In the last few weeks, PayPal has asked several ebook vendors including Smashwords and Bookstrand, to remove their erotica titles in order to continue service sparking a number of articles from sites like Huffington Post and TechCrunch. See “The PayPal Fiction Crackdown Roundup” at Dear Author for a background overview. Several bloggers and commenters have brought up morality and censorship, some asking how a payment transaction service can decide what vendors may sell. It’s not about morality or corporations trying to control others.
It’s about money and the law.
Some have brought up censorship and morality enforcement including the TechCrunch post which says, “it’s clear that PayPal thinks it can police the Internet.” The “morality police” claims (one comment and another,) seem to come from PayPal trying to categorize books with defined subject matter as noted by Mark Coker of Smashwords in an email to authors posted here that, “Their hot buttons are bestiality, rape-for-titillation, incest and underage erotica.” This would appear to include some mainstream and historical books, but likely this is an attempt by PayPal’s acquiring banks to differentiate obscene erotica from romance and other literature.
PayPal is trying to implement the requirements of credit card companies, banks and credit unions. This is where it’s all originating. These same requirements will eventually rain down upon every other payment processor.
This has already been going on in other industries doing business on the web including porn, gambling, dieting and tobacco. These are considered by banks as high risk (see list on merchant-accounts-services.org) due to higher than normal fraud, chargebacks, or questionably legal sales. Any vendor may be considered a high risk if their chargebacks are greater than one percent, but the banks and processors categorize certain businesses as high risk from chargeback statistics or industries that may have a history of illegal activities. It’s also to a money processor’s advantage to categorize sales of questionably obscene materials or services as high risk to charge more fees.
Vendors selling merchandise or services in these high-risk areas pay extra fees as outlined by instabill.com on their Adult Merchant Account used by some porn sites. However, porn sites still have to be careful about what is depicted due to laws about distributing obscene materials.
The US law forbids distribution of obscene materials—which are not protected by the First Amendment. The Miller Test from US Supreme Court in 1973 defines obscene material as satisfying three conditions (source):
- the average person would find that the work, taken as a whole and applying contemporary community standards, appeals to the prurient interest;
- the work depicts or describes sexual conduct in a patently offensive way, when applying contemporary community standards; and
- the work, taken as a whole, lacks serious literary, artistic, political, or scientific value.
Selena Kitt, an ebook publisher of Excessica and erotica author, makes the point on her blog that PayPal would rather not pay for high-risk accounts, and so must comply. In her search for an alternative, Selena Kitt found out that Amazon Payments have a similar rule against the sale of “‘sexually explicit materials.’” In a comment of the TechCrunch post, she continues saying that she has tried many other merchant accounts for credit card processing, including those specializing in porn sites, and turned down for “‘illegal activity.’”
Why now? PayPal has been processing transactions from these vendors for years, likely under the assumption that none of the ebooks being sold were obscene and the vendors doing their due diligence to remove obscene ebooks. Now they know, or they believe there is a risk. There is no attempt at policing the internet here. PayPal is following terms of service with banks to reduce risk.
The rising success of erotica authors has captured the attention of credit card companies that don’t want to risk becoming involved in accepting payments for (questionably) illegal sales. Ebooks containing rape, incest, or bestiality is not a problem as long as the work as a whole is considered artistic, scientific, or has literary value. Vendors like Smashwords and Excessica need to fight showing that they take care in removing purely obscene materials, and even then they may still find themselves in a high-risk category without PayPal services due to varying views on what is considered to have no literary or artistic merit. The banks and credit cards still want their fees. If there is enough profit in erotica literature, then someone will find a way to continue selling likely to come with higher fees. After all, it’s about money.
Note: I don’t read erotica, I have no knowledge if any of these vendors have ever sold obscene ebooks, and I’m not a legal expert. I think it’s fair to say there is a perceived risk of distributing obscene materials—no different than any other adult entertainment—whether that perception is based on law or monetary gain.