Transaction fee is fair?

Yahoo! auction site is a very popular portal in Taiwan. With 3.7 million items and the annual transaction value of NT$22 billion (2005), it owns most of the local market. It recently announced that all users will be charged 3% of transaction fees on most of the items. It aroused users' severe complaints and they accused Yahoo! of violating the Fair Trade Act.

The Fair Trade Commission began to investigate this case. According to Taiwan's antitrust law, a company, with annual revenue over 1 billion New Taiwan dollars and one third of a specific market, will qualify as a monopoly.

A user said that he/she already paid about NT$15,000 for listing his items on the site and other functions each month. Now he would be charged NT$15,000 more for transaction. This amount is enough for renting a small apartment in Taiwan! He/she decided to take away his items from Yahoo! auction site immediately. He criticized this new policy as a nasty tactic to capitalize on Yahoo!'s monopolized market.

Yet Roach Chen argued that Yahoo!'s new price policy might offer an opportunity for competitors to enter the market. An auction site could survive without transaction fees because this service is cross-subsidized by the profit from other services such as advertising. Most competitors could not replicate Yahoo!'s model. That is why other competitors lost the battle with Yahoo! in Taiwan. He added that internet business usually requires low skill and low initial fund. So "monopoly" is less serious than "cross-subsidy" in the market on internet. This is also the issue in the case of Microsoft Windows and IE.