PayPal to Update its Terms of Use

I was excited to read, within Smashwords' site updates, that PayPal is backing down. It is a proud day for indies and the First Amendment. Hard for a 3rd-party transaction processor to remain transparent and neutral, as dictated by card-association policy and legal statutes, when it clouds economic facts with pedantic dogma.

I posted to PayPal's blog the stats I uncovered within eBay, PayPal's parent. The situation is a bitter pill, but I commend PayPal's senior managers for stepping up and embracing change, albeit begrudgingly. I hope the B-school-grad new-hire within PayPal who raised the "objectionable" content issue has an up-to-date résumé.

Cheers,

LC Cooper

Is PayPal Willing to Take on Disney?

First, a disclaimer: I present the following case to expose PayPal's censorship position for the insanity it is. As I've demonstrated within previous posts, I do not support PayPal's position, or any institution's, regarding censorship that attacks legally-protected fiction, as well as the right of individuals to make their own purchasing decisions.

What is PayPal's hidden agenda? Why take on 3 up-and-coming self-publishing sites? Why didn't PayPal target companies, like Amazon, Wal-Mart, Books-A-Million, and the Disney empire, which might generate a significant amount of press? "The Novel Network" is an affiliate of eBay (PayPal's parent). This may be collusion between eBay and PayPal (a merchant and a transaction processor) to snuff out direct competitors to "The Novel Network" and others within eBay's network.

I understand the logic behind content filters. Structurally, they are doomed to failure, especially when one considers the complexity of languages rich with synonyms, dialects, subtleties, and ever-evolving definitions and terminology. So, other than to cripple Smashwords, eXcessica, and BookStrand, what could be PayPal's real purpose?

I do believe PayPal's misguided efforts are based on antiquated policies dictated as a condition of membership in the card-association's networks. It is they, and their financial backers (including foreign governments), who ultimately own this attack on the First Amendment to the U.S. Constitution.

Disney, a U.S. icon, is a respected company that is adored by millions around the world. I am not making sensational claims against Disney, its affiliates, or its products. I value Disney's impact on pop culture and appreciate the creativity required to produce such masterful pieces as those I will mention below.

Admittedly, I'm taking PayPal's censorship issue waaay out there to prove a point, which is if Disneystores.com was subjected to the same degree of scrutiny, Disney would have to destroy all products, movies, rides, et all, and marketing collateral that may or may not directly or indirectly contain content that, in this case, PayPal and the card associations deem "objectionable."

Hence, the following satirical review is provided as comic relief to expose how absurd PayPal's position is. Again, this is not a criticism of Disney.

Beauty and the Beast: Disneystores.com hosts 20 books listed with the word beast, referring to this title. Content filters would absolutely catch this work, calling it bestiality. As an aside, I've run across a couple of titles, outside of Disney, that rewrite Beauty and the Beast as an erotic story. With the exception of direct sexual references, a content filter wouldn't be able to differentiate the Disney version from an erotic one.

Peter Pan contains a love interest between Peter Pan (a human?) and Tinkerbelle (a fairy). Peter Pan and Wendy make eyes at each other. A content filter would call this a pedophilic and bestial work. It contains a subplot of a teenage-girl's desire for a man/boy/non-human who never wants to grow up.

Snow White and the Seven Dwarfs: A young woman (young teen?) lives with 7 small and aged men (possibly gnomes). Is this a pedophilic and bestial story? What should a content filter look for?

Pinocchio: An old man carves a little-boy marionette, which comes to life and eventually lives to serve his master, Gipetto. Could a filter see this as a pedophilic or nemophilic (love of wood, is that illegal?) story? A content filter wouldn't know. Its programmers would have to make assumptions about context.

Sleeping Beauty: Is it necrophilia if a prince kisses a girl who is believed to be dead, or is this a case of Ecstasy being used to knock a woman unconscious so that a lusty man can awaken her loins with a kiss? How would a content filter know the difference?

The Sword and the Stone: If a young boy grabs a sword and yanks it, is this pedophilic writing? Content filters would have to be designed to catch metaphors.

The Jungle Book and The Many Adventures of Winnie the Pooh: In both stories, a boy hugs and dances with a bear, expressing his love for the animal – bestiality – easy prey for a content filter.

The Little Mermaid, along with its sequel Atlantis and Mermaid titles: A content filter would easily classify these as bestiality for a mermaid (a mythical creature) loves a human.

Aladdin: Jafar's demands on Princess Jasmine might be considered BDSM by a content filter, as he's mentally cruel, threatening torture and death if she doesn't comply with his demand to be his wife.

The Hunchback of Notre Dame: Would a content filter be able to determine that the "hunchback" character is actually human, though hideously deformed? If not, a filter would consider this a story about bestiality.

Tarzan: a boy raised by a gorilla – this is fodder for a filter, as it would classify this story as bestiality.

Lilo and Stitch: Lilo loves her other-worldly Stitch, a non-human. Bestiality? Certainly, per a content filter. To what degree does Lilo love Stitch? … as a pet? … a pal? … a cohort? … a lover? Certainly, we can tell, but a content filter cannot.

The Adventures of Tom Thumb and Thumbelina: The likelihood that they are too tiny to be human, along with their desires, classify this title as bestiality, per a content filter.

Monsters, Inc.: Because it contains a subplot about two non-humans of different species dating, a content filter would classify it as bestiality.

This analysis reads like Jerry Falwell attacking the Teletubbies, doesn't it? I wonder if PayPal will go the same way as the irreverent reverend.

In summary, any producer of non-human love stories or those of a caring nature involving minors, would come under a content-filter's scrutiny. The burden of proof would fall on the author and publisher. Disney, DreamWorks, and all the others don't experience content filtering although they historically create and promote products that would not stand up against the rigors of a content filter. However, such products are rapidly consumed by the public without concern or fear of repercussion for purchasing or viewing these products. Legal fiction is protected, no matter the industry. No institution, government, enterprise, or individual has the right to censor legal content. As I proved in this case, if granted the power, whether by law or attrition, the noose would quickly tighten to include works created by Disney's team.

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PayPal's Censorship Issue: Where are the Letters to eBay & Amazon?

PayPal missed out on a great press opportunity by neglecting to send eBay (its parent), Amazon, and Books-A-Million the same letter of demands it sent to Smashwords. I'm guessing PayPal doesn't have the cajones and deep-enough pockets. Besides, Amazon could crush PayPal like a grape. So, instead of getting beaten to pulp, PayPal bullies the smaller players?

I targeted eBay, Amazon, and Books-A-Million because it appeared they aren't downstream recipients of book and ebook metadata from other sources. I'm certain there are others, but these provide a good enough sample of the marketplace for titles containing legal fiction that PayPal finds objectionable.

Here's the scoop (as of 08 March 2012):

Amazon had 17,240 titles that had objectionable / forbidden text in their listing. Of these, 9,325 were works of fiction.

eBay had 1,621 titles with objectionable text in their listings. Of these, 276 are listed as fiction.

Books-A-Million had 1,393, with 164 were fiction.

Smashwords' numbers were minor, and BookStrand and eXcessica had already caved to PayPal's demands, as they didn't have any listings containing the objectionable words.

It's all in the data below. I'd be glad to provide the Excel spreadsheet to warranted parties. Just let me know.

	eBay				Amazon				Books-A-Million				Smashwords				BookStrand.com				eXcessica
		Books, as Percent				Books, as Percent				Books, as Percent				Books, as Percent				Books, as Percent				Books, as Percent
Objectionable	Total Books	of Listings	Fiction		Total Books	of Listings	Fiction		Total Books	of Listings	Fiction		Total Books	of Listings	Fiction		Total Books	of Listings	Fiction		Total Books	of Listings	Fiction
or Banned	Listed Using	Containing	and		Listed Using	Containing	and		Listed Using	Containing	and		Listed Using	Containing	and		Listed Using	Containing	and		Listed Using	Containing	and
Keyword	Keyword	Keyword	Literature	Non-Fiction	Keyword	Keyword	Literature	Non-Fiction	Keyword	Keyword	Literature	Non-Fiction	Keyword	Keyword	Literature	Non-Fiction	Keyword	Keyword	Literature	Non-Fiction	Keyword	Keyword	Literature	Non-Fiction
bestiality	9	13%	1	8	132	65%	45	87	5	83%	0	5	23	100%	Unknown	Unknown	0	N/A	0	0	0	N/A	0	0
incest	363	83%	34	329	3,275	86%	1,676	1,599	246	98%	31	215	>10	100%	Unknown	Unknown	0	N/A	0	0	0	N/A	0	0
rape	1,163	49%	128	817	7,140	55%	1,775	5,365	1,034	97%	115	919	>10	100%	Unknown	Unknown	0	N/A	0	0	2	100%	2	0
pedophile	13	19%	6	7	464	72%	98	366	28	100%	5	23	37	100%	Unknown	Unknown	0	N/A	0	0	0	N/A	0	0
BDSM	73	6%	57	16	6,229	62%	5,731	498	85	99%	13	72	>10	100%	Unknown	Unknown	847	100%	847	0	86	100%	86	0
TOTALS	1,621	38%	226	1,177	17,240	62%	9,325	7,915	1,393	97%	164	1,265	>60	100%	Unknown	Unknown	847	100%	847	0	88	100%	88	0

PayPal's Censorship: It Gets Uglier

Did you know that eBay promotes a members-only site entitled, "The Novel Network?" It's a direct competitor of Smashwords. In exchange for a $49 "lifetime" access fee, members are allowed to download over 3 million titles in any quantity they want at any time, for supposedly no extra charge. How does this tie to the PayPal-censorship issue?
The connection: eBay bought a company a year or so ago that received venture capital from Alta Partners. "The Novel Network" is, according to Hoovers.com, owned by Alta Partners.

So, here's my interpretation of the PayPal v. Smashwords mess, which is nothing more than a new twist on an ageless predatory competitive practice.
As Amazon/Kindle's Preferred program appears designed to restrict competition, this eBay/PayPal venture is quite similar in outcomes.

As I said, "The Novel Network" is a direct competitor of Smashwords. eBay provides a link to "The Novel Network," as a sponsor feature. However, instead of including the direct link of http://www.thenovelnetwork.com/ , it's listed as www.burubookr.web99.eu/ . Seems peculiar ...

Another point: It's against card-association rules for PayPal, as a transaction processor, to reject transactions from a merchant, in this instance, unless the merchant has been classified as "high risk." So, if PayPal can provide proof to the card associations (Visa, MasterCard, AmEx, et al.) that Smashwords is non-compliant regarding banned content, then if PayPal were to push the case and win, the result can effectively change Smashwords' network classification to "high risk"; effectively cutting off Smashwords from access to the networks and its card-carrying customers. The end result - Smashwords would be limited to closed networks, checks, and cash payment methods. With its global presence, such a consequence would likely ruin Smashwords. Crippling Smashwords opens the door for "The Novel Network" to entice and assimilate Smashwords' authors, readers, and titles.

Then, get a load of "The Novel Network's" disclaimer! It absolves itself of any blame related to content (imagine that!). Here's a direct quote from the relevant portion of its Terms, Conditions, and Legal Matters:

"THE SITE, AND THE CONTENTS THEREIN, ARE PROVIDED "AS IS" AND "AS AVAILABLE," AND ALL WARRANTIES, EXPRESS OR IMPLIED, ARE DISCLAIMED, INCLUDING BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, QUIET ENJOYMENT, NON-INFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE. WE ARE NOT RESPONSIBLE FOR DAMAGE OR LOSS CAUSED BY ERRORS OF THE SITE, CONTENT ON THE SITE OR THE INTERNET. The Novel Network DOES NOT EXERCISE CONTROL OVER ANY THIRD PARTIES THAT PROVIDE CONTENT TO THE SITE AND THEREFORE PROVIDES NO REPRESENTATIONS OR WARRANTIES REGARDING SAME." (http://thenovelnetwork.com/legal.html)

So, "The Novel Network" sidesteps the matter, taking no ownership in the event banned content may appear on its site? eBay and PayPal endorse this position?  Well, if so, the solution for Smashwords is quite simple: Just add a sentence in its disclaimer that is identical to the one within "The Novel Network."

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PayPal's Censorship Debacle

Loved the story, "Two People Having Sex," a parody about PayPal's censorship nonsense. Here's a follow-up to the short-story's conclusion:

eBay, PayPal's parent company, is listing products containing the words "bestiality," "rape," "incest," and "pedophile." This fact implies that eBay does not filter products and content. If eBay and PayPal demand compliance with their arbitrary rule, then why does eBay have products listed with these words? I see no proof that the products have been screened for content and relevance. Here are some stats:

1. Bestiality: As of this writing, eBay has 72 products listed with the word "bestiality." Of these 72, 9 are books (13% of bestiality-related products), with 8 claiming to be non-fiction, with 1 being listed as fiction & literature. Focusing only on the books, can eBay certify that products sold on its site do not contain references to banned content?

2. Incest: eBay lists 437 products with this word. Of these, 363 (83%) are books, with 34 (8%) being fictional works. Of the 363, can eBay certify which ones don't contain references to the banned word/act/practice? How, if eBay is policing its own backyard, can these products be sold?

3. Rape: eBay lists 2,364 products with this word, of which 1,163 (49%) are books. 817 are listed as non-fiction, and 128 (5%) are fiction & literature. How is this possible, since PayPal must be policing its parent company's listings. With strong content filters and no possibility of grey areas, then the non-fiction titles cannot possibly contain references to the banned word/act/practice, right? Similarly, the fictional titles could not possibly exist on eBay, right?

4. Pedophile: eBay lists 67 products with this word, of which 13 (19%) are books, and 6 (9%) are listed as fiction & literature. How is this possible? How many of the 13 contain banned content, as defined by eBay and PayPal?

5. BDSM: eBay lists 1,294 products with this word. 73 (6%) are books, of which 57 (4%) are fiction & literature. By the way, eBay sells BDSM apparatus, which, I thought, would be banned as well.

 I could continue spewing stats, but it's not necessary as I proved in 100% of my searches within eBay, that this merchant violates its own (and MasterCard's) policies. I added MasterCard as an example of a card network that has banned certain products & services from its network.

Research indicates that MasterCard possesses a tool that evaluates a merchant's risk, and that if a merchant (e.g. eBay) engages in business that promotes one of MasterCard's "Deadly Sins," then the merchant will be removed from the MasterCard network. These "Deadly Sins" include child pornography, violence/hate, extreme sexual violence, and bestiality.

Can PayPal survive on its own if its parent company, eBay, is cut off from the MasterCard network? By its relationship with eBay, PayPal would be cut off, too, as (a) it processes banned-content transactions, and (b) its parent company would be unable to remain a MasterCard merchant. Once a merchant is listed as "high risk," the other card networks (Visa, Diner's Club, American Express) will likely blacklist the merchant as well. I guess PayPal can develop its own merchant and issuing network (rotsa ruck, PayPal).

Do PayPal and eBay possess the nerve to continue pressing Smashwords to conform to rules that they (PayPal and eBay) obviously cannot follow?

Finally, MasterCard cannot manage to this "Deadly Sins" issue (as it doesn't take ownership of content during the transaction process). A rule put into place, but without the means for enforcing it, would be difficult to defend in court, I'd imagine.