
Amazon forces Unglue.it to Suspend Crowdfunding for Creative Commons eBooks - PanMan
http://blog.unglue.it/2012/08/09/open-thread-amazon-forces-unglue-it-to-suspend-crowdfunding-for-creative-commons-ebooks/
======
rickmb
Providing payment services to structural crowdfunding efforts is a legal grey
area when it comes to financial regulations.

Amazon is not the first to suspend taking on such accounts until they have
better grip on the regulatory implications.

~~~
DennisP
Why is it a grey area? Which regulations?

Seems like a pretty straightforward transaction to me.

~~~
adgar
Money laundering is the first giant red flag that should come to mind.

~~~
DennisP
Any brick-and-mortar shop that accepts cash and charges a lot for labor can be
used for money-laundering, but that doesn't make it illegal.

An online business is actually less useful for laundering than the brick-and-
mortar shop, since you don't have cash payments.

~~~
adgar
Brick-and-mortar shops don't have botnets.

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paulhauggis
Amazon is not a good company. I don't know why more people aren't talking
about it.

They treat their 3rd-party sellers like garbage. They make up a large
percentage of their yearly income and don't even offer any kind of support
beyond automated responses. Amazon also doesn't keep the same standard of
service as their sellers.

They have bots that will auto-ban your account with no recourse.

If a customer complains, they get their money back in 99% of the cases (even
if it's > 1 year later) without ever having to return the item (I got scammed
by many customers this way). Amazon also has no way of banning a customer, so
they can keep doing it, leaving you negative feedback, and their bots will
auto-ban you (good luck getting it un-banned after this happens). So you end
up losing all of the money and the item you sold.

If I buy an ipad and complain, Amazon (If I'm buying from Amazon.com..and not
a 3rd party seller) will make me return it before I get a refund.

I was a seller for many years and finally called it quits. They know they can
get away with it because they are biggest site on the Internet (besides Ebay).

Ebay has its problems, but at least you are treated with respect as a seller.
After moving everything to Ebay, all of my problems went away.

~~~
LoganCale
> If I buy an ipad and complain, Amazon (If I'm buying from Amazon.com..and
> not a 3rd party seller) will make me return it before I get a refund.

What's wrong with that?

~~~
delinka
The implication was that if a third party sells an iPad via Amazon, the
customer can complain, get an immediate refund, and the customer is never
forced to return the iPad to the seller.

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ckchen
From the desk of a WePay API employee: 1\. We have a 24 hour approval process
and we support rewards based crowdfunding companies; equity is wait and see

2\. Numerous companies already use us so our api is battle tested and offers
all standard features (all or nothing, real time charges, split
payments...etc)

3\. Smooth and quick onboarding process for fundraisers using an OAuth 2.0
flow. No disjointed flow or long application process for your fundraisers.
They can accept payment directly in their WePay account.

4\. No redirect on checkout. Pick from an iframe or tokenization. White label
experience for your donors.

5\. Our api was built for marketplace/platforms.

------
jack-r-abbit
So you're telling me that Amazon (who makes a pretty good living _selling_
books) shut off payment processing for UnglueIt (who seems to be working to
_give away_ books for free). Who would have seen that coming?

With all the payment services available, why go with the one that is run by
the company that your "business model" threatens most?

Edit: ok... not knowing exactly how delayed payments work for pledge style
funding, I don't know which payment services can handle that. As far as other
options, there are many. I just don't know if any others will handle the
delayed payment part. If the options truly are only PayPal and Amazon then I
see a huge hole that needs to be filled.

~~~
beedogs
What are the alternatives? (Don't say PayPal -- they seem to have a habit of
locking out these types of accounts too.)

~~~
rdhyee
(I work for Gluejar on unglue.it) We've struggled with the issue of finding
the right payment processor. We went originally with PayPal, but 7 months
after we submitted our application, we still don't have a decision (see
[http://blog.unglue.it/2012/05/03/unglue-it-payment-
options-a...](http://blog.unglue.it/2012/05/03/unglue-it-payment-options-
amazon-vs-paypal/)). Amazon FPS was easy to get started with, and we got what
seemed to be approval very quickly. So it was a bit surprising to then get
shut down by Amazon after running for a while and demonstrating unglue.it
works in practice.

We'd love to hear of alternative payment systems. I'm looking at using
subscriptions in
<https://www.braintreepayments.com/docs/python/subscriptions/> to simulate
conditional payments. [http://www.quora.com/Online-and-Mobile-Payments/What-
payment...](http://www.quora.com/Online-and-Mobile-Payments/What-payment-
solutions-besides-Amazon-can-be-used-for-crowdfunding) leads to
<https://www.wepay.com/> and <https://www.balancedpayments.com/> I'd love to
hear of people's experiences with these payment systems and any others we
should look at for unglue.it

~~~
dangrossman
Can you not get a traditional merchant account provider to approve your
business? If you accept credit cards yourself instead of through a 3rd party,
just about every payment gateway supports storing customers' info to charge at
a later time. You can also use something like SpreedlyCore to store the
payment info and have the ability to switch to different payment gateways
without losing the info.

~~~
drone
I think you're referring to an Authorization, which is valid only for a
limited time. To store enough details to re-bill a non-pre-auth transaction in
the future will get you into PCI DSS Level D compliance, which is not cheap -
to say the least. Full compliance with the PCI DSS with stored credit card
data, including PAN and CVC generally requires a number of products/services
from 3rd party vendors and a dedicated team to manage compliance.

Then, you have the issue as to whether or not the card has the amount
available in the future when you intend to charge it...

~~~
dangrossman
No, you simply send the card details to the payment gateway which vaults them.
You get back a token to reference to make the actual charges in the future.
You don't have to do an authorization up front. Virtually every payment
gateway has such a feature. There's no need to implement storage on your own
and take on the compliance burdens.

If you use SpreedlyCore, for example, you point your signup/billing form to
their server, which stores the card data then redirects back to your site, so
the user never sees anything but your site yet the payment data never hits
your server. If you use Stripe, for example, the form submission gets
intercepted by JavaScript that sends it to Stripe instead of your server, then
returns a token in a callback. If you use services like these, there's
virtually no compliance burden at all.

> Then, you have the issue as to whether or not the card has the amount
> available in the future when you intend to charge it...

You'd have that issue whether you used a 3rd party processor or your own
merchant account. Amazon Payments wouldn't have given them money when the
customers' cards had no funds either.

BTW: There is no PCI-DSS or PA-DSS level that allows storing of verification
codes, for either businesses or payment software companies. The whole point of
that code is that it's never stored.

~~~
drone
"just about every payment gateway supports storing customers' info to charge
at a later time."

"No, you simply send the card details to the payment gateway which vaults
them. You get back a token to reference to make the actual charges in the
future. You don't have to do an authorization up front. Virtually every
payment gateway has such a feature. There's no need to implement storage on
your own and take on the compliance burdens."

Neither Authorize.net nor MES do. (Two of the largest in the US, that I've
been using for the past few years.) I only know of a few specialized players
that offer such functionality.

~~~
dangrossman
Huh? Both of them do. I've been using Authnet's vault for almost 8 years. I've
also integrated with 8 other gateways that offer payment info vaulting. It's a
standard feature for any competitive gateway at this point.

[http://www.authorize.net/solutions/merchantsolutions/merchan...](http://www.authorize.net/solutions/merchantsolutions/merchantservices/cim/)

<http://merchante-solutions.com/files/MES_PaymentGateway.pdf>

I'm surprised you've been using these gateways for years and didn't know about
these features. CIM is prominently advertised on the first page you see every
time you log in to the gateway.

~~~
drone
Dang, color me educated =)

I haven't had either of those features enabled in my UI, but that wouldn't
surprise me as I've often had to ask them to re-enable basic features (like
backoffice w/ MES) when they get accidentally turned off. I'm presuming these
features need to be negotiated as part of the deal, and as I haven't needed
them, they were never brought up.

------
Irfaan
Anyone have any guess why Amazon pulled the plug? There _must_ be a reason
beyond _"Amazon has decided against “boarding fresh crowdfunding accounts at
this time”"_ \- just pulling the plug on an entire category of products willy-
nilly is a _terrible_ image for a cloud service provider to project.

~~~
gluejar
I was told that crowdfunding presents regulatory and contractual challenges
that Amazon Payments is trying to deal with. They don't want new crowdfunding
clients at this time.

~~~
pja
Something to do with the regulations for credit card payments? IIRC you can't
'pre-pay' for goods on a credit card: the merchant agreement says that you can
only be charged when you actually ship the goods.

This makes crowdfunding projects like this a little tricky, since they doesn't
map well to the legal agreements that make up the existing payment systems.

~~~
TylerE
Much more likely SEC/investment regulations.

~~~
ScottBurson
No. You're thinking of equity crowdfunding. No equity is changing hands here.

~~~
olefoo
The purchase of publication rights is an equity transaction, in that a
valuable piece of (intellectual) property is changing hands. And the law as
written is murky enough that it's not simple to say that crowdfunding of
public benefits wouldn't be covered. Not to say that Amazon couldn't be a bit
more transparent about what their concerns are. By running a crowdfunding site
under the new rules; is Amazon taking on unacceptable liabilities? Could
Amazon be held liable by funders if unglue.it failed to secure rights to a
book they had nominated to publish?

Those are serious questions that only a lawyer can answer.

~~~
ScottBurson
_The purchase of publication rights is an equity transaction, in that a
valuable piece of (intellectual) property is changing hands._

Uh, no. By that definition, every transaction would be an equity transaction.

Equity specifically refers to an ownership interest in a business.

------
mocampbell
It's pretty easy to surmise that Amazon doesn't want to facilitate crowd-
source funding for a group whose purpose is to provide free e-books.

------
unreal37
Thus is born another startup idea for someone to tackle:

Wanted: a dedicated backend for crowdfunding that other businesses can
leverage for their crowdfunding projects.

The only two competitors are Paypal and Amazon Payments, and they should be
easy to beat because they are actively turning away legitimate business.

~~~
rmc
Or payments is such a massively hard problem that it's not "easy" to beat the
incumbants.

~~~
angelbob
Guess you could start be setting up on top of, say, Stripe, and see how long
until the regulators come knock on your door.

------
kno
It’s always very sad to see these Big companies give hard times to startups
mostly for the simple reason that they can. They don't generally give a good
reason, with a generic overnight internal policy rule they will just shut down
a service. It’s even more so when you think that they too were startup. Just
hang in there Unglue.it team, implement a new payment process, it’s the hard
way to success I guess.

------
carolh12
Amazon making it up as they go? I used their payments to support a couple of
Kickstarter projects. Maybe Unglueit is seen as competitor to Kickst?

~~~
rdhyee
The fact that Amazon payments powers Kickstarter led me to think that Amazon
would allow other crowdfunding sites such as unglue.it.

~~~
donpdonp
I came to the same conclusion about using Amazon payments for
everythingfunded.com (my crowdfunding site). After testing on the sandbox and
moving to a production payment account, I got the same letter. "We are
currently not on-boarding any new crowd funding/social fundraising sites at
this time." So after some comparison I moved to Wepay. They can handle a
'marketplace' or three-party transaction and I liked that stunt with the block
of ice.

------
salman89
Perhaps there is a market for a crowdfunding payment processor. Such payment
processor could then focus on regulations and legal implications.

------
alexro
Is it at all legal for Amazon to selectively disable it's services for no real
reason? I'm surprised that it looks like this.

~~~
gluejar
why would it be illegal?

~~~
Jtsummers
The implication being that they're abusing their market position as a payment
service to prevent potential competition against their other business (book
sales). Not being able to get to unglue.it here at work I don't know the
specifics. However, since Amazon isn't (as far as I know) in anyway a monopoly
or majority concern in the payment processing business then this could be
abusive, but is likely not illegal.

~~~
gluejar
Seems unlikely.

~~~
Jtsummers
I agree, I've just heard enough people making arguments about situations like
this that I thought I'd share the reasoning they offer, and then followed it
up with why it's flawed.

For instance, I have a coworker who keeps insisting that Apple should have
been hit with an anti-trust suit like MS since they only allowed the Safari
browser on iOS (for a time). He was dead serious (for some reason he truly
hates Apple and wants to see the corporation fail, still owns an iPhone
though). It was based off a flawed understanding of the laws and the markets
the laws apply to. A lot of people seem to jump to the legality of the actions
of the group in charge of a particular platform without considering whether
that platform is one of a larger marketplace.

------
gluejar
The much longer and slightly funnier version is up on my personal blog:
[http://go-to-hellman.blogspot.com/2012/08/why-im-not-mad-at-...](http://go-
to-hellman.blogspot.com/2012/08/why-im-not-mad-at-amazon.html)

------
irollboozers
Wow, so no one in this thread chimed in on the fact that maybe it wasn't
Amazon's Payment Services that pulled the plug, but in fact the publishing
companies?

------
jamoes
Yet another reason to support bitcoin. Bitcoin empowers payments that aren't
subject to the whims of corporations (or any central authority for that
matter).

~~~
kalleboo
How would you do "pledges" in bitcoin? Credit/Debit card pledges work by only
extracting the money of the funding goes though. That seems impossible with
Bitcoin without either (1) trusting the crowdfunding site to refund you (2)
trusting the users to go through with the payment when the date hits (3) Some
kind of third-party, trusted, card company-like escrow server

------
rprasad
Title is inaccurate. Amazon did not force Unglue.it to suspend crowdfunding;
it merely forced Unglue.it to stop using Amazon as the _backend_ for their
crowdfunding payment system. Also, the license for the ebooks and the
distribution model were irrelevant to Amazon's decision. After all, Amazon
sells/gives way plenty of CC'd books.

As other comments have noted, Amazon has decided as a matter of policy not to
accept new crowdfunding customers until the legal and regulatory issues (i.e.,
money laundering, refunds, undelivered goods/failed projects, etc.) are worked
out.

You can still use Paypal (takes a long time to get approved) or Stripe (you
must set up your own backend). Alternatively, you can go directly to a card
processor (but you must then satisfy very stringent and expensive security
requirements).

~~~
duaneb
Don't forget Google Checkout.

~~~
graue
They don't do delayed payments, only immediate purchases. So that doesn't work
with a crowdfunding "pledge" model.

------
zupreme
Why not use Stripe?

While TeddyPass is not a crowdfunding app, it is a recurring billing app and
Stripe works well for it.

So why not, for every pledge, obtain a Stripe token with the project funding
date as the one and only rebill date? If the project does not fund then you
cancel the "subscription".

Again, we're not in the crowdfunding business but that's how I would do it if
I were in your position.

~~~
irollboozers
Shhhh... you're not supposed to tell anyone...

