eBay Sign

Adi Reiss, CEO, and founder of SaleFreaks, is accusing eBay of manipulating search results of listings that appear to dropship products from other marketplaces like Amazon, Walmart, Ali-Express, etc.

He claims that his company found there has been a 25 to 50 percent drop of listing impressions on the affected listings.

Reiss further claims:

“Ebay decided to implement a ‘search throttle’ in the ‘best match’ search ranking algorithm for items sold by sellers who DO NOT practice “dropshipping” from websites such as Amazon, Ali-Express, Wal-Mart and the like.”

“The way the throttle works is by putting ‘dropshippers’ behind ‘non-dropshippers’ in ‘best match’ search results even if “dropshippers” have better prices, sold history, feedbacks, titles…”

SaleFreaks is an arbitrage enabling service that helps sellers list items on eBay found on Amazon and other marketplaces.

The concept of arbitrage is that sellers will find popular products on another marketplace and then offer this item for more money on eBay.

The items are then sent from the original marketplace, often as gift orders to mask the pricing, to the unsuspecting consumer.

Sellers often benefit from the items shipping for free as per marketplace policies and in the case of Amazon, if using Prime, even expedited free shipping.

On Amazon, U.S. eBay sellers using the arbitrage method can even gain an extra 5 percent discount if they are using the Amazon Prime Rewards Visa Signature Card or Amazon.com Store Card. Both cards offer this discount on purchases on Amazon.

By itself, arbitrage is not illegal and many consumers that do not use other marketplaces such as Amazon may not even know the items were actually offered for less on Amazon.

They may know that some eBay sellers use Amazon FBA services to fulfill products and don’t think twice about it.

But it appears, eBay have taken a dim view of arbitrage listings.

Legal Case

On March 10, SaleFreaks took eBay to court in Israel (home country of SaleFreaks) asking the court to issue temporary relief of about this problem they have uncovered.

They want the court to force eBay to reinstate search algorithms used prior to April 20, the date they believe this policy to reduce exposure to listings using arbitrage by eBay was enacted.

In the Facebook post, Reiss offers up the following notes from the hearing (excerpts):

“EBay admitted that they indeed manipulated the ‘best match’ search results against ‘dropshippers’ relative to sellers not ‘dropshipping’ from online sites in order to ‘preserve eBay’s integrity’ and ‘protect purchasers.'”

“Ebay’s lawyer focused their argument on ‘dropshipping’ practices that are problematic such as, manipulations of seller metrics in their favour such as falsely using the ‘cancellation at the buyer’s request’ option and ‘frustrated buyers’ who bought items at too high a price. He also called dropshippers ‘crooks’.”

“In response to the ‘frustrated buyers’ claim, SF (SaleFreaks) argued that this is a very small percentage of buyers, about 99% of satisfied buyers who give positive feedback.”

“SF (SaleFreaks) gave evidence to the judge proving that eBay Israel worked closely with SF (SaleFreaks) and other sellers, fully aware of the work method in use and even gave SF (SaleFreaks) and the other sellers ‘prizes’ for outstanding results.”

Further, he says that SaleFreaks stated they believe eBay had been planning this policy change for over a year and eBay should have provided more notice beyond the 30-day warning which was vague and sent only to Israeli sellers.

The judge in the case asked that both parties try to find a compromise, but Reiss claims that eBay had no interest.

It is now in the hands of the court to make a decision.

READ MORE: Israeli Court Sides with eBay on Temporary Relief in Arbitrage Case

30-Day Notice

What is interesting to note is that apparently, eBay in Israel sent out a 30-Day notice of this policy change to some sellers in Israel.

That would suggest that SaleFreaks had some warning about this change and allowed them to immediately identify the issue when it occurred.

From Reiss’ Facebook post, it seems clear the company knew something was in the works, but may not have known the exact date or how eBay’s policy change may impact sellers globally.

It’s a tough position to be in. On one hand, SaleFreaks may have known this was coming, but going public early could undermine their business before the issue became critical.

It also appears the company was trying to sort out the controversy with eBay before eBay went ahead with the change in search result rankings for arbitrage listings.

On the other hand, some SaleFreaks clients are going to wonder why they were not properly notified that such a move by eBay may be imminent.

Certainly, some sellers could have started working on a Plan B before their listings were downgraded by eBay’s new search algorithm.

eBay’s Position

eBay is increasingly competing on a global scale with other marketplace competitors such as Amazon, Walmart, Ali-Zilla, etc.

Amazon is an especially difficult competitor as they offer fulfillment services that are becoming more popular with sellers, regardless if they are selling on eBay or their own website.

When boxes arrive from a competing marketplace with competing marketplace markings it can cause buyer confusion. Facebook groups are full of stories of buyers receiving packages from Amazon and then complaining/asking sellers why it was shipped from Amazon.

SaleFreaks claims that about 99 percent of buyers are happy because they give positive feedback. And for a seller to continue to operate successfully on eBay, that number has to be close, otherwise, eBay will downgrade the seller anyway.

But if a million items are sold this way, that is still potentially 10,000 complaints! And that may explain why these questions pop up on Facebook and even eBay community forums.

There are a lot of conflicts here for eBay. On one hand, they are making money off these sales and in some cases, they may even offer up products that can’t be easily found elsewhere.

But the vast majority of listings are probably competing with other listings on eBay that may not be sold with the arbitrage model.

In the end, eBay is likely to get the sale anyway and if it is sold by a seller that uses its own inventory, that is ultimately a better sale for eBay.

eBay has also been on a branding campaign, including offering reduced (or free with some store subscriptions) packing supplies to sellers.

Ultimately, eBay has admitted they are using a seller’s location to determine inventory and which competing listings it displays to potential buyers.

The goal of 2 to 3-day service can only be achieved if the inventory location is correct and the seller has the item in stock. In eBay’s thinking, sellers are like Amazon FBA warehouses.

In Australia, eBay already went as far as prohibiting the use of Amazon FBA and other marketplaces as fulfillment services for eBay orders.

READ MORE: eBay Australia Bans Amazon FBA Shipments

Arbitrage vs Dropshipping

Reiss in his Facebook used the word dropshipping and while technically correct, the actual practice that his company promotes is arbitrage. SaleFreaks offers services to automate listings and order processing for sellers who use other marketplaces to sell items on eBay.

There is no indication that eBay is impacting sellers who use manufacturer or distribution-based drop shipping services to fill gaps in their own inventory.

For example, on eBay Motors, many performance parts sellers use services by ChannelAdvisor to list tens of thousands of listings.

Often small shops with limited on-hand inventory are able to expand their online presence by utilizing local and national parts distributors.

Many of the sellers that sign up with ChannelAdvisor may take advantage of a service offered through Keystone Automotive, a national distributor for performance car parts, to fulfill orders on eBay.

On ChannelAdivsor’s supplier page about Keystone Automotive, the company states that Keystone offers customized packing slips with seller information, return form for easy returns, full shipping and tracking information.

This type of wholesale level arrangement is not eCommerce arbitrage, but an extension of standard supply chain practices by sellers.

While there are some issues that can crop up in standard supply chain dropshipping, sellers have a more direct influence on their supply chain vendor to sort them out.

Therefore, we urge sellers to understand the difference between marketplace eCommerce arbitrage which SaleFreaks enables sellers to participate in and standard supply chain dropshipping which is very common in many industries with large SKU counts.

READ MORE: Five Considerations for Opening Your Offline Store, Online

eBay’s Communications

While observers will have different opinions about eBay’s enforcement on arbitrage listings, it is a bit troubling that eBay would not be more forthcoming about notifying sellers.

If the company has the ability to identify “problem” listings, then it should notify sellers that it is changing how it will rank those listings. There should be better communication between eBay and its sellers and it appears that didn’t happen here.

Obviously, the eBay terms of service give the marketplace all the power they need to make adjustments. Every seller agrees to it so in legal terms, they are probably on a pretty solid footing.

A lot of sellers that actually inventory products probably are pretty happy that eBay is cracking down on arbitrage listings as they hurt their own rankings.

But what if eBay decides someday to make a policy change on standard supply-chain dropshipping or some other practice that may impact search rankings and doesn’t notify sellers?

It seems sometimes eBay tries to “hide” from contentious policy changes as it did last year when it made changes to its user agreement trying to crack down on off-platform sales without mentioning this change one-day earlier in its Seller Update.

READ MORE: eBay Sellers May Have to Pay Final Values Fees for Off-eBay Sales

Editor’s Note: Portions of this story are based on information posted Ardi Reiss, CEO, and Founder of SaleFreaks in a Facebook post. And while we attributed those parts in our story to Reiss or SaleFreaks, we urge readers to read his entire post for complete context.

We have no independent verification of the content of the court proceedings he mentions nor have we seen a copy of the email that he alleges eBay sent out to sellers in Israel.

We are requesting comment from eBay and will publish it if they provide any. And we will update any news or comment we receive from SaleFreaks on this situation.

What is your thought on this story? Do you use arbitrage? Head over to our Facebook Discussion Group or use the comments section below.

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