By J. PATRICK PEPPER
ANN ARBOR — A federal judge on Wednesday set aside a default entry against eBay Inc. in a lawsuit alleging the company’s exclusive PayPal payment system violates federal antitrust laws.
The order means the online auction giant will have more time to respond to the class-action complaint filed in April by Dearborn resident Charlotte Smith and five others.
The default judgment was entered in June because attorneys for eBay did not respond to the lawsuit within the required 60-day window after being served. A default judgment, like a forfeit victory in sports, enters the amount of damages in the original complaint.
Judge John Corbett O’Meara of U.S. District Court for Eastern District of Michigan Southern Division in a three-page opinion cited technical problems in the way the company was served with the lawsuit and its apparent desire to fight the charges, writing, “federal policy strongly favors allowing all parties to resolve their disputes at trial rather than by default.”
O’Meara also agreed with the company’s assertion that it has a plausible defense, including the recent dismissal of a similar lawsuit in California.
The lawsuit seeks unspecified damages and an order that eBay stop requiring users to make transactions through PayPal only. PayPal, a wholly-owned subsidiary of eBay, charges up to a 3 percent transaction fee to broker payments between buyers and sellers, which is separate from the brokerage fee eBay receives for listing auctions.
The suit alleges that PayPal results in a restraint of trade that violates the federal Sherman Antitrust Act. Reached at her house Friday, Smith declined to comment on the case, saying her attorney advised against it.
The attorney representing Smith and the other plaintiffs, Peter Macuga, said Friday that he “respected” the court’s decision and wasn’t surprised by the ruling.
Macuga, of the Detroit firm Macuga, Liddle & Dubin P.C., has said since the outset of the case that his clients would settle if eBay dropped the PayPal requirement. So far, eBay hasn’t been receptive.
“Our offer was summarily rejected,” Macuga said.
Attorneys for eBay did not return phone calls seeking comment for this story as of press time, but the company previously has publicly defended the policy as a buyer protection feature. The issue has been a source of controversy since 2008, when it became the only payment option for eBay sales in the United States.
The requirement has generated similar controversy abroad, including a recent ruling by the Australian government that it “substantially lessens competition” among e-commerce Websites. eBay changed its policy there to make PayPal just one of several payment options, something Macuga hopes for.
“We’ve always said this is what we’ll take to settle this,” he said. “Let (eBay users) use cash or personal checks or whatever they want, and forgo whatever buyer protection is purportedly offered by PayPal, and this whole thing goes away.”