Once more on PayPal, etc.

So the debate still rages — as well it should — on PayPal and its efforts to get Smashwords (and other vendors) to delete certain titles from their stock. The titles in question are, at the moment, erotica books that are about rape, bestiality, incest and pseudo-incest. There is a petition available (probably more than one), and many authors have protested, including Remittance Girl, Selena Kitt, Heather Killough-Walden, and others.

In my previous post I said, and I still believe, that what PayPal is doing is within their rights. The word “censorship” has been one to handle carefully. So I guess I should clarify here that I do not think PayPal is violating the First Amendment. The First Amendment says that Congress shall make no law abridging the freedom of speech or expression. So what PayPal does is, well, what PayPal does. For more about censorship and obscenity definitions and some legal stuff, please check Stephanie Draven’s blog.

A few sources, including Smashwords’ press releases, state that “PayPal began aggressively enforcing a prohibition against online retailers selling certain types of “obscene” content” (from Smashwords’ 2/24/12 release). This made me curious, and I searched for PayPal’s terms of service. I found them, including the Acceptable Uses portion, which applies to all users.

It states that:

You may not use the PayPal service for activities that:

  1. violate any law, statute, ordinance or regulation.
  2. relate to transactions involving (a) narcotics, steroids, certain controlled substances or other products that present a risk to consumer safety, (b) drug paraphernalia, (c) items that encourage, promote, facilitate or instruct others to engage in illegal activity, (d) stolen goods including digital and virtual goods (e) items that promote hate, violence, racial intolerance, or the financial exploitation of a crime, (f) items that are considered obscene, (g) items that infringe or violate any copyright, trademark, right of publicity or privacy or any other proprietary right under the laws of any jurisdiction, (h) certain sexually oriented materials or services, (i) ammunition, firearms, or certain firearm parts or accessories, or (j) ,certain weapons or knives regulated under applicable law. (bold emphasis mine)

So who decides what’s obscene, or what the certain sexually oriented materials are? After all, one person’s trash is another’s treasure, right? In this instance, PayPal gets to determine this, because this isn’t about what you can or can’t read, it’s about how you can obtain it, and PayPal does not want their service used to acquire the items and services listed above.

Many people have said, PayPal can’t tell me how to spend my money. This is true. If you have money in a PayPal account, you are can withdraw it or move it into another account, and do with it as you please. However, if you are going to use PayPal’s service to spend your money, you will have to abide by their rules.

I realize this sucks for a lot of independent authors out there, and small publishers and other retailers. It will cut into sales, at least in terms of delaying them, and probably cause other headaches. Is PayPal censoring what Smashwords can carry? Well, yes, it is. However, Smashwords knew the terms when they signed on, and had some luck because PayPal did not enforce the terms. They were really lucky, because from what I’ve seen, PayPal is SW’s only payment processor. It is unfortunate that PayPal did not consistently enforce their prohibitions from the beginning.

Is PayPal a monopoly in the micro-charging world? Many have said it is a virtual monopoly or a de facto monopoly. If that’s so, then presumably it is because so many people were pleased with the way PayPal worked that they went to it. It’s kind of a sad paradox that probably the very people who made PayPal what it is are protesting this new policy enforcement.

Which, by the way, I’m all for them protesting. You have freedom of speech and expression, and you should definitely use it to make your feelings about PayPal known to them and to the world. According to Smashwords’ latest press release, PayPal is already backing off to some degree in how they are enforcing this. Keep tweeting and blogging and signing petitions because public response like this can have an effect on a company.

According to the SW release, PayPal has put some of the “blame” (if blame is the right word) on the credit card companies with which they have agreements. I have to say I’m a little skeptical here. I’ve looked for an “acceptable uses” section from Visa and MasterCard but haven’t found it — if someone has a link, I’d be pleased to pass it on. Generally, I can’t think the CC companies are too concerned with what you buy, so long as it’s a legal product. And, as many people have pointed out in various blogs and forums, stories about underage sex, bestiality, etc., are indeed legal. Icky to a lot of people, but legal.

As Remittance Girls says in this blog entry, “I don’t believe for a moment that the ‘charge-back’ rates are higher on ‘taboo’ erotica than it is on any other genre of books. In fact, because they are so well labelled and readers are so informed of the transgressive nature of what they are purchasing, I’d hazard a guess that the charge-back rates are minimal.” I agree. I don’t agree with the entire post, but I do on that point.

I want to restate a few things I’ve said already. You have a right to freedom of speech and expression and I think that is one of the best things about the U.S. However, you don’t have a right to get paid for it. If you can, terrific. Publishers and retailers are also not obligated to carry your works; they can refuse for whatever reason (if I’m wrong, someone out there please let me know). Borders surely didn’t carry every title available. You can put your files out there for free, or you can accept checks and money orders and send the files or books to the purchasers when they clear. This is very clunky, compared to what we are used to (which hasn’t even been around all that long), but it worked for years and years.

Until a new payment processor arises that doesn’t have PayPal’s restrictions, that might be the best route.

7 responses to this post.

  1. Actually, the credit card companies, specifically the merchant banks, charge a higher fee for sexually related items (such as to the porn companies, the fees can be as high as 20% compared to 1.5% for normal transactions). The rational is simple: wife opens credit card bill, sees charges from a sex site, confronts husband who denies it. Wife calls issuing bank challenging the charges. Since it was a MOTO (Mail-order, telephone order – which is what Internet transactions fall under) there is no signed charge slip. Item is removed from customers account, charged back to merchant bank who charges back the vendor. The fight can usually take months to resolve. Which ties up people all through the financial supply chain. So, yes, they are charged higher fees. PayPal is trying to keep its merchant bank rates down so they can continue to be a profitable micro-payment provider.


    • Thanks, that’s interesting and good to know. If PayPal is trying to minimize that, I can’t blame them. What I’m more curious about, as I said, is if the CC companies have an acceptable use policy, as PayPal does, specifying whether you can or cannot buy certain “sexual material.” To me that changes the complexion of the discussion a bit. I think it may be good that it takes months to resolve these things — people shouldn’t be able to obtain something, deny the charge and get reimbursed when they did in fact buy/obtain/keep it.


  2. Posted by Julie on February 29, 2012 at 6:45 pm

    Before the “Unlawful Internet Gambling Enforcement Act of 2006” (prior to that, the Supreme Court ruled that the Federal Wire Act, did NOT prohibit Internet gambling, hence the law), some credit card companies allowed you to use their cards on casino sites, and some did not. At first most did, then little by little they dropped away, until only about half of the cards (that we had, anyway) allowed you to use them that way.

    Ironically, on some of those sites where the credit cards would not work, you could use PayPal (using the same credit card) and accomplish the same thing.

    Anyway, my point is that in some cases, yes, credit card companies do say that you can’t use them for a particular purpose, though I’ll admit casinos are pretty far out there so far as being considered a “product”. (If I recall correctly, about half the cards I used charged casinos as a cash withdrawal and the other half as a straight charge.)

    I have no idea how the whole thing works now…I haven’t gambled online in probably ten years.


    • Well, not knowing how it works is probably what’s hindering a lot of us in discussing this. We know certain things and can guess at others, but guesses only get you so far. But your point, that CCs can limit their use, is a good one.


  3. Posted by Lady Falcon on March 1, 2012 at 3:45 pm

    I just want to keep reading the responses and I don’t know how to do that if I don’t comment and click on notify. 🙂


  4. Posted by B.Z.R. Vukovina on March 4, 2012 at 12:19 am

    For a while, PayPal also distinguished between physical items and virtual “items” when it came to adult stuff. Real items are easier to track. Hence, you could use PayPal to buy a DVD of the same porn movie that you couldn’t purchase as a stream or video file.


    • Interesting, I didn’t know that. OF course, as I’ve said, I don’t have a PayPal account so I wouldn’t need to be aware of such things. Here’s an article that appeared in The Independent about this whole thing. I think PayPal should just step back, but unfortunately I do think they’re within their rights.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: