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April 23, 2003 10:08am
Ricks Ebay Lawsuit Forces Change
Source: Ricks Cabaret
by: Company Press Release

(HOUSTON, TX) -- RCI Internet Services, Inc., a subsidiary of Rick's Cabaret International, Inc. (Nasdaq: Rick) and owner of the adult auction site NaughtyBids.com, has withdrawn an antitrust suit against eBay, Inc (Nasdaq: Ebay), after Ebay's PayPal subsidiary changed a policy that was allegedly permitting the leading Internet auction company to monopolize online auctions of X-rated videos, sex toys and other "mature" material.

"After receiving RCI's lawsuit, eBay/PayPal agreed to change the policy that RCI alleged to be unlawful and will now refuse to process payments for any mature audience material including eBay sales," said Max Tribble, an attorney with the Houston law firm of Susman Godfrey, which represents RCI Internet Services. "PayPal has taken a clear step back from its original position, which we believe was an attempt to eliminate competition and help eBay monopolize this segment of the online auction market."

Late Tuesday, RCI voluntarily dismissed the antitrust suit it had filed last month in the U.S. District Court for the Southern District of Texas Houston Division that alleged Ebay violated antitrust and anti-competition laws by having its PayPal subsidiary restrict processing of transactions for "adult" auction to only those items sold through eBay's own "mature audiences" section. Prior to the change, PayPal handled transactions for all adult-oriented auction sites, including the Rick's Cabaret auction network, NaughtyBids.com.

In its complaint, RCI said eBay controls over 80 percent of the adult auction market. NaughtyBids.com is the largest competitor to Ebay's "mature" section, providing a marketplace for racy videos, sexual aids such as vibrators, latex and leather products and articles of clothing signed by adult entertainment personalities. PayPal is a favored system to pay for such items since it provides security for personal information.

Travis Reese, Vice President of Rick's Cabaret responsible for the company's Internet activities, noted that the NaughtyBids.com Website "Will provide a list of alternative ways for our customers to pay for mature material if they choose not to use their personal credit cards, money orders or checks. We consider this a victory since eBay will no longer have an advantage over NaughtyBids.com, but we remain puzzled about why PayPal has decided to refuse to process any transactions in this popular category. It seems to us they are denying their customers a valuable and simple-to-use service. Fortunately there are other options."

About Rick's Cabaret

Rick's Cabaret International, Inc. (Nasdaq: Rick) is organized into two business lines: 1) Nightclubs and entertainment comprising Rick's Cabaret clubs in Houston and Minneapolis, XTC Clubs in San Antonio, Houston and Austin, and 2) Internet activities encompassing adult entertainment membership portals that provide access to third-party Websites such as www.XXXPassword.com and auction sites such as www.NaughtyBids.com that operate on a single proprietary technology platform and earn revenue by providing a marketplace for mature audience material and through Webmaster referral fees. For further information visit Ricks.com or email IR@Ricks.com.

Forward-Looking Statements:

This press release contains forward-looking statements that involve a number of risks and uncertainties. Important factors that could cause Rick's actual results to differ materially from those indicated in this press release include the risks and uncertainties as to the future operational and financial results of our Web sites, the future operational performance of our partners, the laws governing the operation of adult entertainment businesses, competitive factors, dependence on key personnel and the ability to manage operations. Rick's has no obligation to update or revise the forward-looking statements to reflect the occurrence of future events or circumstances.

Contacts:

IR and Media:
Allan Priaulx, 212-338-0050, IR@Ricks.com;

Legal:
Max Tribble, Sussman Godfrey, 713 653 7820, MTribble@SusmanGodfrey.com.

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