In January, eBay made several announcements to address lingering issues and optimize its operations for the future.
At the beginning of January, the company announced that it had entered into a deferred prosecution agreement with the U.S. Attorney’s Office for the District of Massachusetts.
This agreement pertains to the conduct of former employees who harassed and bullied the owners of a blog critical of eBay’s business.
As part of a six-count criminal information agreement, the company must fully cooperate with the U.S. Attorney’s Office, undergo an independently monitored compliance program, and pay the government a $3 million penalty.
The agreement will last for three years, and if the company successfully meets all requirements, the U.S. Attorney will dismiss the criminal information against eBay.
eBay is still embroiled in a civil trial related to this situation, initially filed in 2021 but subsequently amended with new allegations. The jury trial for this civil matter is slated for March 2025.
This case has many complex issues, as defendants include not just eBay but indicted and non-indicted former employees, including former eBay President and CEO Devin Wenig.
More Layoffs at eBay
Next up in January was a bombshell report by eBay that it was reducing its workforce by about 9%, or roughly 1,000 workers. This is the second major layoff by the company within one year. Last year, in February, it axed 500 jobs and increased some selling fees.
Over the past four fiscal years, the company reported end-of-year headcounts totaling 13,300 (2019), 12,700 (2020), 10,800 (2021), and 11,600 (2022).
While eBay will not report its financials for the full year 2023 until February 27, 2024, between the two reported major layoffs by the company, the total headcount should still be around 10,000 at the end of 2023.
It’s important to note that some fluctuations may also be attributed to the company selling businesses during this time.
Regardless, it seems eBay will start 2024 with one of the lowest headcounts since before COVID-19.
Observing the impact on customer service will be interesting as that continues to be a perennial complaint among sellers.
$59 Million Fine Over DEA Violations
As January came to a close, eBay announced another agreement with the government, settling with the U.S. Department of Justice (DOJ) to fully resolve the DOJ’s inquiry about products sold on its platform, alleging they violated specific laws administered by the Drug Enforcement Administration (DEA).
While eBay denied the DOJ’s allegations, and its settlement did not include any admission of wrongdoing, the company agreed to “pay $59 million and implement enhanced processes regarding its monitoring and reporting of listings that violate eBay’s terms of service.”
Most large businesses have ongoing litigations, but the big ones are the ones that may impact financial results or require the company to make cost or price adjustments.
The civil lawsuit over eBay’s involvement in the cyberbullying affair mentioned above will probably result in a multi-million dollar settlement.
It’s somewhat surprising eBay hasn’t settled that one, as it also is the one that was featured on the CBS program 60 Minutes twice and brought a lot of negative attention among major national media outlets.
However, as already mentioned, the inclusion of additional defendants makes the case more complicated, which likely problematizes any settlement.
Yet, the civil case is not the biggest problem eBay still faces.
As much as eBay settled some of its legal issues in January, one huge one still looms as the DOJ and U.S. Environmental Protection Agency (EPA) allege that eBay violated Section 203(a)(3)(B) of the Clean Air Act (CAA).
In theory, that case could be a billion-dollar-plus settlement if the government asks for the maximum penalty on a per-violation basis.
With over 343,000 violations cited by the DOJ and a maximum fine of $5,580 per violation, it’s a doozy and, on paper, much larger than the DEA case.
On previous occasions, the DOJ settled similar CAA allegations for around $150 to $250 per violation. Based on the current scope of the allegations, this would amount to less than $100 million.
A year ago, eBay reported in its annual report that it reserved $64 million for legal settlements. However, it has accrued more reserves for future settlement throughout the year and reported at the end of Q3 a total of $114 million in reserves for legal matters.
The January agreements take about $62 million in penalties from these reserves and, based on Q3 financials, would leave the company with around $52 million.
eBay likely continued to build a reserve for ‘legal matters’ in Q4. However, we won’t know where that reserve stands until the company releases its financials later this month.
With the CAA and cyberbullying potential settlements looming, eBay will likely continue to boost its legal reserves over the next few quarters until it can get all its significant legal issues behind it.
eBay is in good financial shape as it prepared for these settlements. The workforce reductions are likely a combination of factors related not to the legal issues but to rebuilding its business and addressing macroeconomics.
Despite challenges, CEO Jamie Iannone leads a multi-year effort to revitalize the platform, focusing on its core strengths.
While not every change benefits all sellers equally, embracing best practices (descriptions, images, item specifics) remains crucial for listing visibility and success.
While eBay navigates legal issues and workforce changes, dismissing it as a sales channel would be premature.
The platform retains significant potential for sellers willing to invest time, research, and adapt to evolving ecommerce trends.
With over 1.9 billion listings, the ecommerce platform is still one of the largest marketplaces in the U.S. (and globally), offering opportunities for solopreneurs and small businesses.
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