SAN JOSE, Calif. (CN) – A federal judge has tossed a class action against eBay, finding that it would not make economic sense for the auction site to run a price-fixing conspiracy on coin-grading services.
The class took issue with a certification policy enacted by the Internet Rules Committee, a working group of “coin industry insiders.”
EBay allegedly worked with the group to create a certification policy for coins sold on its website, with a stated goal of combating misrepresented and counterfeit listings.
The resulting certification policy allows only coins graded by one of five authorized services to be listed as “certified.”
Universal Grading Service claimed that eBay worked with five certified coin-grading services to limit the number of authorized graders, thus artificially increasing the prices of grading services. When coin sellers passed those costs to coin buyers, eBay allegedly saw higher commissions.
The complaint sought damages from coin dealers Vadim Kirichenko and Joseph Kimoto, on behalf of a class of grading companies not certified by eBay, consumers who bought coins certified by eBay and other related groups.
By accusing smaller outfits of selling counterfeit coins and fraud, eBay hampered Universal Grading’s ability to participate in the “then burgeoning online market for certified coins,” according to the complaint.
Dealers that had their coins graded by Universal Grading allegedly received emails from eBay with the subject line “eBay Listing Removed: Counterfeit Currency and Stamps.”
But U.S. Judge Ronald Whyte ruled Monday that the allegations in the fourth amended complaint, like those in earlier iterations, failed to state a conspiracy claim under the Sherman Act because the scheme “does not make economic sense.”
Even if the alleged convoluted conspiracy drove profit, eBay has proven that it can raise commissions without losing users. Thus, it would be “far easier and more efficient for eBay to simply raise its fees for the sale of coins than to conspire with unrelated non-profit trade groups to develop a policy that might result in higher commissions,” Whyte wrote.
The complaint also undermines the class’s theory, as only 0.3 percent of the coins listed on eBay are certified. This means that commissions have declined on 99.7 percent of coins whose sale prices decreased under the certification policy. “An already improbable conspiracy” is not made plausible when the complaint “suggests that the perpetrator has lost money as a result of the agreement,” the 17-page decision states.
Competitive justifications, including the aim of reducing fraudulent listings, add further support to eBay’s policy.
Rather than assailing eBay, the class should aim their gripes at the survey that resulted in the certification policy, which was commissioned by the Professional Numismatists Guild and American Numismatic Association. The court notes that said survey simply relied on what it believed to be the conclusions of industry experts.
The guild and its chairman, Barry Stuppler, already settled with the plaintiffs.
The class’s “novel” theory that it need not establish harm in the monopolized market because it is a consumer and not a competitor “stretches the concept of antitrust injury too far,” Whyte added, noting that Section 2 of the Sherman Act states that a defendant must compete in the affected market to be liable for inflicting antitrust injury.
Since the class had four opportunities to amend its complaint over several years and has been thus far unable to survive dismissal motions, Whyte dismissed its remaining claims with prejudice.