EBay: One Government Probe Down, One To Go

Auction giant eBay (Nasdaq: EBAY) noted in its annual report that government regulators have closed an investigation into whether it engaged in anticompetitive practices in its battle with now-shuttered Bidder's Edge.

eBay said the investigation, which began in 2000, has been closed without any action taken. The company also said a separate investigation into illegal gun sales conducted on the auction site, begun in 1999, continues.

"Antitrust issues will always be something to worry about with a company as dominant in its field as eBay is, but so far they've done a good job of avoiding problems," Morningstar.com analyst David Kathman told the E-Commerce Times.

Case Closed

The closing of the Bidder's Edge inquiry comes almost a year after eBay settled a lawsuit it filed against the Burlington, Massachusetts-based service, which used a Web search engine to aggregate auction listings from dozens of sites, including eBay, Yahoo! (Nasdaq: YHOO) and Amazon (Nasdaq: AMZN).

That settlement prevented Bidder's Edge from crawling eBay listings.

"Starting in 2000, we provided information to the Antitrust Division of the Department of Justice in connection with an inquiry into our conduct with respect to 'auction aggregators' including our licensing program and our recently settled lawsuit against Bidder's Edge," eBay said in its annual report filed Monday with the U.S. Securities and Exchange Commission. "The Division has closed its investigation without taking action against us."

"All the antitrust stuff, including the Bidder's Edge investigation, seems to have been much more of an issue a couple of years ago," Kathman said. "I thought it was potentially significant when the Justice Department started poking around, but if they didn't find any antitrust violations in two or three years, I have to believe there wasn't anything there."

Case Open

EBay did not refer directly to the gun-sale investigation, but it noted that a federal inquiry began in January 1999 relating to "possible illegal transactions in connection with our Web site."

At that time, reports circulated that New York officials were investigating weapons sales on eBay. A month later, eBay formalized a policy prohibiting sales of guns and other illegal items on its site.

The company said it continues to provide information to investigators, who are including "an examination of our practices with respect to these transactions" in their inquiry. "In order to protect the investigation, the court has ordered that no further public disclosures be made with respect to the matter."

Kathman said eBay has taken steps to control sales of illegal goods but because of the volume of transactions that take place every day, completely snuffing out those auctions is difficult.

"It's in eBay's interest to prevent fraud and sales of illegal items on its site," he said. "It relies on the trust of its customers in order to keep operating, and it doesn't gain anything from fraud perpetrated on its site."