eBay Extends Fraud Protection

The auction site will now cover any PayPal-related transactions, regardless of price.
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SAN FRANCISCO -- In an effort to create a friendlier environment for buyers,

eBay

(EBAY) - Get Report

will now protect the full value of a transaction for anyone making payments through PayPal.

The online auction site, which owns PayPal, said it will no longer put a cap on coverage for buyers starting this fall. It will also improve protections for all U.S. sellers by covering them against claims, chargebacks and reversals due to unauthorized payments or items that were not received.

Previously, eBay would only protect transactions valued up to $2,000 for items not received or for items that veered significantly from their descriptions. For sellers, the company had placed an annual coverage cap of $5,000, which will now be lifted.

"Today's announcement makes it simple for our customers -- we're providing protection whether a transaction costs $50 or $50,000," said Scott Thompson, president of PayPal, in a statement.

eBay is now also covering more international transactions, moving beyond the U.S., U.K and Canada and extending to shipments to 190 countries where PayPal is available.

The move comes as customers are increasingly turning to other sites besides eBay to buy and sell their wares, including

Amazon

(AMZN) - Get Report

and

Google

(GOOG) - Get Report

.

Chief Executive John Donahoe has been focused on improving the user experience since replacing Meg Whitman on March 31.

But not all of eBay's policy changes have been well received. In February, sellers

organized a boycott

after the company introduced a new fee structure, which lowered the fees sellers pay to list their auction items on the site but raised the commission charged by eBay if a sale goes through. Sellers also are no longer allowed to post negative comments about buyers, although buyers may still post criticism about sellers.

On Thursday, analyst Derek Brown of Cantor Fitzgerald reiterated his sell rating on eBay out of concern that "uncertainty and competition may increase for the company in the second half of 2008."

Brown noted in a research note that eBay may be gearing up to reduce its upfront listing fees and raise its backend listing fees one more time. He also pointed out that the company will likely tweak its algorithms for search.

But even though the changes may result in long-term improvements, Brown said "they could substantively alter eBay's monetization efforts, disrupt buyer/seller behavior, and/or negatively effect eBay's gross merchandise volume and revenue growth trajectories over the near- to medium-term."

"At the same time, we see potential changes to the competitive landscape," Brown wrote. "Most noteworthy, our research leads us to believe that Amazon.com may soon launch a PayPal-esque Payments service for use by consumers and merchants across the Web, potentially siphoning growth and/or profit from eBay's crown jewel."

Shares of eBay were recently up 10 cents to $29.03.