What happens when an 800-pound gorilla comes under attack? If it's eBay, it counters with an army of professional lobbyists and amateur petitioners drawn from its member base. EBay's aggressive agenda of lobbying on a state and national level bodes well for all eBay sellers, and may actually make the difference as to whether the small and part-time seller can in the future continue to participate on the site.

EBay's business model has been under assault by state legislatures seeking to place the same regulations and licensing fees on eBay sellers as exist for auctioneers, live auction houses and pawnbrokers. Consumer protection is claimed to be the main reason -- offering recourse to victims of Internet fraud unable or unwilling to use online remedies. But in states facing financial difficulties -- which is to say most states, avarice and desperation are likely the main reasons.

For years states have been losing sales tax and other business revenue to interstate sales via the Internet, now many states are seeking a piece of the Internet pie by way of regulating and licensing eBay's sellers. The specific targets of the regulations are eBay seller assistants and drop-off stores, but extend in some locales to all eBay sellers, from Platinum Power Sellers to the smallest of small fries.

Proposed State Fees Prompt Action
Among other states, California, Florida, New York, Ohio, Louisiana, Illinois, Maine and Tennessee have attempted or passed regulatory legislation aimed at eBay sellers. These range from a $300 licensing fee and $250 surety bond in Louisiana, to a California bill that would have subjected eBay drop-off stores to the same restrictions as pawn shops, to a Tennessee law that requires $700 in fees and a week's attendance at an auctioneering school.

Ebay's stock in trade is its listing fees from the average 89 million sales running on the site at any given time, and, more lucrative, the closing fees on sell-through auctions and fixed-price sales. Given that eBay's gross transaction fees for the first quarter of 2006 were more than $500 million, eBay has a lot to protect, and it's doing so in an aggressive, multi-pronged attack.

While eBay's high volume vendors can easily absorb the fees, the same can not be said for the majority of eBay's sellers, many of whom are part-timers who would drop out or curtail their activity on the site if regulated or hit with licensing fees. EBay's business model is centered on the volume of sales, anything that threatens that volume, threatens the company's prosperity.

Further, there is the problem of precedent -- once a state passes regulations, other states are more likely to follow.

In the opinion of many analysts, eBay had no choice but to jump into the breach and try to stem the regulatory tide with everything at its disposal. Furthermore, they say that states are taking a short-term view because, by collecting annual licensing fees, people in their own states wind up unemployed.

eBay Legal Presence Across America
Realizing all this and more, eight years ago eBay began a massive state lobbying program that now extends to 25 states, and is, by all accounts, a highly organized and successful apparatus.

Despite the friendly family marketplace image, there is nothing warm and fuzzy about eBay's lobbying strategy. EBay recruits experienced state and federal lobbyists with little concern for cost, (According to Katie Hafner in the NY Times, some are on $10,000 a month retainers,) weaving attack teams which petition legislators in states with pending hostile legislation. Continued>>>

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