marketplace via Bidder’s Edge and similar search
5 engines.
6 157. Of course, this eventuality would be most unwelcome to eBay as eBay’s revenue
7 comes from the transaction fees it charges its sellers. A significant decrease in the number of sellers,
8 which would certainly happen if search engines would serve as the portals to all auction websites,
9 would result in a significant decrease in eBay’s income. If buyers were to search through one or
10 more secondary aggregators, sellers would no longer feel compelled to list their items on Ebay.
11 Instead, they could list their items on any number of auction websites that were coming into
12 existence at the time.
13 158. Whitman recognized the threat and was determined to prevent such marketplace
14 access. Whitman’s strategy was to extinguish any potential threats posed by competitors while
15 acquiring all or nearly all significant and potentially competitive auction companies in foreign and
16 domestic territories.
17 159. With strategic foresight, Whitman also recognized that the traditional consumer to
18 consumer marketplace had been the “classifieds”. To further solidify Ebay’s stranglehold on the
19 C2C marketplace on the ever emerging internet, and in addition to acquiring other auction websites,
20 Whitman’s Ebay acquired numerous internet classified ad listing services around the globe.
21 160. Ebay even took a substantial interest in Craig’s List with the intent of acquiring it
22 completely. Had Ebay acquired Craig’s List (an internet system that provides classified listings by
23 city and is thus not searchable in a national format) Ebay would substantially control not only the
24 national C2C marketplace as a whole, and arguably the international marketplace as well, but Ebay
25 would have also controlled the majority of all local classified services in the C2C market.
26 161. Thankfully for consumers, the founders of Craig’s List could not be bought by Ebay
27 and refused to sell-out to Ebay. If they had, the C2C marketplace (classifieds and auctions) would
28 have been effectively under the control of Ebay.
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COMPLAINT
1 162. Not surprisingly, Ebay’s alleged misdealing with Craig’s List led Craig’s List to sue
2 Ebay in Federal Court.
3 163. Whitman’s plan was for Ebay to destroy their competitors or other service providers
4 (such as Bidder’s Edge) that might weaken their monopoly intentions while purchasing companies
5 that had a relevant market share in a location that preceded Ebay’s presence. Rather than compete,
6 Ebay would simply buy its potential regional and international competitors. Once Ebay controlled
7 the relevant market Ebay would begin its typical fee escalations and arbitrary abuses of the
8 “Community” and its members.
9 164. Whitman aptly recognized that there was nothing particularly new or unique about
10 Ebay’s formula that attracted users who would participate in the Community.
11 165. Success was simply by virtue of being first in a region where the naturally occurring
12 C2C marketplace was developing in the online community.
13 166. At the relative infancy of the internet and while competitors were still young and
14 vulnerable, Whitman moved to gobble-up and purchase potential competitors or threats to her Ebay
15 monopoly ambitions.
16 167. Ebay’s success was directly attributable to the snowball effect that was the ever
17 emerging widespread use of the internet. The more people that started using the internet, the more
18 users Ebay would have it was just that simple.
19 168. The more users Ebay had, the more money it made. The more money from the
20 world’s largest marketplace, the greater Ebay’s war-chest from which it could acquire all potential
21 domestic and international competitors. Ebay was now “buying countries”.
22 169. Whitman’s killing off the young before they matured proved an effective strategy for
23 conquering competitors and enslaving the internet community.
24 170. A non-exhaustive list of Ebay’s acquisitions includes the following:
25
26
27
28
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______________________________________________________________________________
COMPLAINT
1 Acquisition
Company Business Country Value (USD)
2 date
Online auction site that
3 offered free listings for
sellers and charged no fees
4
July 16, for successfully completed United States —
Up4Sale.com
5 1998 auctions: Merged into Ebay
whereupon Ebay charged for
6 listing and sales
commissions.
7
A 135 year old Auction
8 house that had begun online
April 27, Butterfield & auction services just before United States $260,000,000
9
1999 Butterfield they were acquired by Ebay
10 and their operations merged
into Ebay.
11 E-commerce payment
12 systems and Paypal
Competitor. Ebay would
13 May 18, United States $275,000,000
Billpoint purchase Paypal to ensure it
1999
controlled the financial
14
aspect of all or nearly all
15 transactions on Ebay.
Auction house the largest
16 June 22, Germany $43,000,000
Alando online-auction house in
1999
17 Europe
Listing Tool called Auction
18 October United States —
Blackthorne Assistant then renamed
1999
19 Sellers Assistant.
Online marketplace Ebay
20 June 13, acquired to capture their United States $318,000,000
Half.com
2000 market share and their
21
formatting technology.
22 E-commerce payment
system and, said to be the
23 Precision
December first full-featured buyer's United States —
Buying
24 12, 2000 portal that searched
Service[1]
comparatively multiple
25 websites.
26 January 8, Internet Korea’s largest internet South Korea $120,000,000
2001 Auction Co. auction company
27 March 5, One of Europe’s largest
iBazar France $66,000,000
28 2001 online auction sites with
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COMPLAINT
1 business in eight European

countries
2
July 8, E-commerce payment United States $1,500,000,000
3 PayPal
2002 systems
4 January, 23 Largest classified listings for Germany $152,000,000
Mobile.de
2004 motor vehicles in Europe
5 January 31, United States —
CARad.com Online auction
6 2003
July 11, China $150,000,000
7 EachNet Electronic commerce
2003
8 June 22, India $50,000,000
Baazee.com Online auction
2004
9 August 14,
Craigslist[2] Classified advertising United States $13,500,000
10 2004
Classified advertising: An
11
online classified
12 business in the
13 November Netherlands w/ 80% mkt Netherlands $290,000,000
Marktplaats.nl
10, 2004 share. Marketplatz
14 banched out into Spain,
15 Turkey, Germany and
Canada.
16
December United States $415,000,000
Rent.com Classified advertising
17 16, 2004
May 18, Spain —
18 Loquo Classified advertising
2005
19 Classified advertising
Gumtree which offered
20 classified listing services in United
21 May 19, Britain, Ireland, Poland, —
Gumtree
2005 Hong Kong, South Africa, Kingdom
22 Australia and New Zealand,
as well as the Spanish
23 company LoQUo.
24 June 2, United States $620,000,000
Shopping.com Online shopping
2005
25
Classified advertising in
June 30, Germany —
26 OpusForum.org Germany, Austria and
2005
Switzerland.
27
September Skype Luxembourg $2,600,000,000
Voice over Internet Protocol
28 13, 2005 Limited[3]
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______________________________________________________________________________
COMPLAINT
1 March 9, United States $10,000,000

Meetup.com[4] Social network service
2006
2
April 24, Sweden $48,000,000
3 Tradera Online auction
2006
4 January 10, United States $310,000,000
StubHub Electronic commerce
2007
5 May 3, Turkey —
GittiGidiyor Electronic commerce
6 2007
May 30, Canada $75,000,000
7 StumbleUpon[5] Browser plugin
2007
8 Paypal Competitor Acquired
October 6, United States $1,200,000,000
Bill Me Later By Ebay / Paypal for $1.2
9 2008
Billion.
10 $390,000,000
October 6, dba.dk & Denmark
Classified advertising
11 2008 bilbasen.dk
12 Gmarket: Korea's leading

eCommerce, to be combined
13 with eBay's existing,
previously acquired, online
14
marketplace in Korea, the
15 Internet Auction Company.
"The combination of
16 Gmarket and IAC
17 establishes an exceptionally
2009 Gmarket strong leadership position South Korea $1,200,000.00
18 for eBay in one of the
world’s largest, most
19 dynamic and innovative e-
20 commerce markets" says
Ebay’s current CEO Mark
21 Donahue. Donahue was
hand picked by Whitman to
22 take over Ebay when
23 Whitman departed.
Taiwan's leading operator of
24 auction-style web sites. This
25 NeoCom acquisition establishes
2005 Technology Co., eBay's presence in Taiwan, Tawain ____
26 Ltd the third largest e-commerce
market in Asia, and the ninth
27 in the world
28
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______________________________________________________________________________
COMPLAINT
1
MercadoLivre in Portuguese
2 (Brazil) is a website dedicated
to e-commerce and online
3 auctions. MercadoLibre is Latin
America's number-one e-
4 commerce site. It is currently
present in Argentina, Brazil, Latin America _____
5 2001 MercadoLibre
Chile, Colombia, Costa Rica,
Dominican Republic, Mexico,
6
Ecuador, Peru, Portugal,
7 Panama, Uruguay and
Venezuela. Ebay is a primary
8 interest holder in MercadoLibra
9
HomesDirect is the Web’s
10 leading provider of home
2001 HomesDirect United States ______
11 foreclosure-related auction
services.
12
Indiana-based Kruse, which
13 claims to sell more vintage cars 275,000,000
2001 Kruse Auctions than all other firms combined, United States
14 conducts 40 real-world auctions (w/Billpoint)
a year.
15
16 Ebay acquired an equity interest
in AutoTrader.com, in 2000,
17 2000 AutoTrader the world's largest used car United States ____
marketplace, a title Ebay now
18 holds for itself.
19
20 171. The Ebay defendants have exploited the internet marketplace in an illegal manner for
21 their own personal gain and have created and continue to maintain this market through predatory
22 conduct, as evidenced by their recent $1.2 billion purchase of Korea’s largest C2C internet
23 marketplace .
24 172. With Ebay’s acquisition of Paypal, while also acquiring Paypal’s competitors or
25 blocking Paypal’s competitors from access to the market (such as Citibank’s C2iT and Google
26 Checkout) and with Ebay’s forced use of Paypal for payments of purchases made and items sold on
27 Ebay, Ebay effectively controls the sales and payments of the C2C marketplace.
28
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______________________________________________________________________________
COMPLAINT
1 173. With Ebay being the largest C2C marketplace in the world and with a quarter billion
2 registered users, and with Ebay’s forced use of Paypal by that internet using C2C community,
3 countless other merchants joining the internet marketplace recognize the position Ebay’s Paypal
4 holds and thus make taking Paypal a method of payment on their sites as well, thereby furthering the
5 snowball effect of the Ebay-Paypal monopoly.
6 174. The Ebay-Paypal combination results in Ebay effectively taking a whopping 16%
7 interest, or more, in hundreds of millions of people’s property.
8 175. Absent this monopolistic control of the marketplace, the fees charged would be
9 comparatively nominal or perhaps even without charge, as alleged immediately hereinbelow.
10 176. Ebay’s control over the C2C marketplace is so complete that when Citibank, then the
11 world’s largest bank, created C2iT, a better-than-Paypal competitor, even Citibank couldn’t make
12 inroads through Ebay’s blockade to its captive C2C marketplace.
13 177. Citibank was effectively forced to shutdown its online payment service when Ebay
14 blocked the use of C2iT in the marketplace (Ebay).
15 178. The excessive fees charged by Ebay of its captive market evidence the monopoly
16 Ebay holds. This fact is acknowledged time and time again in posts on the internet where users of
17 Ebay lament their “trapped” and “captive” status, samples of which are attached hereto as Exhibits.
18 179. In an effort to compete with Ebay, Yahoo offered free listings on its Auction website.
19 Thanks to the inherent nature of the “network effect”, described more fully herein (the idea that
20 buyers all go where they know the sellers are and the sellers list their items where they know the
21 buyers are, Yahoo would be unable to compete with Ebay despite its offering its auction services for
22 free.
23 180. Amazon Auctions suffered a similar fate as well.
24 181. Recognizing the captivity of its market and the consequences of the Network Effect,
25 the Defendants had two options. Steward this marketplace or exploit its captive consumers through
26 overcharges and arbitrary actions. Whitman, Omidyar and Skoll chose the ladder.
27 182. Like shooting fish in a barrel, the Defendants, lead by Whitman, have wrongfully
28 taken advantage of this captive market.
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______________________________________________________________________________
COMPLAINT
1 183. The Defendants could have taken unprecedented profits by charging exorbitant fees.
2 184. The services Ebay offers could easily have been offered for a nominal charge or even
3 for free.
4 185. Yahoo provides millions of people with email accounts and unlimited data storage for
5 free.
6 186. Facebook provides its social networking services for free.
7 187. Google will search the electronic universe for its users for free.
8 188. Youtube provides a library of video content for its users to upload and view for free.
9 189. Hulu let’s people watch their favorite television programs for free.
10 190. GoogleTranslate will translate languages from one of many languages into another
11 free.
12 191. Mapquest will provide directions and route information for free.
13 192. The leading auction site in China actually offers its auction services for free as well,
14 proving such services can be offered for free.
15 193. Each and every one of the foregoing companies, despite their offering “free” services
16 for their users, makes substantial profits through advertising, etc.
17 194. Like Facebook, Yahoo, Google, Youtube, Ebay has paid advertising on its pages as
18 well, thereby generating the more “typical” internet revenues as well as charging those who use the
19 website, something Yahoo, Facebook, Hulu, YouTube, etc., don’t do.
20 195. Reflecting this profit generating imbalance, Ebay’s net profits have neared 90%
21 thanks to Ebay’s minimal overhead, minimal investment and failure to provide adequate service.
22 196. Ebay uses its monopolistic control over the consumer to consumer market to take a
23 shocking 15-18% or more of the value of items sold on its website in addition to its advertising
24 revenues.
25 197. For example, if a woman in Dallas Texas sold her watch on Ebay for $500 Ebay
26 would get $2 for the listing fee and 9% of the $500 sale price ($45). If she listed her watch with a
27 reserve price, a smart thing to do unless she wants to give her watch away, Ebay will charge her an
28 additional 1% of that $500 for another $5. If she added a “buy it now” option that’s another $0.25. If
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______________________________________________________________________________
COMPLAINT
1 her listing had the bold text option that’s another $4 and if she posted additional photos that’s another
2 $2 for the “value pack”. So, if our Texan just sold her watch for $500 Ebay would take $58.25. But
3 Ebay’s not done with her yet. Ebay effectively mandates your only option to “checkout” on Ebay,
4 that is, to pay for your item directly, is to pay with Ebay’s Paypal service, which provides through
5 direct links and placement on the auction pages themselves.
6 198. Paypal, acquired and owned 100% by Ebay, will take 2.9% of the total sale price plus
7 $0.30. In our example, that’s $17.19 just for the Paypal fee.
8 199. Thus, to sell a $500 item on Ebay using their auction format it could easily cost the
9 Seller $75.44! That’s a whopping 15% of the items value.
10 200. If there are approximately 250 plus million registered users on Ebay, and if the
11 internet continues its evolution as the primary means by which these users sell their existing property,
12 this ultimately means Ebay owns 15% of all their tangible assets!
13 201. However, if the Seller uses the “Fixed Price” selling option, Ebay would own an even
14 greater share, taking upwards of 18% or more of people’s property.
15 202. Ebay’s automobile listings are also massively disproportionately overpriced.
16 203. To list a vehicle for sale Ebay charges $50 plus $32 for the 21 day listing plus $7 for a
17 reserve plus $2 for the “picture pack.” Thus, to run a no-frills 21 day listing on Ebay the cost is $91.
18 By comparison, Craig’s List is free. Carsdirect.com charges $29 to list a vehicle for sale on their
19 website in perpetuity until the vehicle sells. Cars.com charges $85 until the car sells. Autotrader
20 charges $69 and lists the vehicle for sale until it sells.
21 204. Ebay’s profits snowball given the fact that given the world’s recessionary marketplace
22 where approximately 95-96% of the listings costing $91 (or more) are not ending in sales.
23 205. Sellers keep paying Ebay to list their vehicles, week after week, month after month,
24 without seeing results yet knowing Ebay is the “world’s marketplace” and as a consequence, the
25 largest and most widespread automobile market in the world. After all, this is the electronic C2C
26 marketplace.
27 206. While the lack of sales may well be the result of the recession and recessionary
28 pressures, Ebay is nevertheless charging more than 15 times, to literally infinitely greater fees then
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COMPLAINT
1 what other services charge. Sellers pay these outlandish fees because they realize the giant market
2 Ebay holds captive. Simply put, if they want a real shot at reaching the consumer marketplace they
3 have to run through Ebay and pay Ebay’s extortionary rates.
4 207. For the protection and welfare of the American public, the monopolistic Ebay
5 Defendants must go the way of AT&T and Standard Oil; Companies’ whose control over their
6 respective markets was far less pervasive than Ebay’s control of the C2C or “consumer to consumer”
7 internet “auction” marketplace.
8 208. With the creation and evolution of the internet, a new public utility has emerged, the
9 on-line C2C marketplace.
10 209. Like any utility that is necessary and essential for the public benefit, Ebay must be
11 regulated for the benefit of the community and to protect community members from arbitrary actions,
12 actions that would be deemed unconstitutional and/or violative of public policy if Ebay was
13 appropriately categorized and regulated.
14 210. Ebay controls the internet marketplace for national and even international consumer to
15 consumer transactions. This fact was recognized long ago by the public and the media.
16 211. For purposes of this action, Plaintiffs distinguish themselves from commercial
17 enterprises, those entities or individuals that operate businesses separate and apart from listing items
18 on Ebay and where Ebay is just another avenue for their products. (E.g., Dell or Apple computers:
19 Consumers can purchase their products online at various websites, including Amazon.com,
20 Dell.com, Apple.com, etc. as well as Ebay.)
21 212. Notwithstanding the foregoing, all users of the marketplace, consumers and
22 commercial enterprises alike, are victims of Ebay’s monopoly and their illegal actions.
23 213. The issues presented herein are with respect to Ebay as an illegal monopoly pertains
24 specifically to individual sellers looking to sell (auction) their property via the internet to a national
25 and even international marketplace: The Consumer to Consumer market, regular people or mom and
26 pop businesses selling their wares and personal items.
27 214. Operating the internet marketplace should be no different than other analogous
28 markets or utilities. Federal, State and local governments regulate television-cable-radio services,
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COMPLAINT
1 broadcast companies, airports, transportation, rail, trucking, telephone companies, electric and gas
2 companies, and other essential service providers. With the evolution of technology and society so too
3 must our notions evolve as to what constitutes an essential service.
4 215. Defendant Whitman, Ebay’s CEO during its illegal rise to power as a monopoly,
5 admits that Ebay is an “indispensable” marketplace (as opposed to a business), stating:
6 "Everyday the eBay marketplace becomes indispensable to more people and small businesses
7 around the world.”
8 216. Proof of Ebay’s monopolization of the entire “public”, that is, consumer to consumer
9 internet marketplace lies in the numbers, set forth hereinbelow, numbers that don’t lie, as well as the
10 countless acquisitions as well as the improper litigation tactics employed by Whitman’s Ebay, all of
11 which was designed and intended to illegally secure Ebay’s monopoly status which it now enjoys
12 today. A status Ebay has used and continues to use to grossly overcharge the Community.
13 217. Plaintiffs will show that Ebay is a utility and necessary for the general public good and
14 that the Defendants have misused and abused their control and domination of this market to the
15 severe disadvantage of the public while reaping unsurpassed profits for themselves.
16 218. While it’s often noted that technology advances faster than the law that may apply to
17 it, it’s time the law caught-up with the plight of the people. Hundreds of thousands of people
18 publicly lament their being “stuck” with Ebay and without any real alternative choices while tens of
19 millions suffer in silence behind closed doors while facing their computer screens.
20 219. Our Founding Father’s understood the value of the First Amendment and the necessity
21 of free speech. There has never been a better medium of expression than the internet and, arguably,
22 no better expression is found than on sites like Youtube, where there are literally countless
23 individually created videos lamenting the monopoly that is Ebay. The very existence of these videos
24 shows people are taking the time to “revolt” and “protest”. Why? Because they are trapped. If a
25 consumer doesn’t like a Sharp brand television they most likely will simply buy another brand,
26 perhaps a Sony, the next time around. They won’t be compelled to “revolt”, “protest”, “boycott” or
27 start internet “epetitions”. See, e.g., http://www.youtube.com/watch?v=29v0RvXLTu8
28
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COMPLAINT
1 220. There are literally thousands of complaints voiced over the internet, including videos
2 on Youtube going so far as to compare Ebay with the fascist-like control of Hitler and the Nazis.
3 http://www.youtube.com/watch?v=OqpKnce_fck
4 221. Journalists and the public alike, matter of factly, refer to Ebay as a monopoly. In the
5 view of the public, Ebay’s status as a monopoly is conclusive and beyond question.
6 222. Ebay’s monopolistic control of this auction-style marketplace is in part evidenced by
7 public movements to “boycott” Ebay and calls for an Ebay “revolt”.
8 223. Res ipsa loquitur: That there needs to be a “revolt” a fortiori indicates a total control
9 without alternatives. Otherwise, wherefore the need for a revolt? The primary definition of the word
10 “revolt” is an uprising against the state, that is, the government. The implication is the people have
11 no choice as there is but one government so their only option is to revolt. Likewise, ordinary people
12 and mom and pop businesses have no real alternatives to Ebay if they are looking to sell and/or
13 “auction” their properties on the national / international marketplace. The “Network Effect”,
14 discussed further hereinbelow, assures this.
15 224. If Ebay was not a monopoly and people really had other viable choices they would not
16 waste their time nor energies revolting. For example, if Grey Poupon mustard were to raise its prices
17 so it cost substantially more than it does now, people wouldn’t “revolt” because they have other
18 viable choices for mustard, even Dijon mustards.
19 225. People “revolt” against Ebay not because they are somehow politically or
20 commercially active citizens, but because their lives are being affected and they have no other real or
21 adequate options for relief.
22 226. While citizens and peoples have rights and protections against arbitrary acts against
23 them with respect to governmental agencies that may suspend their rights to do business, as well as
24 public utilities, Ebay acts unilaterally and arbitrarily, suspending auctions and members of the
25 community without, due process, equitable procedures, legal justification, oversight or public review.
26 Attached hereto are Ebay users comments voicing their outrage and frustration. (Exhibit “xxxx”.)
27
28
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COMPLAINT
1 227. Members of the Community use Ebay because it is the only real option,
2 notwithstanding Ebay’s well-known for its arbitrary actions, excessive fees and terrible to
3 nonexistent service.
4 228. Community members lament their plight and note, over and over again, how they are
5 stuck with the monopoly that is Ebay.
6 229. While larger businesses may create their own websites or list their merchandise on
7 sites such as Amazon.com, ordinary people, like the homemaker in Peoria, looking to get the best
8 price she can for that wedding dress she never intends to wear again has only one real option: Ebay.
9 To ignore this fact is to ignore reality. She may list her dress for sale on Craig’s list, but such
10 websites do not have the national or even international reach that Ebay has, and due to the Network
11 Effect, they simply can’t generate the true market value that listing an item on Ebay can.
12 230. Plaintiffs seek the disgorgement of more than $14 billion dollars from the individually
13 named Defendants and more than $40 billion from Ebay, Inc. These sums represent monies
14 wrongfully converted by these Defendants from the Ebay Community. These funds would be
15 distributed amongst the Ebay Community: Reimbursing those that were and remain responsible for
16 the creation, operation and proliferation of Ebay while compensating those who paid excessive fees.
17 231. Plaintiffs seek statutory treble damages. It is suggested that these funds be credited
18 back to Ebay members on a pro-rata basis to refund excessive fees paid over the years. This data
19 would be premised upon Ebay’s accounting records.
20 232. Billions of dollars returned directly to consumers would not only be legally just but a
21 boon for the economy as well as money is rightfully returned to the people from those who
22 wrongfully exploited the Community.
23 233. The marketplace known as EBAY has nearly a quarter billion registered users. If
24 Ebay were a country, its registered users would have Ebay competing with Indonesia for the fourth
25 most populated country on earth behind China, India and the United States.
26 234. Ebay, the world’s self-professed largest marketplace, has been the fastest growing
27 “company” in history. Since its inception, Ebay’s profits have multiplied every quarter at astounding
28 rates, frequently doubling or tripling the previous quarter’s revenues. Ebay, with a market value of
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COMPLAINT
1 $32 billion, a company that did not exist until mid-1995, is now worth more than Bloomingdale’s,
2 Macy’s, Sears, Kmart and Toys R Us―combined. By comparison, Dell Computers, a company that
3 actually manufactures something, is worth a third less than Ebay at $23 billion. Ebay’s market value
4 is comparable to Ford Motor Company’s, a company that’s been in business for more than 100 years.
5 235. Ebay’s spectacular and unprecedented growth is the result of Ebay’s monopolization
6 of an entire marketplace, not because Ebay was responsible for some great invention or innovation,
7 but because Ebay was simply there on the internet just as the internet itself gained use and acceptance
8 by the public. Ebay then used its initial position to thwart out all potential competitors.
9 236. For example, 1996 was the first year the California State Bar used the internet to
10 release Bar examination results. Many at the time didn’t even know how to use the internet to obtain
11 their scores. That same year eBay’s revenues were just $372,000. Today Ebay’s revenues are
12 approximately $9 billion per year.
13 237. In a May 1997 press release, eBay President Jerry Skoll stated that the growth "clearly
14 demonstrates the receptivity and the eagerness of the general public to participate in online
15 commerce. Our goal is to provide a fun, efficient, and reliable forum for both buyers and sellers."
16 Skoll thus admits that the “general public” was looking to participate in “online commerce”.
17 Therefore, Ebay is nothing more than a place where the “general public” partakes in “online
18 commerce”. As one objector from Australia puts it, “I would like to know Who Died and Made Ebay
19 God.” (showcasemerchandise)
20 238. Ebay was simply a “forum” on this new superhighway called the internet where
21 people could meet to buy and sell and engage in commerce.
22 239. Ebay was never a business per se. Rather, Ebay staked as its own the entire internet
23 auction marketplace, thereby resulting in Ebay’s supernormal profits and revenues.
24 240. Evidencing Ebay’s monopolistic and even imperialistic intentions, the Defendants
25 have claimed a Trademark for their self-description as the “World’s Online MarketplaceTM” .
26 241. Ebay’s supernormal profits further underscore the inescapable fact that Ebay is not a
27 business but is in essence a modern, digital public utility. Plaintiffs estimate a staggering 87% of all
28
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COMPLAINT
1 revenues generated by Ebay were net profit. Financial reports have shown Ebay’s General and
2 administrative costs run just 13% to 14% of net revenues.
3 242. Ebay’s PE ratio (profits as a percentage of revenues) was, at one point, nearly seven
4 times greater than Wal-Mart, America’s largest and most profitable company at the time.
5 243. Ebay’s profits have even bucked industry trends. For instance, in 2002 when each and
6 every one of the top twenty corporations in its sector (computer and data service providers) all
7 reported dramatically lower revenues, Ebay was the only company in its sector to show an increase
8 in revenues while the rest of the Top Twenty all posted losses averaging 25% to 79% when compared
9 to the previous year’s revenue.
10 244. Despite downturns in the economy, Ebay continues to its trend of increasing revenues
11 and profits from one quarter to the next with simply phenomenal growth.
12 245. The individual Defendants’ wrongful manipulation and profiteering has made them
13 overnight multi-billionaires. Defendant Omidyar, has become the second richest man in America
14 under the age of forty with a net worth of nearly $8 billion. (Only Michael Dell had a greater wealth.)
15 246. His partner, Defendant Skoll, became the third richest man in America under forty
16 with a net worth estimated at the time of $4.8.
17 247. Nearly immediately after joining Ebay Defendant Whitman joined the Ebay
18 Billionaires’ Club. Whitman came from relative obscurity to become a billionaire, Fortune
19 Magazine’s most powerful woman in America and now stands at the steps of California’s Governor’s
20 mansion, thanks to her Ebay profiteering.
21 248. Defendants’ vast accumulation of riches has been at the expense of the American
22 consumer and at the expense of those actually responsible for the creation of Ebay.
23 249. Despite Ebay’s supernormal profits, the Ebay Defendants routinely impose significant
24 fee increases on the captive members of the Community. These regular fee increases are made
25 without justification and without benefit to the Ebay Community.
26 250. The Defendants are unjustly profiting from their wrongful exploitation of a naturally
27 occurring marketplace: A marketplace with ancient roots and a medium whose creation was
28 spearheaded not by the Defendants but by the American Taxpayer.
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COMPLAINT
1 251. Ebay controls more than 90% of the internet consumer to consumer (C2C)
2 marketplace. Ebay’s monopolization of the United States internet auction marketplace is so
3 complete that Ebay has effectively eliminated all competition.
4 252. “The term [competition] isn't usually uttered with much seriousness in connection
5 with eBay, given that online-auction sites run by Amazon, Yahoo and scores of others have failed to
6 make a dent on the company.” (Wingfield, The Wall Street Journal, April, 2003)
7 253. This “marketplace”, as the Defendants themselves declare it to be, is an accurate
8 description of Ebay. Ebay owns no warehouses, merchandise, manufacturing facilities nor even a
9 single retail store. Ebay is nothing more than a digital medium, an electronic marketplace where
10 people and business meet via the internet.
11 254. Ebay did not create this digital world yet it exploits it as its own. In fact, much of the
12 commerce and trade conducted over the internet, once transacted in brick and mortar stores, is now
13 sold through Ebay.
14 255. Compounding matters and evidencing Ebay’s intent to monopolize and in
15 contravention of Section Seven of the Clayton Act, Ebay has used its amassed wealth for anti-
16 competitive horizontal mergers and to acquire its prospective overseas competitors.
17 256. By acquiring its overseas competitors, Ebay has preemptively precluded their potential
18 entry to the United States market where these companies would have competed with Ebay with
19 consumers benefiting from the competition.
20 257. The intent and effect of Ebay’s acquisitions has been to eliminate any and all existing
21 and potential competitors, both herein the United States and abroad.
22 258. EBAY’S acquisition of Paypal, the world’s largest online payment service and a
23 producer of complementary products (conglomerate merger), violates Section 7 of the Clayton Act
24 and further evidences Ebay’s efforts to monopolize.
25 259. Paypal was acquired by Ebay for the sum of 1.5 billion dollars. Paypal controls more
26 than 90% of the online payment market and itself a monopoly.
27 260. Paypal completely dominates the C2C and C2SB (Consumer to Small Business)
28 payment marketplace while Ebay completely dominates the C2C and C2SB marketplace itself.
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COMPLAINT
1 Paypal is a payment monopoly owned, exploited and controlled by Ebay. A payment service used as
2 Ebay’s secret weapon.
3 261. Ebay has tied Paypal to the marketplace in a further effort to eliminate competition
4 and to secure its monopolization of the internet marketplace and to create yet another impediment to
5 prevent potential competitors from entering the marketplace while unconscionably overcharging the
6 captive members of the Community.
7 262. Ebay is, and has been conducting business in direct contravention of Federal and State
8 antitrust laws which prohibit predatory conduct and monopolies.
9 263. Ebay is a predatory monopoly which has effectively eliminated the potential for
10 competition.
11 264. In the seminal ALCOA antitrust case, it was held that mere size alone could constitute
12 evidence of monopolization. (ALCOA’s market share was substantially less than Ebay’s and less
13 than Paypal’s respective market shares!) While Plaintiffs’ action is not based on sheer size alone,
14 Plaintiff’s do note that Ebay’s market domination is unparalleled in size and scope in antitrust
15 history.
16 265. Applying the Department of Justice’s Merger Guidelines it is clear that Ebay has no
17 real competitors. Under the Guidelines, a product market is defined by asking which products
18 would be substituted by buyers in response to a small but significant price increase.
19 266. Ebay has repeatedly and substantially raised its fees charged to the consumer without
20 improving its services whilst ever increasing its registered Users. In fact, Ebay raises its fees while
21 also making participating in the marketplace less enjoyable and still the number of registered Users
22 increases, proving there are no real substitutes in the market.
23 267. As Ebay has no competitors, the Users of Ebay pay, albeit it grudgingly, Ebay’s ever
24 increasing fees. Thus, Ebay is free to raise fees and has no fear of losing customers as the customer
25 has no real alternative but Ebay.
26 268. A case in point is the owner of an independent Ferrari dealer and service center in Los
27 Angeles. In his early 40’s, the Owner/Master Technician works hard to maintain his business,
28 particularly through the Recession. He notes he’s billed hundreds of dollars monthly from Ebay for
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COMPLAINT
1 listing cars and parts that don’t sell. “Ebay used to be fun. People would put stuff up for sale in a real
2 auction and you’d bid to win. But Ebay is different now. Their fees are outlandish and their policies
3 make buying and selling much more difficult.” When asked why he still uses Ebay month after
4 month if he’s so unhappy with Ebay he responds “because there really are no other options. They
5 need to start Ebay all over again. It’s a market and you have to be in the market. It’s that simple.”
6 269. Perhaps best exemplifying this market domination and the “network effect” is the
7 failure of prospective competitors to compete with Ebay despite offering their services for free! For
8 instance, Yahoo’s efforts to compete with Ebay were unsuccessful despite Yahoo’s charging $0 to
9 list items on its auction site.
10 270. Defendants’ market domination is not due to their labors, inventions or
11 entrepreneurial skills. Ebay had no part in creating the internet nor did Ebay invent the concept of
12 the auction or marketplace nor did Ebay create what is people’s natural desire to engage in trade.
13 271. Ebay’s market popularity is founded solely upon its being the first online auction-
14 marketplace to post its web page just as the internet was on the brink of reaching the general public, a
15 position it solidified through its illegal and anti-competitive measures.
16 272. As shown herein, these same naturally occurring market forces will guarantee that
17 Ebay remains a monopoly despite their abusive practices and that Ebay’s domination will only
18 further solidify thanks to the network effect, and of course, Ebay’s anti-competitive measures.
19 273. The media from as far away as Australia have recognized that Ebay’s success is
20 founded on its monopoly power, stating Ebay’s success comes “from its domination of the domestic
21 online auction market and steady market share gains in more than two dozen countries.” (Konrad,
22 The Australian IT, Ebay’s Profits Skyrocket, April 2003.)
23 274. Ebay’s subsequent success has not been attributable to the Defendants’ innovations or
24 technical advancements.
25 275. Apart from its timing (i.e., first or nearly first on the unfolding internet scene) Ebay
26 has been successful because of the contributions made by the actual Users of Ebay; that is, the Ebay
27 Community itself, as set forth herein and as repeatedly admitted by the Defendants.
28
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COMPLAINT
1 276. Despite the Defendants’ spectacular profiteering, the fees charged to the captive Users
2 of Ebay are routinely and significantly increased without justification and without benefit to the Ebay
3 Community and without any correlation to the actual service provided to the User.
4 277. Notwithstanding this disproportionately excessive cash overflow, Defendants
5 recklessly managed Ebay and for most of Ebay’s history failed to implement even the most basic of
6 security measures to protect the Ebay community from years of rampant fraud.
7 278. Ebay’s failure to provide a customer support telephone number is but one glaring
8 example of Ebay’s facilitation of fraud. Rather than providing telephone support, Ebay’s maze
9 continually diverts the User to page after page of preprinted generic information. There are literally
10 hundreds of these pages which effectively trap the User making it likely they will simply give up
11 their efforts to find an email address for Ebay support.
12 279. Eventually finding an Ebay email address may be of no use either. An Email from an
13 Ebay fraud victim shows his frustration and inability to find help from Ebay: “HELP, HELP, HELP.
14 I was a victim of fraud on Ebay motors and need to file a claim form. WHERE IS IT LISTED? Does
15 any one know? I have spent 3 days trying to locate it, emailed Ebay with no results. I would
16 appreciate any help..” (noodlesnana )
17 280. Ebay’s failure to provide telephone customer support, and its efforts to hide its email
18 address, reflects the Defendants’ desire to maximize profits at the expense of the Ebay User.
19 281. Ebay justifies its efforts to insulate itself from the Ebay Community by stating:
20 “Ebay is an internet based auction venue and because of this, our member support is
21 email based as well. We do not offer phone support.” (Dave S. S. of Ebay’s email based
22 support.)
23 282. With the billions of dollars earned by Ebay, much of it pocked by the individual
24 Defendants, Ebay’s election to not provide customer service support was intentional and contrary to
25 the Community’s interests.
26 283. As one defrauded Ebay User puts it, “Ebay's failure to post its phone number on its
27 site to permit members to alert Ebay of irregularities is yet another irresponsible cost-saving
28 mistake.”
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COMPLAINT
1 284. An Ebay operated as a regulated utility, while still earning a respectable profit, could
2 effectively slash the fees charged to its users by an estimated seventy to eighty percent, implement
3 security measures to improve the safety and integrity of the marketplace while also providing
4 telephone support. These measures would not only protect the Ebay community from fraud, but
5 would reduce the cases plaguing Federal and local law enforcement agencies.
6 285. Left unchecked, the Defendants will continue to bilk billions of dollars from the
7 captive consumers.
8 286. Defendants’ wrongful conduct and mismanagement of the Ebay site affects all
9 Americans as thousands of victims of fraud flood the FBI, FTC and local law enforcement officials
10 with their complaints.
11 287. EBAY’s reckless disregard for necessary safety measures costs the US taxpayers
12 millions of dollars each year.
13 288. According to the FTC and FBI, Ebay internet auction fraud produces the largest
14 number of fraud complaints. In fact, new departments have been created within the FBI and law
15 enforcement agencies across the Country to deal specifically with Ebay’s victims of fraud.
16 289. In addition, credit card companies have been forced to absorb many of Ebay’s
17 fraudulent transactions.
18 290. As a result, everyone pays the price for Defendants’ wrongs through higher taxes and
19 credit card charges whilst the Defendants became some of the richest individuals on the Planet.
20 291. Absent intervention, the US Taxpayer, all credit card holders, and members of the
21 Ebay Community, all pay a heavy price for the Ebay Defendants’ profiteering and mismanagement.
22 292. Ebay’s advice to its ripped-off Users has been its instruction to victims to notify their
23 credit card companies of the fraud and request that they write-off the fraudulent charges. Every time
24 a credit card company cancels a bad debt it spreads this cost to all users of credit cards, thereby
25 affecting each and every one of us.
26 293. Ebay’s failure to responsibly re-invest the profits earned from the marketplace to
27 secure the marketplace from fraud has resulted in enormous costs to all American taxpayers, credit
28
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COMPLAINT
1 card holders and the users of Ebay itself. Ebay must not be permitted to profit from this captive and
2 naturally occurring marketplace while shifting its financial responsibilities to the general public.
3 294. Ebay was originally advertised and represented to the public to be free with no fees to
4 be charged. Only after its inception were nominal fees charged and these fees, we were told by
5 Omidyar, were to cover the minor operating expenses such as electricity and server costs, etc.
6 295. Defendant Omidyar actively posted “no-cost” notices on the web advising of what he
7 called a “free web auction.”
8 296. From its inception, Ebay’s primary promotion had always been User word-of-
9 mouth/word-of-email publicity. As described by one reporter: “Computer geeks and tech-savvy
10 bargain hunters were e-mailing one another the AuctionWeb URL, and inserting hyperlinks on their
11 websites that took web surfers directly to the AuctionWeb home page.”
12 297. Again, it was the “Community” that marketed itself to the community and that
13 marketing began with the Defendants’ representations of a “free” website.
14 298. From the outset Users accepted the risks of potential fraud as Ebay was a free service
15 supported by a self-sufficient community. AuctionWeb then known as Ebay wasn’t perceived as a
16 business providing a service. Rather, it was created and promoted as a “Community”. Thus, the Ebay
17 Community was responsible for devising a costless solution to the rampant fraud.
18 299. Ebay Users themselves came up with an idea to implement a no-cost mechanism
19 intended to provide at least a minimum of security. It was known as “Feedback”.
20 300. This no-cost feedback system was never suggested to be the most effective means of
21 policing the market. Rather, it was proposed as an efficient zero cost system for an auction site that
22 charged zero fees.
23 301. However, once users were hooked, the Defendants began escalating the fees to access
24 the marketplace while failing to provide services commensurate with the vast sums of money taken
25 from the community.
26 302. An investigative reporter wrote of the Defendants’ hijacking of the Community: “The
27 Average Guy and Average Girl made this behemoth what it is. This is the thanks you get, kids. You
28 made it possible for Ebay to become what it wants to become. Increasingly, it seems, Ebay is a
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COMPLAINT
1 company at war with itself. The swap fest that has been endlessly touted as the Internet's happiest
2 marketplace ('People go gonzo over Ebay,' declared USA Today) is fast evolving into something
3 rather different. While Whitman continues to hype Ebay's touchy-feely communitarianism, she's
4 quietly and rapidly overhauling the company in service of a goal the staunchest capitalist would
5 understand: pleasing Wall Street.”
6 303. The Defendants have acted intentionally and with a clear disregard for the safety and
7 well being of the Community.
8 304. With fraud and security problems escalating, Defendants even ignored political
9 inquiries. For instance, Congressman Billy Tauzin, one of the recognized leaders in Washington on
10 matters relating to the internet and technology, Chairman of the House Commerce Committee,
11 through which just about every piece of high-tech legislation and oversight must pass, and moving
12 force behind the 1996 Telecommunications Act, expressed his concerns to Ebay in a letter dated June
13 25, 2001. “I am writing to request your assistance in assessing the prevalence of online auction fraud
14 and the steps that are being taken to combat this fraud. In a recent study, the Internet Fraud
15 Complaint Center reported that from May to November 2000, auction fraud accounted for 64.1% of
16 Internet fraud complaints filed with the Center. According to these statistics, the occurrence of
17 online auction fraud is higher than the occurrence of all other online fraud combined. The ability
18 to disguise identity, revoke bids and maintain multiple online identities may facilitate undesirable
19 practices like shilling. In private auctions, bidders email addresses are concealed both during the
20 auction and after the auction has closed. Only the seller and high bidder know who bought the item.
21 Does this practice encourage shill bidding? Online auction participants rely on feedback ratings to
22 help protect themselves from unreliable or fraudulent sellers or buyers. Feedback “padding”
23 interferes with a participant’s ability to make informed participation decisions. What is the incidence
24 of feedback “padding?” To what extent does “padding” diminish the value of feedback as a tool for
25 making informed decisions about with whom to conduct business on an auction site? Do auction
26 rules that allow for changes in identity or the maintenance of multiple identities facilitate fraudulent
27 practices? Sincerely, W.J. “Billy” Tauzin, Chairman.
28
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COMPLAINT
1 305. The Defendants ignored Congressman Tauzin’s concerns and failed to take corrective
2 measures in response to Congressman Tauzin’s letter.
3 306. On the contrary, Whitman actually protected criminals. When allegations of fraud
4 were made and the identity of the perpetrator sought from Ebay, Ebay would refuse to provide the
5 identification information associated with the User’s ID. Ebay shielded this information on the
6 grounds of “privacy”, Whitman stated: “Ebay comes from the roots of an open, sort of libertarian,
7 point of view…. let's not get government too involved here.”
8 307. Defendants have intentionally made misrepresentations of fact regarding the security
9 of Ebay and have failed to devote sufficient resources to monitoring and policing Ebay, as set forth
10 fully hereinbelow, in an effort to artificially boost the value of Ebay stock.
11 308. In doing the things alleged herein, Defendants have been motivated by greed.
12 309. To achieve their goal of artificially boosting the value of Ebay stock and in turn
13 increasing their own net worth, Defendants must have the Ebay Community and the general public
14 believing Ebay is a safe and relatively fraud free marketplace.
15 310. In another effort to sanitize Ebay’s appearance in order to foster stock market
16 confidence, Ebay closed its anti-fraud hotline. According to Ebay User Nick Farrell: [26-04-2002]
17
“Rather than addressing the rampant fraud on Ebay, Ebay decided to terminate its anti-fraud
18
email hotline. The SafeHarbor service is a channel for reporting suspicious activity or specific
19 fraud complaints, and was to be replaced with an online form. However, Ebay is not
20 disclosing the availability of the new form. Instead, Ebay is only telling customers who email
the safeharbor@Ebay.com address. Ebay is said to have had no plans for a wider
21 announcement. Moreover, the safehorbor email address is no longer available.”
22
311. Auction experts say that the form limits the way customers can report fraud on the site
23
and could effectively prevent clients getting in touch with Ebay.
24
312. In April of 2002, Ebay introduced tighter rules for the use of its discussion boards;
25
rules which make it impermissible to warn other members about poor experiences with another buyer
26
or seller.
27
28
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COMPLAINT
1 313. Ebay’s profit motives not only hurt the community but knowingly facilitated fraud and
2 identity theft.
3 314. For instance, unlike most e-commerce sites, Ebay didn’t automatically encrypt the
4 data sent between User’s computers and Ebay's servers, which means that when customers type their
5 password into Ebay's Web site, that information can be viewed by hackers. "SSL is typically a no-
6 brainer on any Web site," said John Pescatore, research director for Internet security at Gartner.
7 According to Pescatore, "They [Ebay] are doing their users a disservice," Ebay’s failure to encrypt
8 renders Users’ IDs vulnerable to being “hijacked”.
9 315. As a result, thousands of Ebay users have seen their accounts hijacked and used to set
10 up fraudulent auctions. The scam artists parlay the members' good reputations into bids--then take off
11 with the cash. Identity theft and Ebay auction fraud are the top two most frequently cited consumer
12 fraud complaints filed with the Federal Trade Commission.
13 316. Unlike most secure websites, Ebay has failed to implement a Lockout system. A
14 Lockout system would prevent a person from trying to log in as a member if, for instance, after three
15 attempts they were unable to enter their correct password. After three unsuccessful attempts, the
16 person would be “locked out” and unable to attempt to enter any more passwords. Without a lockout
17 system, a hijacker is free to spend hours trying to guess a person’s password.
18 317. “Ebay's reluctance to put in place a lockout system may have more to do with it
19 wanting to save money on customer service than anything else”, said Rosalinda Baldwin, editor of
20 The Auction Guild, a newsletter covering the online auction industry. “If the company put in place a
21 lockout system, it would have to provide people with instant customer support over the telephone so
22 they could unlock their accounts. Currently, Ebay doesn't list a customer support phone number on
23 its site, instead directing all inquiries to e-mail or to lists of frequently asked questions. Locking out
24 accounts would make sense, but they would have to hire some people to man a phone 24-7.
25 That's not what they want to use our dollars for."
26 318. Jerry Auerbach, of Tenafly, N.J., paid $1,725 for a nonexistent IBM ThinkPad. "It is
27 clear to me that Ebay's current fraud policy was designed to save costs, permitting thieves sufficient
28 time to conduct multiple fraudulent auctions. The 30-day waiting period to notify Ebay of fraud is
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COMPLAINT
1 wrong, and Ebay's failure to post its phone number on its site to permit members to alert Ebay of
2 irregularities is yet another irresponsible cost-saving mistake. Had Ebay acted with care, these
3 fraudulent auctions could have been monitored, permitting authorities to more easily capture the
4 perpetrators, or Ebay could have halted the auctions."
5 319. That Ebay is not taking a more active role in protecting customer accounts by
6 implementing a lockout system indicates that the company is putting business concerns ahead of
7 security concerns, said Richard Power, editorial director of the Computer Security Institute. "I think
8 Ebay's foolish," Power said. "The thing that holds back people from buying on the Internet more than
9 anything is insecurity."
10 320. According to financial analyst Richard Trinker, problems with fraud can "have a
11 significant effect on the way people perceive Ebay's character." Fraud could damage Ebay's
12 reputation to the point where it scares people away from the site. Not surprisingly, Ebay tends not to
13 publicize the details of various frauds perpetrated on its site.”
14 321. Like Arthur Anderson’s creative accounting with Enron, Ebay too was cooking its
15 books with respect to underreporting incidents of fraud.
16 322. Defendant Omydar represents that “only 30 times out of a million might a transaction
17 not be completed because of fraud.” Defendant Omydar’s representation is knowingly false.
18 323. Robert Posica, an FBI supervisory special agent who co-managed the IFCC, stated
19 incidents of fraud on Ebay are "vastly underreported."
20 324. Ebay’s claimed rate of fraud of less than 0.1 percent of all transactions, represents
21 only a fraction of the problem. For one thing, an untold number of victims simply don't bother to
22 report a fraud, either out of embarrassment, a feeling that the process will be too time-consuming, or
23 a belief that it won't do any good. In addition, fraud can be reported variously to Ebay, the IFCC, the
24 National Consumers League, or local police, leading each to end up with low figures. The Internet
25 Fraud Complaint Center (IFCC) is a partnership between the Federal Bureau of Investigation (FBI)
26 and the National White Collar Crime Center (NW3C).
27 325. The National Consumers League's Internet Fraud Watch states auction fraud
28 constitutes fully 70 percent of their complaints. “We're convinced it's much bigger than numbers
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COMPLAINT
1 indicate, because many victims don't file complaints.” says Holly Anderson, a spokeswoman for the
2 National Consumers League. “A fraction of these cases are tried in court. Many escape notice
3 because the amount of money lost is often relatively low and the incidents cross state lines.”
4 326. "At the very least, they're morally responsible for ensuring that their services aren't
5 used to rip people off," says Susan Grant, director of the Internet Fraud Watch, a division of the
6 National Consumers League in Washington.
7 327. Ebay’s purported rate of fraud is not based on claims of fraud submitted by victims.
8 Rather, Ebay refuses to include in its figures fraud claims that its investigators can't or won't confirm;
9 in other words, it isn't fraud until Ebay says it's fraud.
10 328. "Ebay has done a great job of creating a warm and fuzzy image of itself as the place to
11 swap and shop," says Ken Hall, who writes a syndicated column about antiques and collectibles, "but
12 it's a free-for-all."
13 329. Ebay also won't say what percentage of transactions result in claims of fraud. A
14 survey conducted by the National Consumers League's Internet Fraud Watch program, however,
15 found that 41 percent of all online auction buyers claimed to have been bilked in some way by
16 sellers, leading to an average loss of $326 per person.
17 330. In doing the things alleged herein, Defendants have been motivated by greed and
18 financial gain.
19 331. To achieve their goal of artificially boosting the value of Ebay stock and thereby
20 increasing their own net worth, Defendants have manipulated the Ebay Community and the general
21 public into believing, from the outset, that Ebay is a safe and fraud free marketplace, while
22 simultaneously not investing in measures that would ensure that Ebay had the qualities the
23 Defendants were representing. By not investing the resources necessary to adequately secure Ebay,
24 the Defendants were able to boost Ebay’s Price / Earnings ratio, with as much as 90% of Ebay’s
25 revenue being profit, thereby boosting Ebay’s share value while the Defendants were, by far, the
26 largest share holders.
27 332. The more people Defendants could convince that Ebay was safe to use, the more
28 people would register as Users, increasing the volume of goods listed and sold on EBAY.
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COMPLAINT
1 333. The greater the number of registered Users and the greater number of transactions that
2 then occur on Ebay, the more favorable Ebay stock appears to investors.
3 334. Ebay’s stock value is a primary concern for the Defendants as the Defendants were the
4 largest shareholders of Ebay stock and stock options, at one point holding more than 98% of Ebay’s
5 outstanding shares.
6 335. The higher the market price for Ebay stock, the greater the net worth of each and
7 every Defendant.
8 336. With such significant holdings, Defendants couldn’t simply dump their stock all at
9 once without adversely affecting the value of Ebay stock.
10 337. Thus, Defendants had to prolong the charade that all is well with Ebay while not
11 investing the revenues generated back into the business long enough to keep the P/E ratio high for the
12 Defendants to sell their stocks and exercise their options.
13 338. There is clear evidence that the Defendants recognized they would not be able to keep
14 increasing fees charged to the Community without providing any corresponding service and so they
15 would have to liquidate their shares when Ebay was still at its maximum P/E ratio.
16 339. “With the stock market being manipulated recently, new information sheds light on
17 the volatile position of publicly traded Ebay stock. The President and Chief Executive Officer of the
18 Internet auction site, Ebay.com; Margaret C. Whitman has been dumping stock faster than Ken Lay
19 at Enron. Between December 19, 2001 and May 8, 2002, Ms. Whitman has sold-off 13,049,536
20 shares of stock. At $56 a share, that comes to more than $730 million.”
21 340. With the initial development of the internet and the marketplace, it was recognized
22 early on that an electronic payment system would be necessary to facilitate online transactions.
23 Snail-mail payments by check were antiquated almost overnight with the advent of the internet.
24 341. Ebay purchased Billpoint in 1999, which was at that time, Paypal’s primary
25 competitor
26 342. By the year 2000 there were a number of online payment services, including Paypal,
27 Citibank’s C2iT, Yahoo’s PayDirect, Western Union’s BidPay and later, Google’s Checkout.
28
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COMPLAINT
1 343. By 2000, Paypal had the substantial share of the then still nearly infant online payment
2 market with about 11 million users.
3 344. With yet another flex of its financial might, and a reflection of Ebay’s management
4 failure to effectively compete with a competitor, and despite Whitman’s acquisition of Billpoint just
5 five months earlier, unable to make it a success, Ebay bought out its competitor Paypal, instantly
6 securing, with Billpoint and Paypal, well over 90% of the online payment market.
7 345. Paypal has proven to be Ebay’s secret weapon, whereby Ebay can charge the
8 Community twice, once through Ebay and then again through Paypal as Ebay mandates Paypal be a
9 method of payment while also bundling Ebay with Paypal much the way Microsoft bundled Explorer
10 with Windows.
11 346. Reflecting the expansion of the internet, Paypal now has 223 million users and
12 operates in 190 markets.
13 347. Like Ebay, Paypal amassed its market share as a result of its false and fraudulent
14 representations. Paypal lured in millions of users, solidifying itself as the primary online payment
15 service, by offering its services for free. Once it reached its desired targeted number of users, Paypal
16 increased its fees to levels beyond what credit cards charged but without offering any of the rights,
17 remedies and protections afforded to users of credit cards.
18 348. For example, if a buyer purchased an item on Ebay and paid with Paypal and the item
19 failed to arrive as advertised, but the seller could provide proof of shipping, the buyer would be out
20 his or her money as delivery was the only criteria Paypal required for a “valid” charge.
21 349. On the other hand, if a buyer paid for an item with their credit card and reported the
22 item as delivered not as advertised, the credit card would investigate and reimburse the buyer where
23 appropriate. The credit card companies charge a fee but return services to the purchaser for such fees
24 charged. Paypal charged the same or greater fees but gave no protection or benefits.
25 350. If the buyer funded their Paypal purchase with a credit card, and that credit card issued
26 a credit for the purchase, Papal would then go after the purchaser for the money the credit card
27 company determined was owed back to the purchaser! Paypal could then suspend the purchaser’s
28
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COMPLAINT
1 Paypal account and, without notice, go into the Purchaser’s bank account and withdraw the money
2 the credit card company had already determined was not owed by the purchaser!
3 351. The following is a true story: A consumer using Ebay purchased what was advertised
4 and shown by photographs on Ebay to be a BMW M3 engine. The consumer paid for the engine
5 with Paypal and weeks later received a crate. Upon opening the crate a worthless old rusty junk
6 Chrysler engine was found inside. The Consumer filed a complaint with Paypal. The Seller provided
7 a shipping and receipt confirmation which showed “a package” had been delivered to the Buyer.
8 With that and that alone, Paypal upheld the payment and the Buyer was out more than $6000.
9 352. In a similar scenario, a defrauded Buyer paid through Paypal with a credit card. The
10 credit card company found for the Buyer and reversed the charges. Paypal then froze the Buyer’s
11 account and demanded the Buyer pay Paypal for what the credit card company had already
12 determined was a fraudulent charge.
13 353. On the other hand, if a Buyer institutes a false claim regarding goods received, should
14 the claim be approved by PayPal, the buyer gets his money back in full, PayPal and eBay keep their
15 fees, negative feedback posted by the buyer against the seller is almost impossible to have removed,
16 the seller receives their item back, (in most cases), and the item is typically returned in a damaged
17 condition. There is no penalty of any kind for the buyer.
18 354. By signing up to use Paypal, which Ebay forces you to do if you want to buy or sell on
19 Ebay, you must “accept” Paypal’s Terms of Service.
20 355. Accepting their ToS in effect means you waive your rights to credit card consumer
21 protection laws and that you may not issue a chargeback for unauthorized use of your credit card and
22 PayPal account, or if you do, then they have the right to limit, suspend or even cancel your account.
23 356. Moreover, that purchaser, with their Paypal account now suspended, would be unable
24 to transact business on Ebay and could even be suspended from Ebay, as, in 2002 Ebay took $1.5
25 billion of what was really the Community’s money to acquire Paypal.
26 357. Just five months after purchasing Billpoint, Whitman’s Ebay purchased Paypal to
27 eliminate competition.
28
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COMPLAINT
1 358. Rather than let the market forces determine which online payment service consumers’
2 would favor, Whitman was determined to monopolize the C2C online payment market.
3 359. Whitman laid the foundation for its monopoly even before its acquisition of Paypal.
4 Ebay, which controlled more than 90% of the C2C market, began making its online payment system,
5 Billpoint, the payment method for Ebay.
6 360. Paypal’s management was threatening to file an antitrust lawsuit against Ebay for its
7 illegal bundling strategy.
8 361. With one stone, Whitman killed two birds: Ebay eliminated the serious threat of a
9 well-funded anti-trust lawsuit regarding Ebay’s bundling with Billpoint while also securing for itself
10 the monopolization of the online payment market it sought with its Billpoint bundling tactics.
11 362. While Ebay refused to permit real access to the marketplace for online payment
12 services not owned by Ebay, Ebay promoted and then effectively mandated that Users of Ebay have a
13 Paypal account and that Paypal be a means of payment.
14 363. No other online payment service could complete with Ebay’s Paypal.
15 364. Ebay heavily promotes PayPal to its buyers and sellers.
16 365. As a wholly owned subsidiary of eBay, PayPal has enjoyed a monopoly on favorable
17 treatment from eBay for auction item payments. Every page of every form sent out by eBay extols
18 the virtues of PayPal, while plainly and overtly "bad-mouthing" every alternative such as C2IT,
19 BIDPAY, PAYINGFAST, etc., until those services were literally driven out of business.
20 366. Significantly, Ebay only offered “Buyer Protection” to buyers who used Paypal for
21 their transactions.
22 367. Now Ebay profits twice from an auction or listing of an item for sale: Once for the
23 series of Ebay listing and sale fees and then again for the Paypal fees.
24 368. Even, Citibank, America’s largest bank and the second largest bank in the world, was
25 unable to establish itself in the online payment marketplace thanks to Ebay’s preclusion of
26 competitors from the marketplace while promoting Paypal.
27 369. Citibank began offering its service, C2iT, for free. The relatively new service had
28 about 200,000 users, compared with about 11 million users for market leader PayPal.
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COMPLAINT
1 370. However, Ebay wouldn’t permit the Community to effectively use C2iT.
2 371. For instance, after winning an auction or using the “buy it now” feature, a “Pay Now”
3 page would appear whereby the purchaser would be taken directly to Paypal via an Ebay provided
4 link on the page.
5 372. It was not possible to, for instance, place the C2iT logo on the same page and offer a
6 payment link via C2iT. Ebay forbid it.
7 373. Despite being the largest in the United States, Citibank was unable to compete with
8 Paypal because Ebay’s predatory actions precluded it.
9 374. Realizing the impossibility of the situation, Citibank would cease operating its online
10 payment service.
11 375. If World’s second largest bank in the world couldn’t survive Ebay’s monopolistic
12 policies and predatory actions, who could? Certainly not the individual consumer.
13 376. Making matters worse for consumers, unlike Citibank, a regulated financial institution
14 which could actually provide real financial services and expertise, Ebay’s Paypal is an unregulated
15 private enterprise that acts arbitrarily and without due process, seizing unsuspecting user’s funds
16 from their bank accounts and freezing their assets in their Paypal account.
17 377. As with Ebay, Paypal Customers found themselves trapped once they discovered
18 using Paypal was not like using their credit cards, despite the fact Paypal charged more than credit
19 card companies charged. For instance, Paypal was notorious for its horrific customer service. Like
20 Ebay, it was, by design, impossible to contact customer service at Paypal for they had no customer
21 service telephone support.
22 378. Only years later did Paypal offer telephone support and only after they were forced to
23 by law under the EFTA (Electronic Funds Transaction Act).
24 379. Paypal failed to disclose material terms at signup. For instance, Paypal failed to
25 inform customers that their money was 100% at risk. That PayPal can, will, and has in the past,
26 completely cleaned-out customers' accounts, including their checking or savings accounts and with
27 no appeals process nor due process protections available.
28
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COMPLAINT
1 380. Paypal unconscionably buried such terms in the fine print of their near 40 page Terms
2 of Service agreement.
3 381. Unlike a regulated financial institution, when there are questions of fraud or mis-
4 dealings, Paypal acts, without oversight and without having to comply with laws or regulations, as
5 the investigator, judge, jury and executioner.
6 382. Unlike credit card companies conducting the same investigations, Paypal refuses to
7 provide the consumer with the details of their investigation while withholding documents they relied
8 upon to make their decisions.
9 383. A customers only contact with Paypal may be an email that says: “Thank you for
10 contacting PayPal. We apologize for the delay in responding to your service request. After review,
11 the decision has been made to keep your account locked. This decision cannot be appealed.”
12 384. Ebay’s Paypal operates in virtually every nation, deals with a quarter billion
13 customers, transacts billions of dollars of business and is regulated by absolutely no one.
14 385. Not only is Paypal regulated only by Ebay and Ebay’s managements’ interests, but
15 they impose their self-serving rules on all who use the Paypal service, at the end of a shotgun, thanks
16 to Ebay’s forced use of Paypal upon the Community.
17 386. The following is an extremely typical Paypal experience in the Community member’s
18 own words:
19 “I've been selling on Ebay for 4 years. In 2006 I quit my job to do ebay only. Just about 6
20 months after, I started having issues with people stealing and filing false claims, leaving false
feedback, and ebay and paypal are just as fraudulent as those people. Last summer ebay
21 suspend my account and paypal froze my money for no reason. It pissed me off that the
22 government is talking tough BS about regulation when right under their nose capitalist laws
are being violated and no actions are taken. There is no question that ebay and paypal is a
23 monopoly. If you have an ebay account and a paypal account, if one has an issue it cancels
24 the other. This is total BS. I have a store, when one of my credit card merchant accounts has a
problem, that doesn't automatically put me out of business. Guess what? On ebay it does. I
25
feel sorry for those who got hurt and have their money abducted by paypal with no
26 explanation. Somebody needs to explode or do something because I too have over $1100.00
stuck in there and they told me to wait for six months for an appeal. What a load of crap.
27
PLEASE DO SOMETHING GOVERNMENT OFFICIALS, DON'T LET THEM BRIBE
28 YOU.
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COMPLAINT
1 II.
2 CLASS ALLEGATIONS
3 387. Plaintiffs reallege, refer to, and herein incorporate by this reference as if set out in full,
4 paragraphs 1 through 386.
5 388. This action has been brought and may be properly maintained as a class because the
6 unlawful acts of the Defendants have caused damage to persons similarly situated and as such, there
7 is a well-defined community of interest in the litigation and the proposed class is easily ascertainable.
8 389. Plaintiff Class consists of all members of the Ebay “Community”.
9 390. As a subclass, Plaintiffs consist of all “consumers” that, is persons other than large
10 commercial retailers, consisting of those who would fall within the Consumer to Consumer (“C2C”)
11 classification.
12 391. NUMEROSITY: The Plaintiff Class is so numerous that the individual joinder of
13 all members is impracticable under the circumstances of this case, where the class size exceeds 100
14 million. Moreover, the likelihood of individual members of the Class prosecuting separate claims is
15 remote and individual members of the class do not have a significant interest individually, nor the
16 financial resources needed to prosecute separate claims against the Defendants’ vast resources.
17 392. COMMON QUESTIONS PREDOMINATE: There is a well-defined community
18 of interest in the questions of law and fact involved affecting the parties to be represented. Common
19 questions of law and fact exist as to all members of the Plaintiff Class and predominate over any
20 questions which affect only individual members of the class
21 393. TYPICALITY: Plaintiffs claims are typical of the claims of the members of the
22 Plaintiff Class. Plaintiffs injuries flow from the Defendants monopolization of what is truly a public
23 marketplace where transactions are conducted in the C2C market via an electronic medium, the
24 internet. The injuries and damages of each member of the Plaintiff Class were caused directly by the
25 Defendants’ wrongful exploitation of the community.
26 394. ADEQUACY: Plaintiffs will fairly and adequately protect the interest of the
27 members of the Plaintiff Class. Plaintiff-students reside in California, are similarly situated, attended
28 the same classes, suffered the same harms and seek the same redress. Plaintiff-students are adequate
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COMPLAINT
1 representatives of the Plaintiff Class and have no interests which are adverse to the interests of absent
2 class members. Plaintiff-students have retained counsel whom they believe best able to prosecute
3 their claims, whom they trust, and with whom they are familiar and who has pre-existing familiarity
4 with their claims.
5 395. SUPERIORITY: A class action is superior to other available means for the fair and
6 efficient adjudication of this controversy since individual joinder of all members of the Class is
7 impracticable. Class action treatment will permit a large number of similarly situated persons to
8 prosecute their common claims in a single forum simultaneously, efficiently, and without the
9 unnecessary duplication of effort and expense that numerous individual actions would engender.
10 Furthermore, as the damages suffered by each individual member may be relatively small whereas
11 the expenses and burden of individual litigation, particularly against these resource rich Defendants,
12 would make it difficult or impossible for the individual members of the class to redress the wrongs
13 done to them while an important public interest will be served by addressing the matter as a class
14 action. The cost to the court system of adjudication of such individualized litigation would be
15 substantial and impractical while individualized litigation would also present the potential for
16 inconsistent or contradictory judgments.
17 396. Plaintiffs are unaware of any difficulties that are likely to be encountered in the
18 management of this action that would preclude its maintenance as a class action.
19 397. Like Defendant Omidyar (supra), Co-defendant Whitman, Ebay’s CEO for most of
20 the company’s history, has repeatedly admitted that Ebay’s success Ebay is directly attributable to the
21 Ebay Community.
22 398. In an interview with Business Week’s Senior Correspondent, Robert Hoff, Whitman
23 admits that Ebay was “built by the users” and that Ebay was created and constantly refined and
24 modified by the Users themselves. As Hof put it: “Whitman's secret: Let the customers tell
25 Ebay what to do.” Below are several such admissions made by Whitman regarding the
26 Communities contributions.
27
28
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______________________________________________________________________________
COMPLAINT
1 Q: Can you explain how Ebay views the unusually active role of its customers in the
company?
2
WHITMAN: We created the marketplace, but the site was actually built by the
3 users. The users listed the items, the users handled customer support, the users
shipped out the items, and the users were buying the items. Without them, we actually
4
didn't have a business. (Of course, Whitman’s statement the Ebay “created the
5 marketplace” is wholly unsupportable and historically false.).
Q: Although you have compared Ebay to financial marketplaces such as the New
6 York Stock Exchange, it seems that Ebay's customers have an even more direct
influence on its business than at those marketplaces.
7
WHITMAN: “Involving the users in the strategy of the company, the product development of
8 the company, and the direction of the company was central to our ability to build a
successful, long-term marketplace.” (Whitman admits Ebay is a “marketplace” as contrasted
9 with a “business”.)
10 Q: So are most of the new features and categories driven by the customers?
WHITMAN: I would say between 75% and 85% of ideas germinate within the user
11 community. Sometimes we veer off from that, and it's usually not as
12 successful as we thought…. What we have is millions of entrepreneurs who make small
changes to the marketplace. That adds up to an optimized marketplace. It is far better to have
13 an army of a million than a command-and-control system that tries to make the decisions.
14 399. The Ebay Defendants unethical conduct and greet was further exemplified by a House
15 Financial Services Committee Report which showed the Ebay Defendants as having used their
16 influence and flexed their financial muscles to obtain insider trading information, including Ebay
17 billionaires Whitman, Omidyar and Skoll.
18 400. A report released by the House Financial Services Committee cited several of the
19 Defendants for having used their power and influence to obtain insider trading information.
20 401. The Report states: “These initial public offerings seemed to be anything but public."
21 402. Rep. Richard H. Baker, R-La., chairman of the Financial Services subcommittee on
22 capital markets, stated: "A small circle of preferred clients were given vast access by the investment
23 banks to IPO shares and reaped large profits on the sale of these shares. What is most disturbing is
24 that their profits were gained at the expense of the average investor whose only option was to buy
25 the shares at the oftentimes inflated aftermarket price."
26 403. New York’s Attorney General declared "Small investors were left holding the bag."
27
28
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______________________________________________________________________________
COMPLAINT
1 404. Goldman Sachs was the lead underwriter of Ebay's 1998 IPO. Not so coincidentally,
2 soon thereafter Defendant Whitman became a Goldman Sachs director and member of the
3 brokerage's compensation and audit committees.
4 405. Access to IPOs can be better than winning the lottery for the individual but
5 devastating to the company and individual investor. When the recipients of the shares were top
6 executives in a position to return the favor with business from their firms, it wasn't just favoritism. It
7 was tantamount to a bribe, as the profits were pocketed by the executives themselves, not their
8 companies. Perhaps more damaging is the fact that IPO shares were attractive as gifts only as long as
9 investment bankers priced IPOs below market, knowing the stock would immediately go up in price.
10 That routine doubling and tripling -- and in one case eightfold pop -- in the share prices of dot-coms
11 during their first day of trading, robbed the fledgling companies of tens of millions in hard cash
12 they would desperately need. Investors paid the price.
13 406. Defendant Skoll bought more than 75 IPOs.
14 407. Defendant Omidyar purchased more than 40 IPOs.
15 408. Defendant Whitman bought more than 100 IPOs.
16 III.
17 VENUE AND JURISDICTION
18
409. Plaintiffs seek to secure injunctive relief and civil penalties for Ebay’s violations of
19
the antitrust Laws of the United States and the antitrust and unfair competition laws of the State of
20
California, and for, inter alia, unjust enrichment, fraud, breach of contract, Violations of the
21
Consumer Legal Remedies Act, negligence, misrepresentation, conversion, restitution.
22
410. This Court has jurisdiction over this matter pursuant to Section 4 of the Sherman Act,
23
15 U.S.C. § 4, and 28 U.S.C. §§ 1331 and 1337(a). Plaintiffs bring this action, inter alia, pursuant to
24
Section 16 of the Clayton Act, 15 U.S.C. §§ 26, to obtain injunctive relief based upon Defendants’
25
anticompetitive practices in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2.
26
411. The Complaint also alleges violations of the following, but is not limited to, and is
27
expected to amend to include further, State antitrust and/or unfair competition and related laws, and
28
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COMPLAINT
1 seeks injunctive relief as well as civil penalties based on these claims: California’s Cartwright Act,
2 Cal. Bus. & Prof. Code §§ 16720 et seq.; California’s Unfair Competition Act, Cal. Bus. & Prof.
3 Code §§ 17200 et seq.; Connecticut Antitrust Act, Conn. Gen. Stat. §§ 35-24 et seq.; District of
4 Columbia Antitrust Act, D.C. Code § 28-4501 et seq. (1996); Florida Statutes §§ 501.0275, 501.24,
5 542.18, 542.19, 542.21-.23 ; Illinois Antitrust Act, 740 ILCS 10/1. et. seq.; Iowa Competition Law,
6 Iowa Code Chapter 553; Kansas Antitrust Statue, K.S.A. §§ 501 et seq., 50-623 et seq.; Kentucky
7 Antitrust Statue, K.R.S. 367.175; La. R.S. 51:122 et seq., and La R.S. 51:1401 et seq.; Maryland
8 Antitrust Act, Md. Com. Law Code Ann. §§ 11-201 et seq.; Michigan Antitrust Reform Act
9 (MARA), MCL 445-771 et seq., and MSA 28.70(1) et. seq.; Minnesota Antitrust Act §§ 325D.49 -
10 325D.66 (1996); N.M. Stat. Ann. §§ 57-1-1 to 57-1-15; N.Y. Gen. Bus. Law §§ 340 et seq.
11 (McKinney 1988); North Carolina, N.C.G.S. §§ 75-1, -1.1, -2, and -2.1; Ohio Valentine Act, Ohio
12 Rev. Code §§ 1331.01 et seq.; South Carolina Code of Laws §§ 39-3-10 et seq. and §§ 39-5-10 et
13 seq.; Utah Antitrust Act Utah Code Ann. §§ 76-10-911, et seq; West Virginia Antitrust Act, W. Va.
14 Code §§ 47-18-1 et seq., and West Virginia Consumer Credit & Protection Act, W. Va. Code §§
15 46A-1-101, et seq.; and Wisconsin Trusts and Monopolies Law, §§ 133.03(1), (2), 133.14, 133.16,
16 Wis. Stats. This Court has supplemental jurisdiction over these state-law claims pursuant to 28
17 U.S.C. § 1367(a). The State-law claims are so related to the Federal-law claims raised in this
18 complaint that they form part of the same case or controversy under Article III of the United States
19 Constitution. The issues raised by the State-law claims are no more novel or complex than the federal
20 law claims, nor do they substantially predominate over the federal-law claims. Supplemental
21 jurisdiction would avoid unnecessary duplication and multiplicity of actions, and should be exercised
22 in the interests of judicial economy, convenience and fairness.
23 412. Venue is proper in this district under Section 12 of the Clayton Act, 15 U.S.C. § 22
24 and under 28 U.S.C. § 1391, because Ebay transacts business and is found within this district. Ebay’s
25 anticompetitive practices complained of herein threaten loss or damage to the general welfare and
26 economy of the United States.
27 IV.
28 CLAIMS FOR RELIEF
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COMPLAINT
1 FIRST CLAIM FOR RELIEF

2 (VIOLATION OF SECTION 2 OF THE SHERMAN AND CLAYTON ACTS)
3
413. Plaintiffs reallege and incorporate herein by reference, as though set forth in full, the
4
allegations contained in the Introduction and 1 through 412.
5
414. Ebay and the Ebay Defendants attempt to monopolize the internet auction market has
6
been successful as a result of the illegal practices and circumstances recited hereinabove, all to the
7
detriment and harm of the public.
8
415. Ebay and Paypal possess monopoly power in the Consumer to Consumer and
9
Consumer to Small Business internet marketplace, including the internet C2C and C2SB auction
10
marketplace, and in the field of online payment services.
11
416. Significant entry barriers now characterize this market.
12
417. The Defendants have willfully maintained that power by anticompetitive and
13
unreasonably exclusionary conduct, as alleged herein.
14
418. Unless restrained by the Court, the Ebay / Paypal Defendants will continue to
15
unlawfully maintain their monopoly power causing irreparable harm to the Plaintiffs, the
16
“Community”, for which Plaintiffs have no adequate remedy.
17
419. Ebay and Paypal’s anticompetitive acts have harmed consumers and competition.
18
420. Ebay and Paypal have acted with the specific intent to maintain their monopoly power
19
and its illegal conduct have allowed them to do so.
20
421. Ebay and Paypal’s conduct occurred in and affected interstate commerce.
21
422. The Defendants have retarded if not altogether extinguished competition in the
22
consumer to consumer and consumer to small business online marketplace and consumer to
23
consumer online payment industry.
24
423. The Ebay Defendants use their monopoly power to charge consumers 70-80% greater
25
fees than would be necessary to sustain a profitable enterprise.
26
27
28
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______________________________________________________________________________
COMPLAINT
1 424. The Ebay Defendants use their monopoly power in an arbitrary manner, suspending
2 individuals and business from access to the internet marketplace at will, without recourse and without
3 any due process.
4 425. The Ebay Defendants possesses monopoly power over the internet auction
5 marketplace. Significant entry barriers characterize said market.
6 426. The Ebay Defendants have willfully maintained that power by anticompetitive and
7 unreasonably exclusionary conduct in violation of Section 2 of the Sherman Act, 15 U.S.C. §2.
8 Unless restrained by the Court, the Ebay Defendants will continue to unlawfully maintain its
9 monopoly power causing irreparable harm to Plaintiffs, for which Plaintiffs have no adequate legal
10 remedy.
11 427. As a direct, foreseeable and proximate result of the Ebay Defendants’ conduct in
12 violation of Section 2 of the Sherman Act, Plaintiffs have been and will continue to be damaged by,
13 without limitation, the wrongful conduct alleged herein, in amounts to be proven at trial and in excess
14 of 40 billion dollars.
15 428. Plaintiffs injuries are the types the antitrust laws are intended to prohibit and thus
16 constitutes antitrust injury. Unless the activities complained of are enjoined, Plaintiffs will suffer
17 immediate and irreparable injury for which Plaintiffs are without an adequate remedy at law.
18
19 SECOND CLAIM FOR RELIEF
RACKETEERING (RICOH)
20
21 429. Plaintiffs reallege and incorporate herein by reference, as though set forth in full, the
22 allegations contained in the Introduction and 1 through 428.
23 430. In doing the things alleged herein, Defendants have violated the Racketeer Influenced
24 and Corrupt Organizations Act (RICO), 18 U.S.C. 1961 et seq.
25 431. The Defendants committed wire fraud as they devised, and intended, to devise a
26 scheme to defraud the Plaintiffs on the basis of a material representations, as set forth herein, and the
27 Defendants did such things with the intent to defraud the Plaintiffs and the Defendants did in fact
28
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______________________________________________________________________________
COMPLAINT
1 defraud the Plaintiff through their use of interstate wire facilities, thereby committing wire fraud
2 under under 18 U.S.C. § 1343.
3 432. In doing the things alleged herein, the Defendants acted with a specific intent to
4 defraud the Ebay Community.
5 433. In doing the things alleged herein, the Defendants were engaged in activities that
6 affected interstate commerce, including internet commerce and financial transactions, electronic mail,
7 bank withdrawals, etc., made between the Defendants and the Plaintiffs and originating in other
8 States, thereby violating 18 U.S.C. §1341, §1343.
9 434. Financial institutions were involved in the Defendants’ illicit activities as the
10 Defendants have, by electronic means, withdrawn money from Plaintiffs’ bank accounts.
11 435. Plaintiffs are informed and believe that the Defendants have intentionally deleted
12 relevant emails and are thereby guilty of obstruction of justice under the RICO statutes.
13 436. Defendants, and each of them, conspired to commit the prohibited illicit offenses and
14 each Defendant is therefore subject to the same penalties as their intentions were in furtherance of the
15 conspiracy (18 U.S.C. §1349).
16 437. Defendants have used income derived from their pattern of racketeering activity to
17 invest in and acquire businesses, as set forth herein, that are engaged in and affecting interstate
18 commerce. (18 U.S.C. § 1962.)
19 438. Among the “racketeering activities” committed by Defendants, as alleged herein are
20 acts in violation of several State and Federal criminal laws, including criminal provisions regarding
21 fraud and illegal monopolization.
22 439. In addition to violating State and Federal criminal laws as set forth hereinabove,
23 including Section 2 of the Sherman Act (15 U.S.C. §2; monopolization as a felony), Defendants
24 violated 18 U.S.C. §1343 (Fraud by Wire).
25 440. Plaintiffs have been injured by reason of Defendants RICO violations and are entitled
26 to recover threefold the damages they’ve sustained and the cost of his suit, including reasonable
27 attorneys’ fees.
28
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COMPLAINT
1 THIRD CLAIM FOR RELIEF

2 (LARCENY)
3
4
5
442. Defendants fraudulently appropriated the property that was entrusted to them by the
6
Ebay Community.
7
443. The Ebay Community created the Ebay marketplace, including its ideas and
8
functionality.
9
444. The Ebay Community entrusted the Defendants with the supervision of this property.
10
445. Defendants, knowingly and designedly, by false and fraudulent representation or
11
pretenses, defrauded the Community of this property and their interests therein. The Community
12
invested in the building, operation and marketing of the marketplace based on the representations of
13
the Defendants that Ebay was, at first, a free website created for the “Community” and later, that only
14
nominal fees would be charged to the Community in order to operate the website, encompassing such
15
things as electricity and computer servers.
16
446. Relying on these representations and assurances, the Community continued to build its
17
property, as Defendants have admitted and as alleged herein.
18
447. Once the property reached a particular point of value, that is, the Community’s
19
marketing efforts had successfully increased the Community size, the Community had provide the
20
necessary ideas and structure to make the marketplace an undeniable success, etc., the Defendants
21
took the Defendants property, claimed it as their own, and began charging the Community excessive
22
fees to use what was really the Community’s property.
23
448. The Community seeks the return of their property (i.e., the Ebay website) and the
24
return of the moneys paid by the Community for use of its created property.
25
26
FOURTH CLAIM FOR RELIEF
27 (CONVERSION)
28
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______________________________________________________________________________
COMPLAINT
3 450. The Defendants have willfully interfered, without lawful justification, with the
4 Community’s right to access and participate in the internet marketplace which, by Defendants’ own
5 admissions, it substantially created.
6 451. Defendant Whitman admits 75-85% of the ideas for Ebay’s successful creation came
7 from the community, that the Community was responsible for the grass roots marketing that grew
8 Ebay, that the Community was responsible for customer service / help functions via the Help Forum,
9 that the Community was responsible for monitoring the marketplace through the Feedback system it
10 had created, that the Community is responsible for the buying, selling and shipping of all items, etc.
11 452. Notwithstanding the foregoing, the Defendants have unjustifiably and above and
12 beyond the costs necessary to maintain the website, charged the Community for the right and use of
13 its undeniably created property.
14 453. In doing the things alleged herein, the Defendants have converted the Plaintiff
15 Community’s property and made of the Community’s property as their own through the exploitation
16 of the Community.
17 FIFTH CLAIM FOR RELIEF
18 (EMBEZZLEMENT)
19
20
455. In doing the things herein alleged, the Defendants have fraudulently misappropriated
21
the property entrusted to them by the Plaintiffs.
22
456. As alleged herein, the Plaintiffs (i.e., the “Community”) is mostly responsible for
23
creating and developing the internet, C2C and C2SB (consumer to small business) marketplace.
24
457. Defendants admit it was the Community that provided 75-85% of the ideas
25
responsible for making Ebay successful, that the Community was responsible for the grass roots
26
marketing that grew Ebay, that the Community was responsible for customer service / help functions
27
via the Help Forum, that the Community was responsible for monitoring the marketplace through the
28
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______________________________________________________________________________
COMPLAINT
1 Feedback system it had created, that the Community was responsible for the buying, selling and
2 shipping of all items, etc.
3 458. The Plaintiffs entrusted the management of this property, that is, the Community’s
4 marketplace, which, in a digital medium, was embodied in the form of data contained in generic
5 computer hardware.
6 459. The Defendants took the Community’s property which had been entrusted to them and
7 made use of it as their own and to the exploitation and disadvantage of the Community, and to the
8 profit of the Defendants at the Community’s direct expense.
9 460. Plaintiffs seek the return of their property and reimbursement of all funds paid by the
10 Community to the Defendants, minus all operating costs and fair compensation to the Defendants for
11 their labors.
12 SIXTH CLAIM FOR RELIEF
(VIOLATION OF THE CONSUMERS LEGAL REMEDIES ACT : CAL.CIVIL CODE, §1770 ET SEQ.)
13
16 462. In doing the things herein alleged, the Defendants, and each of them, did engage in
17 unfair methods of competition and deceptive acts and practices which were intended to result and did
18 in fact result in the sale of services to consumers.
19 463. In doing the things alleged herein, the Defendants violated Section 1770 of the
20 Consumer Legal Remedies Act, subsection (5), by representing that the services it provides have
21 characteristics and benefits which they did not have; subsection (9) by advertising services with
22 intent not to sell them as advertised, subsection (2) by misrepresenting the source, sponsorship,
23 approval, or certification of the services provided; subsection (7) representing that goods or services
24 are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they
25 are of another; and subsection (14) by representing that Ebay transactions confer or involve rights,
26 remedies, or obligations which they do not have or involve.
27 464. As alleged herein, for one example, Defendants advertised that Ebay had advanced
28 security measures in place, and according to Ebay’s much touted advertisements, Consumers
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COMPLAINT
1 wouldn’t get “hosed” by fraud on Ebay. When in fact, Ebay’s security measures were intentionally
2 ignored by the Defendants as the implementation of such measures, even basic ones, would have cut
3 into the Defendants price earning ratios, as outlined hereinabove. Despite Ebay’s representations
4 regarding the services it provided, there was substantial fraud and hundreds of thousands of victims
5 of fraud, which, had the Defendants implemented the measure of security they represented, could
6 have been avoided.
7 465. Ebay also represented to offer a market that was free from interference yet Ebay
8 interfered directly with Sellers and Buyers transactions, including actions ranging from unjustified
9 censorship to interference with contractual relations to unwarranted suspension of buyers and sellers
10 from the internet marketplace, all in contravention to Ebay’s representations of an open marketplace.
11 466. Plaintiff consumers relied on the Defendants’ representations to their detriment and
12 have suffered real and substantial harms as a result of said reliance.
13 467. Pursuant to Civil Code §1780, Plaintiffs statutory damages for the violations alleged
14 herein of the Consumer Legal Remedies Act include punitive damages, actual damages (in no case
15 less than $1000 per victim multiplied 75 million registered users), injunctive relief, restitution,
16 attorneys fees and costs, and if the victim is a senior citizen, an additional $5000 per victim.
17
18 SEVENTH CLAIM FOR RELIEF
(UNJUST ENRICHMENT)
19
22 469. As alleged herein, the Defendants have admitted, time and again, that it was the
23 Plaintiffs, i.e., the “Community”, that “built” Ebay, that contributed 75-85% of the ideas that made
24 Ebay successful, whose grass-roots marketing efforts built Ebay’s customer base, whose concepts
25 formed the very basic functioning of Ebay (e.g., the Feedback system), who provided “Help” via the
26
Help Forum, and who did the buying, selling, packing and shipping.
27
28
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______________________________________________________________________________
COMPLAINT
1 470. As alleged herein, from the outset, these contributions by the Community which
2 actually and admittedly “built” Ebay, were made with the understanding and expectation that the
3 Community would benefit from the Community’s efforts and that the Community’s access to the
4 “Marketplace” would be unhindered, without interference and without costs above and beyond the
5 costs necessary to maintain the marketplace itself.
6 471. Despite the trust reposed in the Defendants by the Plaintiff Community, the
7 Defendants breached that trust by taking the Community’s property (ideas) and contributions and
8 claimed them for their own.
9 472. The Defendants began charging the Plaintiffs for the marketplace they built. At first
10 these charges were just as understood, to cover the costs for funding the operation itself (electricity,
11 computer hardware, etc.). However, the Defendants became greedy. They realized they were at the
12 front of a marketplace and, as the marketplace grew stronger and the network effect took hold, the
13 Defendants repeatedly and routinely raised the fees charged to the Community, to the point where the
14 goal was generating tens of billions of dollars in profit.
15 473. These Defendants have been unjustly enriched at the expense of the Community.
16 474. Plaintiffs seek reimbursement of the funds that were unjustly taken by the Defendants.
17
18 EIGHT CLAIM FOR RELIEF
(INTERFERENCE WITH CONTRACT)
19
22 476. Ebay would arbitrarily suspend Community members. The suspension could be for
23 almost anything as Ebay was literally the law, judge and jury. For instance, even complaint to or
24 about Ebay could get a member of the Community suspended from the marketplace.
25 477. On thousands of occasions of such suspensions, valid contracts between Buyers and
26
Sellers had been created which would result in economic benefits for the Sellers.
27
28
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______________________________________________________________________________
COMPLAINT
1 478. As shown by Ebay’s records, Ebay had knowledge of these specific contractual
2 relationships.
3 479. Nevertheless, Ebay acted intentionally and with the specific design to interfere with
4 and disrupt the contractual relationships. Ebay would email the contracting party, advising them of
5 their suspension of the Buyer or Seller, and further instructing the Buyer or Seller not to complete the
6 transaction, notwithstanding the legally enforceable contractual relationship.
7 480. On receiving these severe appearing letters from Ebay, the Buyers or Sellers,
8 believing they had to follow Ebay’s rules, would then breach their contractual obligations as a result
9 of Ebay’s actions.
10 481. Consequently, the party Ebay suspended was now incurring additional damages as a
11 result of the breach of contract(s) caused by Ebay’s actions.
12 NINTH CLAIM FOR RELIEF
(BREACH OF CONTRACT)
13

16 483. In doing the things herein alleged, Ebay and the Plaintiffs entered into a contractual
17 relationship.
18 484. At all times material, the Plaintiffs have performed pursuant to the Parties’ contractual
19 relationship.
20 485. Defendants, in doing the things herein alleged, have breached material terms of the
21 Parties’ Agreement.
22 486. As a consequence of the Defendants’ breach, the Plaintiffs have suffered damages as
23 alleged herein.
24 TENTH CLAIM FOR RELIEF
(Negligence)
25
28
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COMPLAINT
1 488. The Defendants owed a duty of care to ensure the Plaintiffs were not injured while
2 using the product the Defendants were packaging and offering.
3 489. The Defendants breached their duty of care as alleged herein, motivated by their
4 efforts to maximize their profits at the expense of the Plaintiff’s safety.
5 490. As a direct and proximate result of the Defendants negligence, Plaintiffs have suffered
6 harms as alleged herein, including millions if not billions of dollars in avoidable injuries.
7
ELEVENTH CLAIM FOR RELIEF
8
(Unfair Competition and False Advertising)
9
10
11
492. The Defendants’ violations of the Federal Statutes, including Antitrust Laws, and
12
Defendants violations of the California Cartwright, etc., constitute unfair competition and unlawful
13
and unfair business practices and acts and practices within the meaning of California Business and
14
Professions Code.
15
493. The Ebay Defendants’ actions, as alleged herein, constitute “unlawful, unfair, or
16
fraudulent business practice(s)” and accordingly violate Section 17200 et seq. of the California
17
Business and Professions Code.
18
494. Defendants’ acts of unfair competition alleged herein include unlawful, unfair and
19
fraudulent business acts. Defendants have, in furtherance of their unlawful acts, engaged in
20
deceptive, untrue and misleading advertising.
21
495. Defendants’ actions, as alleged, constitute unfair competition and an unreasonable
22
restraint on trade in violation of the California Business and Professions Code.
23
496. Defendants will continue their unlawful, unfair, and fraudulent business practices, as
24
described hereinabove, causing irreparable and continuing harm to the Plaintiffs and to the public.
25
497. Defendants will continue their deceptive, untrue and misleading advertising, causing
26
further damage and injuries therefrom.
27
28
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______________________________________________________________________________
COMPLAINT
1 498. As a direct, foreseeable and proximate result of Defendants unlawful, unfair and
2 fraudulent business practices, as set forth herein, Defendants have obtained at the expensive of
3 Plaintiffs and continue to hold ill-gotten gains and have been unjustly enriched thereby. These
4 wrongful acts have proximately caused and will continue to cause Plaintiffs and the public at large
5 substantial injury until this Court enjoins such conduct.
6 499. Plaintiffs are entitled to restitution for the unlawful and unfair business practices as
7 alleged in this Complaint.
8 500. Plaintiffs are also entitled to disgorgement of Defendants’ ill-gotten gain derived from
9 their unlawful, unfair and/or fraudulent business practices in violation of California Business and
10 Professions Code.
11 501. Plaintiffs further allege that Defendants are subject to liability for treble damages
12 under Section 17206.1 for perpetrating the acts alleged hereinabove against senior citizens and
13 disabled persons.
14 502. Although unascertained, Plaintiffs’ damages are estimated at more than forty billion
15 dollars for which the Plaintiffs seek restitution thereof.
16
17 TWELFTH CLAIM FOR RELIEF
18 (COMMON LAW UNFAIR COMPETITION)
19 503. Plaintiffs reallege and incorporates herein by reference, as though set forth in full, the
20 allegations contained in paragraphs 1 through 502.
21 504. The actions and conduct in which the Defendants engaged, described hereinabove,
22 constitutes common law unfair competition.
23 505. As a direct and proximate result of Defendants’ acts of unfair competition, Plaintiffs
24 have suffered, and continues to suffer, damages and harms.
25 506. In engaging in the acts of unfair competition alleged herein, Defendants acted
26 willfully, with malice and with conscious disregard for the rights of Plaintiffs, thereby entitling
27 Plaintiffs to an award of exemplary or punitive damages, pursuant to California Civil Code, §3294, in
28 an amount to be determined by the trier of fact.
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______________________________________________________________________________
COMPLAINT
1 THIRTEENTH CLAIM FOR RELIEF

2 (VIOLATION OF THE CARTWRIGHT ACT (§16720 ET SEQ.)
3
4 507. Plaintiffs reallege and incorporates herein by reference, as though set forth in full, the

6 508. In doing the things alleged herein, Defendants have formed an illegal trust in order to
7 carry out restrictions in trade and commerce in order to increase the price of the digital/internet
8 marketplace, to prevent and eliminate competition, and to fix and control the price of participation in
9 the internet marketplace, causing injury to the Plaintiffs’ in an amount to be determined according to
10 proof at trial.
11 FOURTEENTH CLAIM FOR RELIEF
12 (FRAUD AND DECEIT)
13
509. Plaintiffs reallege, refer to, and herein incorporate by this reference as if set out in full,
14
paragraphs 1 through 508.
15
510. As alleged herein, Defendants made the aforesaid material representations with actual
16
knowledge of their falsity and/or were reckless when they made such representations without
17
knowing whether the representations were true or false.
18
511. Defendants have concealed and suppressed material facts relating to the internet
19
marketplace as set forth hereinabove while falsely representing their contributions to the creation and
20
development of the marketplace.
21
512. The misrepresentations of material fact and concealment of material facts outlined
22
herein were made by the Defendants with the intent to induce Plaintiffs to rely thereon and for the
23
purpose of Defendants wrongfully profiting from Plaintiffs’ reliance.
24
513. At the time Defendants made these representations, Plaintiffs were ignorant of the
25
falsity of the Defendants' representations and believed them to be true.
26
514. Plaintiffs justifiably relied on the Defendants’ representations and as a result, suffered
27
harms and damages therefrom.
28
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______________________________________________________________________________
COMPLAINT
1 515. Plaintiffs reallege, refer to, and herein incorporate by this reference as if set out in full,
2 paragraphs 1 through 514.
3 516. Defendants made assertions of fact on which the Plaintiffs relied which were untrue
4 and for which Defendants had no reasonable ground for believing the statements, outlined
5 hereinabove, to be true.
6 517. Defendants owed the Plaintiffs a duty to exercise reasonable care to disclose facts
7 basic to the transaction and not to falsely represent material facts on which Defendants knew
8 Plaintiffs would rely.
9 518. Defendants breached this duty by making misrepresentations of material facts on
10 which the Plaintiffs relied, as set forth hereinabove, causing Plaintiffs to suffer harms as alleged.
11
12 PRAYER FOR RELIEF
13
14 Wherefore, Plaintiffs pray for relief against Ebay and the Ebay Defendants as follows:
15 That the Court adjudge and decree that:
16 (a) Ebay is a marketplace;
17 (b) As a marketplace on the publicly funded and developed internet, the Consumer
18 to Consumer and Consumer to Small Business marketplace serves a vital and
19 essential function in today’s economy and society and as a necessity thereof it
20 shall be regulated as the public utility which it is;
21 (c) Ebay and the Ebay Defendants Unlawfully possessed and exploited internet
22 marketplace monopoly in violation of Section 2 of the Sherman Antitrust Act
23 and Cartwright Act;
24 (d) Ebay and the Ebay Defendants unlawfully acted to secure and monopolize as
25 its own for its own exploitation the internet marketplace in violation of the
26 Sherman Act and Cartwright Act;
27 (e) Ebay and the Ebay Defendants unlawfully tied the use of its Paypal payment
28 system to transactions on in the marketplace while forbidding the use of other
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______________________________________________________________________________
COMPLAINT
1 payment services such as those offered by Citibank (C2iT), Google (Google

2 Checkout), etc.
3 (f) Ebay and the Ebay Defendants violated the Racketeer Influenced and Corrupt
4 Organizations Act
5 (g) Ebay and the Ebay Defendants unlawfully committed acts of unfair
6 competition, including violations of the California Business and Professions
7 Code, §§17200 et seq.;
8 (h) Ebay and the Ebay Defendants unlawfully committed acts of unfair
9 competition in contravention to the common law;
10 (i) Ebay and the Ebay Defendants violated Section 17500 of the California
11 Business and Professions Code;
12 (j) Ebay and the Ebay Defendants violated 18 U.S.C. §1343 (Fraud by Wire);
13 (k) Ebay and the Ebay Defendants have been unjustly enriched and profited from
14 the fruits of the Plaintiffs’ labors;
15 (l) Ebay and the Ebay Defendants violated California’s Consumers Legal
16 Remedies Act;
17 (m) Ebay and the Ebay Defendants are guilty of Conversion;
18 (n) Ebay and the Ebay Defendants are guilty of embezzlement;
19 (o) Ebay and the Ebay Defendants have committed larceny under California Penal
20 Code §484;
21 (p) That the Court grant an Order declaring that Ebay and all persons acting on its
22 behalf or under its control, and all successors thereto, be enjoined from
23 engaging in the unlawful practices described in this Complaint and from
24 engaging in similar unlawful practices;
25 (q) That Plaintiffs recover treble damages as permitted by law, including 18
26 U.S.C. §1964, the Clayton Antitrust Act, and Business & Professions Code,
27 Sections 16750, 17082, 17206.1;
28
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______________________________________________________________________________
COMPLAINT

Hoang V Ebay Complaint

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Hoang V Ebay Complaint

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Case 2:10-cv-08207-RGK -JC Document 1 Filed 10/29/10 Page 1 of 83 Page ID #:8

JURY TRIAL DEMANDED

1 Tristram T. Buckley [SBN 187754]

27 JURY TRIAL DEMANDED

17 following the use of the world “like”.

18 Dear Mr. Smith: [Not actual name]

12 using the Contact eBay Member function.

1 business in eight European

1 March 9, United States $10,000,000

12 Gmarket: Korea's leading

1 FIRST CLAIM FOR RELIEF

1 THIRD CLAIM FOR RELIEF

15 allegations contained in the Introduction and 1 through 481.

1 THIRTEENTH CLAIM FOR RELIEF

5 allegations contained in the Introduction and 1 through 506.

12 (FRAUD AND DECEIT)

1 payment services such as those offered by Citibank (C2iT), Google (Google

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