Chinese Exporters to Sue PayPal

CCID Net, 8/16/11

A number of businesses engaged in international trade plan to launch a class action lawsuit against eBay's online payment platform PayPal for reportedly freezing accounts belonging to Chinese export traders arbitrarily and without giving any legitimate reason. One Shenzhen-based trader, who identified himself only as Keven, said his company is filing the suit due to PayPal's repeated arbitrary cancellation of orders and consequent automatic reimbursement of funds to the buyers. Currently, more than 100 Chinese export traders are taking part in the lawsuit, and have retained a lawyer to gather evidence for the case. The group's next step will be to file the suit with the Shenzhen Intermediate People's Court.

According to what Keven says is a conservative estimate, the total value of orders with Chinese export traders canceled and the combined amount of assets they have frozen by PayPal each year is in excess of USD 100 mln.

Keven's foreign export business is primarily in the sale of high-end computer motherboards. Beginning in March this year, Keven noticed that funds for motherboards already sold to buyers in Indonesia and Russia had been frozen by PayPal, and that other transactions had been canceled. PayPal justified its action with complaints from buyers who claim their accounts have been subject to acts of identity theft or that the goods involved in a transaction were never received. Keven, however, has shipping invoices which indicate that the goods in question were in fact received and signed for by buyers.

Keven said that countless similar incidents happen to Chinese sellers across the country on a daily basis, and that by not having an adequate system for verifying such claims, PayPal has shifted all the risk to Chinese merchants.