Yes, I agree. A FVF on postage charged on the lowest domestic postage would be logical, from a seller's point of view, as somebody pointed out apparently happens in the USA.

However, I suspect that apart from a blatant "money grab" by eBay, the other reason for introducing the FVF on postage was to counter the few unscrupulous sellers who list an item for 99 cents  (when it is clearly worth much more than that), with a flat rate postage cost of $99, to minimise FVF. Charging FVF on lowest domestic postage may defer a few of those unscrupulous sellers, but one suspects that they would just increase their 'flat rate' postage from $99 to, say $105, to compensate...