PayPal on Tuesday reversed a ban on the use of the online payments service for sales of electronic books portraying rape, incest and bestiality.
Anuj Nayar, director of communications for PayPal, which is owned by online auction giant eBay, announced the change of policy in a blog post on the PayPal website.
Nayar said PayPal would limit the sales ban to digital books that contain "potentially illegal images, not e-books that are limited to just text."
"The policy will prohibit use of PayPal for the sale of e-books that contain child pornography, or e-books with text and obscene images of rape, bestiality or incest," he said.
"In addition, the policy will be focused on individual books, not on entire 'classes' of books," Nayar said.
"Instead of demanding that e-book publishers remove all books in a category, we will provide notice to the seller of the specific e-books, if any, that we believe violate our policy," he said.
Nayar said PayPal was working with e-book publishers to come up with an appeals process for authors whose books are judged to violate the policy.
"Our primary interest in this matter has always been to come to a mutually agreeable solution that allows freedom of expression, while still ensuring PayPal is used in ways that fully comply with applicable laws and our policies," he said.
The Washington-based Center for Democracy & Technology (CDT) welcomed PayPal's decision.
"We're thankful to PayPal for taking the objections of authors, booksellers and free speech advocates seriously and wisely choosing to change course," said Kevin Bankston, director of free expression at the CDT.
"With this policy change, PayPal is correcting a serious mistake and setting a good example for the future," Bankston said in a statement.
"PayPal's previous threats to cut off services to e-book platforms unless they stopped selling broad categories of erotic fiction was a major misstep," he said.
"By limiting its policy to pictures rather than text and to specific books rather than whole categories of content... PayPal appears to be admitting that its previous demands to ebook publishers were far too broad and threatened to chill the availability of a wide variety of protected speech," Bankston added.
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