• Some are asking about whether this rule implicates off-platform speech. This is not 100% clear to me. It says "you may not use the PayPal service for activities that...involve the sending, posting, or publication of any messages, content, or materials that [are prohibited]".
This seems to be far too broad as it relates to the transaction itself, as one of the prohibited categories is "depict or promote illegal drug use". So if you sell a DVD of Trainspotting, then you are using the PayPal service for activities that involve the sending of content that depicts illegal drug use. Get ready to be fined $2,500.
You also could not use PayPal to sell a DVD of the movie 42 (about Jackie Robinson), because it "depict[s] discrimination of protected groups or of individuals or groups based on protected characteristics (e.g. race...)".
It seems absolutely bonkers to think that using PayPal for these transactions (or the many other examples imaginable) could result in a $2,500 fine.
It is unclear how broadly PayPal can sweep in off-platform language. That is, if you have a website that sells all sorts of things, can they claim that you are "using the PayPal service for activities" that break their rules? The fact that this is to be determined "in PayPal's sole discretion" does not bode well for a seller.
• This is framed as "liquidated damages", which IIRC are not allowed in some jurisdictions. Liquidated damages basically means "we're just deciding on this amount as a deterrent, not because it relates at all to the harm actually suffered by any of the parties". In general, liquidated damages are disfavored because they discourage so-called "efficient breach" of contracts. This happens when A agrees to paint B's house for $500, but then A gets an offer to paint C's house for $10,000 on the same date. A knows that B can find a replacement painter for $1,000 even at the last minute, so he decides to breach his agreement with B and is willing to pay the actual damages (the extra $500 that B would have to pay) because it is efficient for him to do so, given his ability to earn much more money painting C's house.
• This amount that PayPal can deduct under this TOS is not limited to $2,500. That is just the liquidated damages piece. They could claim other, larger damages, though I can't really imagine what that would be. Harm to their reputation? Seems hard to prove.
You also couldn't use it in a transaction involving women's sports leagues, which inherently discriminate on the basis of sex or gender. Or universities that discriminate on the basis of race.
That said, the policy is obviously not to set out clear and objective criteria that can be understood by the other party or a 3rd party adjudicator, but to create confusion and ambiguity and allow arbitrary and selective enforcement.
> This is framed as "liquidated damages", which IIRC are not allowed in some jurisdictions
I'm not a lawyer, but I know from personal experience that California disallows liquidated damages for rental late fees that exceed actual damages (prorated interest). Plenty of landlords illegally collect late fees, but you can either not pay or sue them in small claims and recover the cost. There may even be some kind of statutory punitive damages for putting illegal late fees in a contract as there is for illegal non-competes, but again I'm not a lawyer. While California government is dysfunctional in many ways, at least the law there favors employees and renters more than any other state that I know of.
I thought the principle of liquidated damages was that they were supposed to be a reasonable estimate of hard-to-calculate damages, and if they were just a deterrent, the other side could argue that it was an unenforceable penalty.
The reason I was researching this is because Stubhub's support website actually describe their liquidated failure to complete transaction damages as a "penalty," which seems to be a major mistake on their part.
• Some are asking about whether this rule implicates off-platform speech. This is not 100% clear to me. It says "you may not use the PayPal service for activities that...involve the sending, posting, or publication of any messages, content, or materials that [are prohibited]".
This seems to be far too broad as it relates to the transaction itself, as one of the prohibited categories is "depict or promote illegal drug use". So if you sell a DVD of Trainspotting, then you are using the PayPal service for activities that involve the sending of content that depicts illegal drug use. Get ready to be fined $2,500.
You also could not use PayPal to sell a DVD of the movie 42 (about Jackie Robinson), because it "depict[s] discrimination of protected groups or of individuals or groups based on protected characteristics (e.g. race...)".
It seems absolutely bonkers to think that using PayPal for these transactions (or the many other examples imaginable) could result in a $2,500 fine.
It is unclear how broadly PayPal can sweep in off-platform language. That is, if you have a website that sells all sorts of things, can they claim that you are "using the PayPal service for activities" that break their rules? The fact that this is to be determined "in PayPal's sole discretion" does not bode well for a seller.
• This is framed as "liquidated damages", which IIRC are not allowed in some jurisdictions. Liquidated damages basically means "we're just deciding on this amount as a deterrent, not because it relates at all to the harm actually suffered by any of the parties". In general, liquidated damages are disfavored because they discourage so-called "efficient breach" of contracts. This happens when A agrees to paint B's house for $500, but then A gets an offer to paint C's house for $10,000 on the same date. A knows that B can find a replacement painter for $1,000 even at the last minute, so he decides to breach his agreement with B and is willing to pay the actual damages (the extra $500 that B would have to pay) because it is efficient for him to do so, given his ability to earn much more money painting C's house.
• This amount that PayPal can deduct under this TOS is not limited to $2,500. That is just the liquidated damages piece. They could claim other, larger damages, though I can't really imagine what that would be. Harm to their reputation? Seems hard to prove.