eBay to Buy PayPal for $1.5 Billion — Internet auction pioneer eBay has announced plans to acquire PayPal, the leading Internet payment service, for $1.5 billion in stock. The move is a natural one – approximately 60 percent of PayPal’s business takes place on eBay, and 25 percent of eBay auction payments are settled using PayPal (another 15 percent are settled via other electronic payment mechanisms). eBay will phase out its competing service, eBay Payments by Billpoint, which struggled to compete against PayPal and was losing $10 to $15 million per year. PayPal’s services will continue, with the exception of the company’s support for online gambling, a field that’s coming under increased legal scrutiny. Though both companies are highly regarded in general, both have also endured criticism – eBay for its response to security exploits and for not cracking down on fraud hard enough, and PayPal for poor customer service (resulting in several class-action lawsuits from users whose accounts were frozen) and investigations from several U.S. states as to whether or not PayPal should be regulated as a bank. [ACE]
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