Should PayPal Be Allowed to Dictate eBookstore Content?

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Should PayPal Be Allowed to Dictate eBookstore Content? Listen to this article

Should PayPal Be Allowed to Dictate eBookstore Content?

Now here’s a slightly unusual, and extra sticky, case of censorship. Smashwords sells all sorts of self-published works, from regular old fiction to instructional works, to erotica. It’s that last category that has Paypal’s metaphorical undies in a bunch, and in a really upsetting turn, they’re using their position as a payment processor to force Smashwords to pull titles. (Warning: Some of the links below are NSFW)

According to The Digital Reader, Smashwords made this announcement over the weekend:

This email is being sent to all authors, publishers and agents who have published erotica at Smashwords. We will also post this message to Site Updates and the Press Room.

According to our records, you pubish [[count_published_erotica_books]] erotica-categorized title(s) out of [[count_published_books]] title(s) now live in the Smashwords system. This message may or may not pertain to you.

Today we are modifying our Terms of Service to clarify our policies regarding erotic fiction that contains bestiality, rape and incest. If you write in any of these categories, please carefully read the instructions below and remove such content from Smashwords. If you don’t write in these categories, you can disregard this message.

PayPal is requiring Smashwords to immediately begin removing the above-mentioned categories of books. Please review your title(s) and proactively remove and archive such works if you are affected.

I apologize for the short notice, and I’m especially sorry for any financial or emotional hardship this may cause the authors and publishers affected by this change.

As you may have heard, in the last couple weeks PayPal began aggressively enforcing a prohibition against online retailers selling certain types of “obscene” content. For good background on the issue, see this Selena Kitt post here – http://selenakitt.com/blog/index.php/2012/02/19/slippery-slope-erotica-censorship/ or here – http://theselfpublishingrevolution.blogspot.com/2012/02/slippery-slope-erotica-censorship.html#comment-form or this Kindleboards thread here – http://www.kindleboards.com/index.php/topic,104604.0.html

On Saturday, February 18, PayPal’s enforcement division contacted Smashwords with an ultimatum. As with the other ebook retailers affected by this enforcement, PayPal gave us only a few days to achieve compliance otherwise they threatened to deactivate our PayPal services. I’ve had multiple conversations with PayPal over the last several days to better understand their requirements. Their team has been helpful, forthcoming and supportive of the Smashwords mission. I appreciate their willingness to engage in dialogue. Although they have tried their best to delineate their policies, gray areas remain.

The Digital Reader has the full email, which mainly gets into the details of what is/is not acceptable  (bestiality, incest, rape themes are all being banned.) This is a really, really, awkward situation. Personally, all three of those creep me out, but they’re not technically illegal. What really worries me is what PayPal is going to ask for next, because this isn’t really about the content.

At least, not according to one of the sources Smashwords provides. If you read Selena Kitt’s post (FYI: her site is NSFW), she says in her research it comes down to fees. More people have buyer’s remorse on pornographic titles, and so they have their credit card companies reverse the charges. It looks like PayPal sees this in dollars and cents, and the costs are higher for adult content. From Selena Kitt’s site:

What I discovered was that most merchant-services (i.e. companies that allow you to use Visa and MasterCard on their site) which allow adult products charge a $5000 up-front fee to use their service. Then, they take exorbitant percentages from each transaction. Some 5%, some 14%, some as high as 25%.

Now it was starting to make more sense. The credit card companies charge higher fees for these “high-risk” accounts because there is a higher rate of what they call “chargebacks.” You know that protection on your credit card, where if you dispute the charge, you don’t have to pay for it? Well they’ve determined that happens more with porn and gambling and other “high-risk” sites than others, so they’re justified in charging more money to process payment for those sites.

PayPal doesn’t want to have to pay Visa and MC for carrying “high risk” accounts on their books. You have to remember that PayPal is a middleman. Sites that carry high-risk material have to pay the high-risk costs of doing business. If you’re going through PayPal, you don’t have to pay that. Until PayPal catches you. And then they insist you take down your high-risk content or lose your account.

It’s a plausible-ish explanation…it’s not the content, no, go ahead and download the dirty books to your heart’s content, it just costs too much to process. Riiiiight. That’s all it is. So regular erotica is ok, but as soon as it hits a controversial and taboo area, it’s out. Somehow, it’s a controversy that seems to be expensive, not content. My concern is that if this is about PayPal cutting costs, where do they draw the line? Are they going to squeeze out regular erotica next? If they find there are chargebacks on historical fiction, will that be on the chopping block too?

Honestly, I don’t believe this is a business decision. It’s driven in some part by distaste over the content, and it’s upsetting to see PayPal leveraging their influence over Smashwords to force a change in what they sell. Again, as far as I understand, the titles were distasteful, but not illegal. PayPal had an issue, and since it’s prohibitively expensive to find another solution, Smashwords caved. No one wins here, because while certain categories were out today, it’s only a matter of time before the restrictions become more onerous.

Censorship and books is never a pretty subject, and this one, with a mix of bad business decisions and moral objections, is especially messy. I’ve made it pretty clear I don’t agree with PayPal, and while I don’t blame Smashwords for protecting the bulk of their business, it’s unfortunate they were put in this situation. I don’t see how this can’t lead to PayPal and other payment processors demanding vendors follow certain rules of content and morality, and it’s just a little too close to a digital book burning for my tastes.

What’s your take on this conflict? Let us know in the comments!

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About the Author

Zek
Zek has been a gadget fiend for a long time, going back to their first PDA (a Palm M100). They quickly went from researching what PDA to buy to following tech news closely and keeping up with the latest and greatest stuff. They love writing about ebooks because they combine their two favorite activities; reading anything and everything, and talking about fun new tech toys. What could be better?