German Watchdog Starts PayPal Probe

January 25, 2023
Germany’s antitrust regulator is investigating PayPal over claims of inhibiting competitors and restrictive price competition.

Germany’s antitrust regulator is investigating PayPal over claims of inhibiting competitors and restrictive price competition.

The proceeding, which the Bundeskaterllamt opened on Monday (January 23), addresses concerns around PayPal’s surcharging rules, as well as the "Presentation of PayPal" user agreement that applies to the country.

Under these terms and conditions merchants are not allowed to offer their goods and services at lower prices if customers choose to use a payment method that is cheaper than PayPal.

In addition, sellers are not allowed to express a preference for payment methods other than PayPal or, for example, make their use more convenient for customers.

The fees incurred by sellers for the use of a payment service differ considerably depending on the payment scheme. Sellers usually include these fees in the product prices so that ultimately consumers bear the costs incurred for payment services even if these costs, unlike shipping costs, for example, are often not separately charged to consumers.

PayPal is not only the leading online payment scheme in Germany, but is one of the most expensive online payment services, according to the Bundeskaterllamt.

According to the company’s price list, PayPal’s standard rate in Germany currently amounts to 2.49-2.99 percent of the payment amount, plus 34-39 cents per payment.

Bundeskartellamt chief Andreas Mundt said the clauses being investigated might restrict competition and violate the prohibition on abuse of a dominant position. “We will now assess the extent of PayPal’s market power and in how far online sellers depend on offering PayPal as a payment method.”

“If merchants are prevented from taking into account the differences in costs of various payment methods by imposing surcharges or granting discounts, it is more difficult for other and new payment schemes to compete successfully in terms of price and quality or to enter the market in the first place,” he said in a statement.

This could lead to power payment schemes obtaining additional pricing leeway. “Consumers in particular would also suffer since in the end they are the ones indirectly paying for these higher costs via the products’ prices.

The antitrust proceeding is based on the prohibition on abuse of a dominant position and the prohibition on abuse of a position of relative or superior market power, and in addition the belief that the company’s conduct might violate laws regarding anti-competitive agreements.

Meanwhile, in the context of the EU’s review of the revised Payment Services Directive, the Bundeskartellamt also called for abolishing the surcharge ban for certain card-based payments as these payment schemes do not always involve low costs.

Germany is not the only country looking at this. In November, the Polish competition regulator said that it was investigating complex and imprecise terms in PayPal’s contracts that it believes may breach the law.

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