You're right. To clarify, what I was trying to imply by "automatic" was just that you will presumably be charged that much regardless of what PayPal's actual damages are. As I see it, it's a punitive fine that they can impose automatically without bothering to calculate actual damages for minor violations of their policies.

IANAL but that sounds like "If we charge you $2500, and you argue that that's too high, you'll lose."

Can you explain what incentive PP has _not_ to impose the full $2500 fine? I mean, it's money in their pocket, right?

Other people have pointed out in this thread that the language of the acceptable use policy is so broad that it arguably violates it to sell a Basic Instinct DVD over the Internet. Given this, PayPal obviously won't actually be pursuing every violation, but rather wants to create as many violators as possible, giving them unlimited power to close the accounts and claim damages against nearly everyone.

The people it actually takes this steps against will be those who violate some secret internal policy, presumably. They don't enforce it against every violator because the number of violators means it would destroy their business.