There it is, on the e-commerce websites of people selling bongs, cannabis seeds, weighing scales, hydroponics equipment, and cannabis cultivation books. It’s on the websites of marijuana advocates, left-wing activist groups, environmental organizations, gun dealers, and Bible wholesalers.
What is it? None other than the famous PayPal logo, usually accompanied by a cheerful statement proclaiming PayPal is an easy, safe and effective way to do business on the Internet.
Too bad PayPal isn’t really a safe, effective way to engage in e-commerce. In reality, PayPal is a corporate volunteer in the war on drugs and free speech.
Not My Pal
The genesis for this article came when a marijuana entrepreneur called me to complain about PayPal. The website for his company does a lot of Internet business, retail and wholesale. None of his products are illegal; they are sold in hundreds of retail outlets worldwide.
“They’ve got thousands of dollars of my money,” he screamed into the phone, panic-stricken. “I’ve been doing business through them for years. Now they’re holding months of payments made to us by customers using PayPal.
“They say they’ll hold it for six months. We have bills to pay, we need the money, but they’ve frozen the damn account. When I called them, they got nasty. They said if I were smart I wouldn’t raise any noise about this, because they had a lot of information on my customers and me.
“They threatened to nark me out! They have a lot of personal information that would be harmful if it was disclosed to law enforcement. I can’t do anything to get people’s private information off my account. They’ve got it locked down.” My friend reported that he spent hundreds of dollars on long distance phone calls and registered mail, trying to get his money and prevent his customers’ information from being provided to police agencies.
“The way they treat you is like shit,” he said. “They transferred me around, gave me false information, and held on to my money as long as they could. They so much as said that they are an information-gathering source for the police. That’s the shit I want people to pay attention to the most.”
My friend’s experience reveals that using PayPal means giving up sensitive financial and personal information and the right to keep that information private.
The PayPal user agreement makes clear you’ve signed your privacy away when you become a PayPal user. You’ve also given PayPal the right to determine which of your e-commerce transactions are acceptable or unacceptable, as defined by PayPal. If you’re a pothead or a pot entrepreneur, using PayPal means you’ve given the company the right to help get you busted.
PayPal also bans sales of “paraphernalia,” and says, “Sale of [some other drugs]may be legal in certain jurisdictions or circumstances, [but]due to safety concerns, PayPal also prohibits the sale of GHB (gamma hydroxyl butyrate), Rohypnol, and anabolic steroids.”
PayPal‘s definition of paraphernalia is whatever PayPal says it is. In cases where it’s not absolutely clear whether a product is illegal or affiliated with use of an illegal substance, PayPal actually examines the product.
They look at its marketing, the company selling it, and its packaging to determine if the product glorifies illegal drugs, or if the product is a drug use accessory marketed to illegal drug users.
Usually, only law enforcement officers, Justice Department attorneys, and prosecutors are allowed make such determinations; it appears that PayPal sees itself as a quasi-law enforcement regulatory agency.
PayPal takes voluntary action against marijuana-related sites and individuals who visit them. Such was the case with Planet Skunk, an Irish cannabis-related site. In 2003, Planet Skunk‘s site administrator received simultaneous account cancellation notices from PayPal and from an Australian licensed version of PayPal called PayMate.
Planet Skunk stated on its website that PayPal closed the company’s account without notice and would not give them the money in their account for 180 days. PayMate closed Planet Skunk‘s account without notice and kept the company’s PayMate registration fee.
Because PayPal and eBay are dominant, pervasive facilitators of e-commerce, their attacks against the cannabis community can be seen as part of the drug war’s arsenal of economic weapons. These weapons used to only include arrests, property thefts and asset forfeitures conducted by law enforcement agencies and prosecutors.
But now, PayPal is practicing its own form of asset forfeiture by temporarily holding money owed to people who’ve used PayPal to receive payment. And because there are few other easy methods for e-commerce entrepreneurs to receive payments from customers, being banned from PayPal is often a deathblow to e-commerce merchants.
In March 2005, Dutch cannabis entrepreneur Nol Van Schaik received a sudden and rude notice from PayPal.
“Dear Nol van Schaik,” PayPal‘s email said. “The PayPal User Agreement states that PayPal, at its sole discretion, reserves the right to close an account for any violation of the User Agreement, including the Acceptable Use Policy.
“Under the Acceptable Use Policy, PayPal may not be used to send or receive payments for narcotics, steroids, controlled substances or drug paraphernalia.
“We are hereby notifying you that, after a recent review of your account activity, it has been determined that you are in violation of PayPal‘s Acceptable Use Policy.
“Therefore, your account has been closed. You will need to remove all references to PayPal from your website(s) and/or auction(s). This includes not only removing PayPal as a payment option, but also the PayPal logo and/or shopping cart. We thank you in advance for your cooperation.”
Van Schaik complied with PayPal‘s corporate drug war policy, and was forced to shut down his Internet web shop as a result.
Similar economic warfare has hit members of British Columbia’s cannabis activism family.
In December 2003, Cannabis Culture publisher and international cannabis genetics purveyor Marc Emery was victimized when PayPal prevented him from using PayPal to receive donations to his Pot-TV.net Internet media network.
PayPal informed Emery of its suspension of his account “privileges” without prior notice, claiming that Pot-TV.net was “acquiring and promoting drug paraphernalia.”
Bubbleman, whose bubblebag water extraction production method is used to source medicinal glands from a variety of plants, says PayPal suspended his account in 2004, and kept $10,000 of his money for 180 days, without paying him a penny of interest.
Renee Boje, a Canada-based drug war refugee who retails legal medicinal herbs through her innovative Urban Shaman Entheobotanicals store, was repeatedly frustrated by PayPal‘s corporate reps when she tried to find out why PayPal had canceled her account.
PayPal finally sent her a cryptic unsigned email, dated Feb. 7, 2005. The email said Boje’s PayPal access was being suspended “regarding the sale of salvia divinorum, herbal ecstasy and other items.
The email explained, “Under the Acceptable Use Policy, PayPal may not be used in the sale of any dietary supplements banned by the U.S. Food and Drug Administration (FDA) or on the FDA’s Alerts list.”
At first glance, PayPal‘s email seemed to contain at least partial support for its contention that Boje violated the corporation’s draconian Acceptable Use agreement, but closer examination showed the FDA had NOT stated that specific products Boje was selling were illegal substances in the US or Canada.
It is also of note that PayPal‘s email indicated that the company was closely monitoring Boje’s business transactions and the geographic location of her customers.
Not Just Pot
PayPal doesn’t just go after herbal products and pot people. It also smashes progressive political activists and organizations.
In 2004, PayPal reportedly canceled an account maintained by the Leonard Peltier Defense Committee. PayPal gave as reason for its cancellation the fact that Peltier is a convicted felon. Of course Peltier’s Defense Committee knows he’s a convicted felon: its members, along with thousands of other people, consider Peltier to be an innocent Native American activist framed during the 1973 Wounded Knee uprising for crimes he did not commit.
The Committee’s work can hardly be considered illegal- it is an advocacy organization seeking judicial review of Peltier’s conviction. Yet, PayPal allegedly closed the Committee’s account.
In response, Michael Snedeker of the National Center for Reason and Justice sent a protest letter to PayPal, stating that his organization was canceling its account with PayPal.
“The Peltier matter alerts us that PayPal, through its anonymous informants, has assumed the role of admitting those it deems worthy of democratic participation and rejecting those it deems unworthy,” Snedeker told PayPal.
“No doubt selecting your customers is your legal prerogative. It is also our prerogative to stop giving you our money. If you wish to change your policy and start doing business with anyone carrying on the crucial, legal act of raising money for political causes – including the Peltier committee – we will be happy to sign up again with PayPal.
“Until then, we will help publicize what we believe is your misguided, dangerous misuse of corporate power.”
Snedeker isn’t the only person threatening to publicize PayPal‘s “misguided, dangerous misuse of corporate power.”
There are entire websites, among them www.PayPalsucks.com and www.PayPalwarning.com that feature thousands of complaints, action alerts, and boycott strategies designed to challenge PayPal and its parent company, eBay.
Don’t pay this pal!
So I called PayPal and tried to get their reps to answer a series of questions. I was transferred from phone to phone, and the answers people gave were non-answers and refusals to comment substantively, all designed to put me off.
I emailed PayPal. It took PayPal representatives a long time to get back to me. Initially PayPal press spokesperson Sara Bettencourt said she’d answer the questions, then she refused to answer them unless I told her which magazine I was writing for.
When I finally did get her answers, they did little to clarify whether PayPal is an active nark outfit that also steals money from users. Indeed, Bettencourt referred back to the user agreement, which I had already thoroughly reviewed, as a premise for most of her answers.
She did provide confirmation that PayPal is a nark corporation by admitting that PayPal reports illegal internet activity to police “in compliance with federal and state laws.”
In regards to claims that PayPal is taking too long to give users their money, she said, “PayPal will limit accounts if users are in blatant violation of our acceptable use policy. If a user’s account is limited, PayPal will investigate the matter promptly.
“If the investigation is not in a user’s favor, PayPal may continue to limit the account access for up to 180 days as is necessary to protect against the risk of chargebacks, or may close the account by giving the user notice and mailing a check for any funds in the account.”
According to Sara, despite claims to the contrary by Peltier’s advocates and many other political groups, “PayPal does not evaluate users’ political views when reviewing a site for violation of our acceptable use policy.”
On the other hand, she admits that “PayPal has a dedicated team that is focused on reviewing sites for user policy compliance, and they will determine after thorough investigation if an account is in violation of our policies. We maintain a proactive compliance team whose sole purpose is to stop illegal or unauthorized use of our service.
“PayPal also uses sophisticated analytical systems and third party services to help detect and stop the use of our system or illegal activities. We also work closely with our community of users to alert us to any illegal or unauthorized use of the PayPal service.”
I asked her if PayPal‘s acceptable use policies reflect the fact that medical marijuana is currently legal in 11 states, and could be federally legal if the Supreme Court backs state medpot laws in its ruling on the Ashcroft versus Raich-Monson case.
She said, “We are not in the position to speculate on future federal or state policy decisions. PayPal‘s acceptable use policy currently prohibits our service to be used for the sale of marijuana, and we have not announced any plans to change this policy.”
Of course, this answer does not explain why PayPal closed Bubbleman’s account, given that he was not selling anything illegal at all!
Bettencourt refused to reveal how many users have had accounts suspended due to violations of PayPal‘s drug-related acceptable use policies. She also refused to discuss if her company has been sued by account holders seeking compensation for PayPal‘s actions.
Some pot entrepreneurs say there are PayPal clones that offer discreet, truly safe payment options for herbalists and others who’ve run afoul of PayPal‘s corporate conservatism.
The homepage of a website called www.aboutPayPal.org sounds like it provides an alternative purchasing system; it also contains dozens of PayPal horror stories that include people losing thousands of dollars when hackers broke into PayPal accounts and created false transactions that left the customer, not PayPal, on the hook for monies owed.
“PayPal Provides you with a PayPal account, not a real merchant account,” the site warns. “Your money is deposited into a PayPal account, which PayPal controls, rather than your own bank account.
“If PayPal even wonders for a second about the validity of a transaction, they can freeze your PayPal account immediately and suck all your money out.
“They can even pull your money directly out of your personal bank account, many times without even a phone call or e-mail.
“If you think PayPal treated you unfairly and want to dispute their decision, you will be at their mercy, as PayPal plays the role of the Investigator, Judge, Jury and Executioner in all issues regarding your account. (You agreed to all of this, when you signed up.)
“Sound fair? We don’t think so. Explaining your version of what happened, in most cases seems to make no difference. They will refuse to provide you with detailed information from their investigation and will not disclose documents they relied upon to make their decisions.”
As bad as PayPal is for counterculture people, the corporation apparently isn’t the only electronic payment service company that mistreats pot people.
For example, after having his account terminated by PayPal, Bubbleman signed on with www.beanstream.com, a Victoria, B.C.-based Canada electronic cash transaction service.
“They froze over $10,000 for 180 days, saying the bubblebags were related to marijuana,” Bubbleman says. So Bubbleman tried a Montreal company www.paysystems.com.
“They terminated our account in September 2004,” he laments. “Over 200 days later they still have $7000 U.S. of our money, and they have no intention of handing it over. We did $600,000 worth of business through them up to that point; no complaints, nothing at all illegal. In fact, they complimented us on having an excellent record of customer satisfaction.
“PaySystems makes two to five percent on every transaction. They made $12,000 to $30,000 handling our sales, and then they ditch us, freeze our account, and won’t hand over our money at all.”
Bubbleman’s internet payment system saga unhappily continued when he tried using www.2checkout.com.
“We went with www.2checkout.com and yes, they cancelled our account and have held $6000 U.S. They told us they aren’t giving us the money, and ‘good luck trying,'” he reports.
Bubbleman’s experience mirrors my friend’s reality. PayPal froze my friend’s business PayPal account; apparently he never got all the money PayPal owed him. He lost about $4,000, he says, and his business credit rating was negatively affected.
He gave up trying to get fairness from PayPal when two of his customers told him they got busted because of information PayPal provided to police about their PayPal purchases of cannabis-related equipment from him or from another merchant.
“These customers were pros and they didn’t make any other security mistakes,” he said. “The only possible vector for them going down was purchasing through PayPal. We’re convinced PayPal is a corporation that thinks it’s a police force. Every time you do something through PayPal, they are scrutinizing it, to see if you’re violating marijuana laws.
“I tell everybody: Make a political statement against corporate pigs ? don’t use PayPal or eBay. Meet people in person. Barter. Send money orders or wire money. Use Western Union. Send a cheque. Send an ounce of gold.
“Just don’t use PayPal. They’re fucking narks!”