How PayPal fumbled in the Wikileaks controversy

By Kevin Kelleher
December 9, 2010

A unique feature of the web is that it was designed by idealists and capitalists alike. A hacker sensibility fights for an open, democratic structure, while profit-minded businesses helped shape it into a thriving industry. The more successful companies, like Google and Facebook, understand both ethics equally.

But idealism and commerce often clash as well, and woe to the company that is caught in the crossfire. This week, PayPal is such a company. The eBay online-payments subsidiary suspended the account that Wikileaks used to handle donations, citing a violation of terms that prohibit “activities that encourage, promote, facilitate or instruct others to engage in illegal activity.”

The business logic seemed clear enough: Avoid the wrath of the U.S. State Department and steer the company away from the Wikileaks controversy. But it quickly backfired. Not everyone agreed Wikileaks was engaging in illegal activity, and many hackers and other idealists not only boycotted PayPal, they hit the company with denial of services attacks.

In a web conference in Paris, a PayPal executive was booed by the audience when he tried to explain why it shut down Wikileaks’ account. It later emerged that all it took was a letter from the State Department claiming Wikileaks was illegal. The PayPal executive, VP of Platform Osama Bedier, told the audience, “One of the signs that you’re a successful payments company is that hackers start to target you, this case isn’t anything different.”

That may be true as far as it goes, which isn’t very far. Again, web companies thrive when idealism and profits are in harmony, not when they are opposed. PayPal miscalculated how strongly many of its customers feel about the issue, and caving in under pressure that was no weightier than a letter doesn’t look very good.

Which is unfortunate for PayPal, because it is more vulnerable to the controversy than other companies. Many online shoppers are threatening to boycott Amazon along with PayPal, but Amazon has long been accepted by the mainstream consumer, which has never been quite comfortable with PayPal.

Similarly, other online-payments companies, like MasterCard, suffered denial of service attacks. But unlike MasterCard, PayPal has a reputation as a buggy, sometimes unreliable payments processor. Complaints about the company – about its customer service and its penchant for shutting down accounts for little reason – won’t be helped any by any disruption caused by the denial of service attacks.

Perhaps PayPal does believe Wikileaks deserves to be shut down, but if so it misread how divided its customer base would be on the issue. Taking a stand for free speech might have brought a different set of problems, but it would have been truer to the spirit that built the web.

15 comments

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This one-sided anti-American propaganda is just the thing Big Brother is looking for to justify controlling Internet content. Free speech means nothing if you defend everything even murderous abhorrent behavior. You just helped the FCC build the gilded cage you will soon lament living in.

Posted by vicvow | Report as abusive

Poor decision making may bring consequences far beyond expected.

Posted by Dr.Tubarc | Report as abusive

Well, was ok for the Bush Goverment to uncover the CIA agent Valerie P. and really endangered her life, while is not ok for wikileaks to uncover the garbage of dirty politicians, probably all those who are asking to prosecute and kill assange have something to dirty to hide, there is really no justice in this world.

Posted by wikijustice | Report as abusive

The tone of this article, unfortunately, is gross materialism. The implication seems to be to do whatever the public wants regardless of principle when there are perceived or worse, real differences. What happened to taking a stance rather than vacillating?

Posted by groggie | Report as abusive

Paypal jumped the gun and acted too quickly. Wikileaks deserves better treatment. It has done good work. I would hesitate to use Paypal after this incident. I had been using the service more this year but will look for another means of transferring money

Posted by transendit | Report as abusive

How much would it have cost PayPal to try their message out on a Focus Group or two ? Considering how much is at stake to the company, the public, and its Brand, its worthwhile investment in taking a difficult decision.

In fact, it is still not to late to reevaluate, and make a stronger case, or even to change course.

Posted by robertfkh | Report as abusive

These kind of articles give out the wrong information. The majority of users dont agree with what Wikileaks is doing. Hackers and free speech activists are very vocal and tend to go on media platforms but it doesnt always reflect the views of the entire public. No true American or citizen of any other country will want their dirty linens hung in public. Only hackers and nerds and extremists hate their countries that much. People will just go on and keep using PayPal. Those boycotting PayPal are too few to make any difference. And please stop calling this a fight for free speech because it is not. You cannot have one freedom charter item violate another freedom charter item. You cannot talk of free speech when you are violating another man’s right to privacy. You cannot talk of free speech when you are exposing another man to his death. (like in the case of Us soldiers in battle). If America was not the democratic country it is, this could lead to a war. This is actually an act of war on America. I dont what else is!

Posted by HistoryLesson | Report as abusive

These guys are criminals..calling it Free Speech is a joke..

Boycotting is fine, doing harm is not…

Posted by plcombs | Report as abusive

PayPal denies or cuts off service to individuals, Websites and businesses every day. Not capriciously or due to a lack of ethics, but because they have ethics and abide by their Terms of Service. PayPal made a business decision; they don’t feel comfortable doing business with Wikileaks. Would you rather they didn’t enforce their Terms of Service? There are already too many Websites with Terms of Service that are nothing more meaningless pixels. I’m sure Reuters has turned down advertisers, deleted comments or passed on editorial content they considered unacceptable for one reason or another. That is every Websites prerogative, including Wikileaks. PayPal’s only crime against the Internet community was not pulling the plug on Wikileaks at a more opportune time. If you don’t like PayPal’s policy decision, use a different transaction vendor. There is no excuse for DDoS attacks.

Posted by Ther | Report as abusive

“states that our payment service cannot be used for any activities that encourage, promote, facilitate or instruct others to engage in illegal activity.”
Freedom of speech is illegal according to Paypal!
I was a customer of Paypal for many years. Not any longer! Paypal is a company that acts unethically and pretends to be a Bank. What Paypal call “Acceptable Use” is just a cover up, and we all know that. Freedom of speech should not be a crime, not in the USA, or any other country.
If to be able to publish what our governments are doing is NOT consider “Acceptable Use”, we should not do business with such a company. Bye bye Paypal I hope I’m not alone on this decision.

Posted by uuugb | Report as abusive

I won’t use PayPal again, and when it’s possible to use an alternative to Amazon, Visa, and Mastercard, I will use it. I regard it as outrageous that private companies who are supposedly in business to provide services to their customers should have the effrontery to try to prevent their customers making their own choices about who or what to spend their money on, because those companies would rather act as a branch of the State Department! (Or whichever bit of the US Govt is leaning on them.) In fact I had started out with mixed feelings about the activities of Assange and Wikileaks, but on hearing about the way that concentrations of public and private power are, frankly, abusing their powers to hound an inconvenient individual, my response is to want to make a donation to Wikileaks (for the first time) to stand against this Big Bullying Brother nonsense. Political and profit-making corporations acting like this need slapping down firmly and quickly.

Posted by ElleKay | Report as abusive

@Historylesson

The issue is not if you agree to make all this info public or not. If the US has a mole that gives all this info to wikileaks, they should do their homework, fins the mole and bring him to trial. Will you sue Reuters because they are giving info about the leaks given by wikileaks? What will be next??

Everything stinks on the way that governments are handling this issue. For me, two basics:

1/ Today, the difference between dictatorships and so called western democracies is free press. Politicians do as they want, only press manages to keep them a little on track. Kill that and we become just another China.

2/ Where is presumption of innocence for Assange? The guy has been judged before even stepping in court.
It’s pretty scary, it seems that we are free as long as we don’t piss off powerful people

It’s scary the names involved: Swedish government, VISA, Master Card, Paypal, Amazon, swiss banks… all bending to whatever pressure they are getting.

Posted by Make | Report as abusive

@ HistoryLesson – America is the same country that secretly tested biological weapons on its citizens in the subways of Philly, and secretly exposed unknowing test subjects to nerve gas. How you can trust them with any secrets is beyond my understanding. Our government is run by men and thus cannot be trusted with everything being kept secret from the public on which they are in existence to serve.

Posted by VdubTDI | Report as abusive

It appears there are actually two distinct questions here:

(1.) Does Wikileaks’ actions justify reducing or eliminating it to conduct financial transactions which in and of themselves are legal and perfectly legitimate?

(2.) At what point should a private company voluntarily agree to cooperate with the government [in countries where they have a choice, that is]?

Obviously, the first question is turning out to be extremely controversial, and in that controversy, it has become somewhat conflat.ed with the second, which is why I’m pointing out here those questions are distinct from each other.

For now, at least, the answer to the first question affects mostly just the one organizaton, Wikileaks.

However, the second question is more immediately of concern to the broader general public, and is one that has already arisen in American public discourse in other contexts, such as our reaction to 9/11. Think “Patriot Act.” And think “National Security Letters.” And “warrantless wiretapping.” And “Guantanamo and renditioning.”

And now, an unsupported letter from the Department of State was enough of a crack of the whip to get Paypal to fall straight in line with State’s wishes.

For Paypal to accommodate State’s wishes may turn out yet to have been the right move. However, even if so, I feel it did so for insufficient reason, maybe even the wrong reason.

Though there are many intelligent people who disagree with me, I remain entirely unconvinced that a simple letter by itself amounts to anything more than a “note from Mommy” — hardly a document that should compel obedience by its recipient. (That’s what sticks in my craw about National Security Letters.)

Let me be perfectly clear: I am *not* defending Wikileaks. I am, in fact, appalled by the release of some of the documents, such as those exposing meant-to-be private conversations with members and leaders foreign governments, and of our diplomats’ frank, candid assessments of people and situations in other countries. We already see foreign governments reducing their contacts with our diplomats, reducing those diplomats’ abilities to carry out their duties fully.

Posted by MekhongKurt | Report as abusive

Paypal looks like a bank to me. They’re regulated like a bank in Europe. Why aren’t they regulated like a bank here in the US? Someone really needs to investigate this further.

Posted by Anon_Mike | Report as abusive

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