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Nothing.
It's the refusal to consider a partial refund that I think is wrong.
He's relying on the buyer's inertia (people often sell things on here that are the wrong size etc, because they CBA to return them) to be able to keep all the money and claim that he's put the matter right.
Of course, it's entirely up to the buyer to make that decision, but he should have the choice and not be backed into a corner.
Let's not forget who is in the wrong.
People, what's wrong with the offer of full refund? Seems pretty reasonable to me.