August 7, 2002 12:15 PM PDT
eBay's PayPal bid under scrutiny
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PayPal received two federal grand jury subpoenas last month concerning its processing of online gambling transactions, in addition to requests from federal regulators regarding the proposed merger with eBay, according to regulatory filings.
Before eBay announced the proposed $1.5 billion deal in July, PayPal had met with federal regulators to discuss allegedly anti-competitive practices by the auction site, the companies said in separate regulatory documents.
The new inquiries follow an earlier subpoena from the attorney general of New York regarding its online gambling business and five lawsuits that were filed on behalf of PayPal shareholders in an effort to stop the eBay-PayPal merger, alleging that the price eBay is paying for PayPal is inadequate.
The latest subpoenas regarding online gambling were issued at the request of the U.S. Attorney's Office for the Eastern District of Missouri, PayPal said in its quarterly report, filed on Tuesday. The subpoena was for documents related to its online gambling business, the company said.
PayPal "intends to cooperate fully with the United States Attorney's office in this matter," the company said in its regulatory filing.
Representatives from PayPal and eBay did not return calls seeking additional comment.
A representative from the U.S. Attorney's office for the Eastern District of Missouri declined to confirm or deny the subpoenas or whether the office was investigating PayPal.
As with other mergers, eBay's acquisition of PayPal is subject to regulatory review of antitrust concerns. The U.S. Department of Justice has already requested more documents about the merger and met with both companies, the companies said in separate regulatory filings on Tuesday. Because of their global operations, the companies could also face scrutiny from overseas regulators.
As recently as June, PayPal representatives submitted documents or met with Justice Department and the Federal Trade Commission officials as part of its allegation that eBay was engaged in anti-competitive acts toward PayPal, the company said in its quarterly report.
Representatives for the Justice Department and the FTC did not return calls seeking comment.
PayPal has been the subject of repeated legal scrutiny in recent months. State regulators from New York and other states have questioned whether the company is running an illegal bank or unlicensed money transmitter service. PayPal has since tried to address those concerns by obtaining or seeking money transmitter licenses in a number of states.
The company also faces several class-action lawsuits filed on behalf of customers who alleged that PayPal illegally restricted access to their accounts. Meanwhile, the company is involved in several patent disputes concerning its online payment system.