Nanny PayPal Hates Porn, Won’t Let You Spend Your Allowance on It

Or, PayPal Engages in Blatant Censorship, and We Should All Be Outraged

For those of you living outside the self-publishing ebook bubble, here’s what’s going on:  PayPal is engaging in blatant censorship of ebooks by deciding that certain subjects of erotica are in violation of their terms of use.  They are demanding that online ebook sellers (Smashwords, Bookstrand, All Romance, and more) remove any ebooks for sale that contain such “obscenity.”  The cost of non-compliance is having the company’s PayPal account frozen.

That means…no one could buy anything from that online store using PayPal, not even works in compliance with PayPal’s moral standards.  If the ebook seller pays out royalties to authors via PayPal, they could not distribute those royalties to their authors.

For a lot of the ebook vendors, this is a huge issue, because PayPal is the most widely used proxy payment system whereby a small business can circumvent the burden of setting up a vendor account with the credit card companies themselves.  If you need some background to understand why, you cannot do better than this 2010 Wired article

The problem comes when these vendors rely on PayPal as the means to process all payments.  No one would think that an entity which makes its money by skimming a percentage off all your transactions would try to put a stop to any of those transactions (barring actual illegal transactions)…until it does.  PayPal’s behavior is like some Kafka-esque parody of a corporation trying to control the behavior of its customers—and the slyness with which PayPal claims its right of censorship reveals that they know this.

First, let me clarify that this is not a First Amendment issue.  The government has nothing to do with this fiasco—private companies and private consumers only are involved. As a private company, PayPal is free to set whatever terms and conditions and limitations on their service they like, and in their defense their terms and conditions do specify certain restrictions that include what is being censored from Smashwords, et al (I am focusing on Smashwords’ experience here because that is how I learned of this issue).  From their terms and conditions:

You may not use the PayPal service for activities that:

  1. violate any law, statute, ordinance or regulation.
  2. relate to transactions involving (a) narcotics, steroids, certain controlled substances or other products that present a risk to consumer safety, (b) drug paraphernalia, (c) items that encourage, promote, facilitate or instruct others to engage in illegal activity, (d) stolen goods including digital and virtual goods (e) items that promote hate, violence, racial intolerance, or the financial exploitation of a crime, (f) items that are considered obscene, (g) items that infringe or violate any copyright, trademark, right of publicity or privacy or any other proprietary right under the laws of any jurisdiction, (h) certain sexually oriented materials or services, (i) ammunition, firearms, or certain firearm parts or accessories, or (j) ,certain weapons or knives regulated under applicable law.

Emphasis added.  Do you see how they do this?  They bury their morality in a list of items that actually are illegal or directly relate to illegal activities—drugs, steroids, drug paraphernalia, hate crimes, financial exploitation of crimes, copyright infringements, privacy violations.  Oh, and obscene and sex stuff.  Do you also see how they very clearly fail to define their terms and intentionally obfuscate what specifically they are forbidding you from purchasing (for what else can such a failure to define their legal terms be but a desire to retain arbitrary judgment)?  “Items that are considered obscene.”  By whom?  In what context?  Barring a specific entity who passes judgment on what is or is not obscene, then they should define what they consider obscene.  From Mark Coker’s emails we know now they consider “obscene” and therefore unacceptable anything portraying incest, pseudo-incest, bestiality, or rape “for titillation” (the discussion of why those are not the obvious verboten topics they appear is its own post)—but PayPal does not bother to define that in their user agreements.  So you have no way of knowing in advance whether something you want to purchase with your PayPal account is “considered obscene,” because they do not tell you who is doing the considering OR what constitutes obscenity.

Note also the vagueness of their “certain sexually oriented materials or services” clause.  What does that phrase mean?  Is it just Adult XXX Superstore that I’m forbidden from buying from?  Or can I buy something from the store as long as it’s not a DVD of pornography or a dildo?  (What about the “cake topper – for novelty use only” items sold in counties that still have sodomy laws on the books forbidding sales of sex toys?)  Or is it that I can’t even use PayPal to pay for a Brazilian wax, because by their view that is a sexually-oriented service, since why would I want to be waxed “down there” for reasons other than sexual, and thus I could not even use PayPal to purchase a gift card to a salon where I might get a Brazilian wax along with my hair cut?  The ambiguity is wide.

While I reiterate that their restrictions are not precisely illegal, I find their obfuscation highly deceptive and perhaps a legal gray area.  I am certainly no lawyer, but would PayPal need to make the fact that they monitor your account for infringing activity more clear in their terms of use, since right now it seems to be admitted only when they suspend an account?  Do their millions of customers actually understand that their purchases are being watched and weighed as acceptable (or not) by PayPal—that they are not benignly scraping of 2.7% of every purchase but also casting a moral judgment on whether they will allow you to make that purchase?

The fact that they specifically bury these forbidden sex-oriented items in a long list of other (more standard) terms, separate them away from each other (so as to minimize the chances of you noticing one or either or both in your skim of their terms of use), do not define their terms, and do not say in unambiguous terms that PAYPAL IS WATCHING YOUR PURCHASES is…bordering on the unethical.

Yes, it is the responsibility of every individual to read the terms of use for any service they use (and read between the lines for what activities they implicitly allow if they accept the terms of use). That PayPal does not make these restrictions more clear implies they are aware of how unsavory those terms will be to most people—even people who do not intend to purchase such goods—because it (1) smacks of controlling what customers are or are not allowed to do with their money, which no one likes and (2) reminds people that their purchases WILL be monitored, which is uncomfortable (and probably unethical and possibly illegal, but what’s going to matter to most consumers is the sense that their privacy and anonymity are being invaded).  PayPal KNOWS such terms of use might adversely affect the willingness of most people to engage in business with them; that is why they do not make those terms crystal clear. 

PayPal is in the business of facilitating financial transactions, but they also want to be in the business of controlling their customers’ private transactions…and if more of their customers were aware of the latter, they would have fewer customers now and would have had fewer customers for a long time. They would not have been allowed to become such a ubiquitous tool of online commerce.

In Mark Coker’s second email regarding Smashwords’ move to comply with PayPal’s requirements and the continuing dialogue he is having with them, he intimated they are claiming this is a banking and/or credit card regulatory issue.  I NEED TO SEE THE LAW OR FEDERAL BUREAUCRATIC OVERREACH THEY ARE REFERRING TO BEFORE I BELIEVE THAT.  I poked into the terms of use for credit cards that I could find online, and none of them have this kind of content restriction.  Same with all banking regulations I could find, other than those operating under Sharia Law—which certainly no banking entity in America does.  So long as the transaction is not illegal—i.e., you are not buying an illegal product or service, and the charge is not fraudulent, etc.—then they don’t care what you’re buying. 

Selena Kitt offered a conspiracy theory that credit card companies are trying to equate erotica ebooks with online porn (which is a “high risk” purchase because of high returns against charges) and are raising processing fees for erotica ebooks to those of porn sites, a fee hike PayPal doesn’t want to deal with.   No Boundaries Press says the credit card companies they talked to shut down that speculation with the bottom line, “as long as you spend they don’t care [on what].”  While the libertarian in me would love to point to this and say “unintended but entirely predictable consequence of Dodd-Frank,” I really don’t think that’s the case.  I think PayPal realized they had a shitstorm of epic proportions brewing and wanted to try to spread the blame across the entire financial sector. 

Why? 

Because if there is one rule of staying alive as an internet company, it’s don’t do anything that will cut people off from what they want to buy and do online.  PayPal was an innovative idea and started as a tech-geek/finance-geek darling.  Their relentless drive to censor the internet and their customers—and the bullying tactics which rely on their dominant market position to strongarm or intimidate customers into giving into their demands—is the fastest way to make themselves irrelevant by giving their competition a leg up.

After all, this kind of moralizing may prove to be just the galvanizer a competitor (or the market) needs to knock PayPal from their current position as go-to easy money-transfer service.  I know a high percentage of bloggers and vendors concerned by this blatant censorship are looking for a way not to use PayPal.  They exist, as No Boundaries Press can attest, as can Dreamwidth (who were subjected to this same petty tyranny and voted to take their business elsewhere and maintain their integrity and intellectual freedom). Now people have an active reason to embrace the alternatives, instead of going with the path of least resistance, which at present is PayPal.  No Boundaries Press has also stepped into the new market void of where to sell the edgiest of erotica that risks censorship at the more mainstream sites, either because of their own guidelines (Amazon) or those imposed by PayPal (Smashwords, All Romance, et al).

The bottom line is that PayPal wants to be your online nanny.  They want to look over your shoulders and prevent you from making purchases they find morally repugnant, regardless of whether you do or whether the average person would.  And, worst of all, they don’t want you to know that they are doing it.

 This intrusive judgment on the part of a payment facilitator is an example of overreach from a company that believes itself immune from judgment by the market.  Step by step, brick by brick, let’s prove them wrong.  Find another payment processor—there are alternatives to PayPal, they are simply not as widely used.  Write PayPal an email or put up a blog post or a tweet about the fact that they want to nanny the internet.  Tell everyone you know who might care about censorship what’s going on. 

PayPal needs a reminder of what hubris brings.  And while they’re revisiting the Greek myths, perhaps they should read one where Zeus becomes a bull or a swan or a goat in order to rape some girl.

This is the first post about this topic.  I will have others.  For a more complete list of blog posts on this matter you can check out S.V. Rowle’s excellent round-up.

5 Comments

Filed under Digital Revolution, Ramblings, Rants and Storms

5 responses to “Nanny PayPal Hates Porn, Won’t Let You Spend Your Allowance on It

  1. Well then I’d like the names and numbers to the companies that No Boundaries talked to. Because I have had, literally, dozens of conversations with CC processors in the past two weeks and I have a colleague who has talked to at least that many herself and we have both run into the same thing from every single one – NO CC processor will allow anything related to incest, pseudo incest, bestiality or rape for titillation. Period. Including all those processors that normally take extreme adult material like CCBill and Verotel.

    My recent foray into high risk and adult merchant processors (including those offshore) has proven even further that this IS the CC processors. I was referred, through several channels, to a guy who could get an account for *anyone.* He told me personally that his company dealt with some of the most “fringe” and risky Internet businesses out there.

    He turned my application in to his underwriter who came back with an immediate NO due to “illegal activity.”

    That’s right, apparently writing FICTION about sex between two consenting adults is “illegal” now?

    But the fact remains that if you are honest and upfront to the CC companies about what is on your site, they will turn u down if it contains any of the above.

    So either No Boundaries has come up with the heretofore undiscovered most lenient processor in the world – which they should clearly share with the rest of us in the interest of the public good – or they aren’t being exactly honest with the processor they contacted about the content they will be carrying on their site.

    • Hi Selena! Thanks for clarifying your experience further. I do wonder who No Boundaries is using (they did not specify in their posts) and under what auspice. Perhaps the difference was a hypothetical versus an actual “set me up an account” conversation, i.e., their spin sounded like it would be fine whereas the realties your app made plain were not? This whole situation is disturbing and infuriating. I’ve got you bookmarked for updates…best of luck!

      • This is from the NBP blog: “I was promised by the companies i spoke with that it is PayPal NOT the credit card companies that PayPal is trying to blame.”

        They must have talked in a way that indicated PapPal was transferring blame to the CC’s. There’s a lot of finger pointing going on and it’ll be interesting to see how this plays out.

        One thing I do know (don’t remember where I read it) is that PayPal has spent a lot of time securing their rights and by doing so have had to be in the good graces of the Government, so it could be that the Government is using PayPal to tell the public what is and is not okay? I mean, they can’t break the first amendment themselves. Just another conspiracy theory.

        As for alternatives of payment processors, the good thing about PayPal is that it can easily be used internationally. So far, I haven’t seen any other such payment processor (so I have to use my credit cards instead – which I do, now).

        I just stopped by to compliment you on your post, Lily. It’s truly excellent.

      • Thank you, Erica! I am glad you enjoyed it so much.

        Mark Coker said PayPal told him the same thing–this is coming from credit card companies. If it is, I am not sure why, because none of the topics are illegal, just distasteful, and if they’ll let you charge a visit to the bunny ranch or a medical marijuana dispensary, I don’t see where they have any moral authority to stand on with other topics.

        I’m hoping to get some clarifying statements from some of these companies but, being a lowly blogger and not a news/journalism website reporter who knows if any will respond. :)

  2. Also as a truly “alternative” transaction solution – BitCoin. http://bitcoin.org/

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