German regulator says PayPal fee rules may restrict competition

Germany’s Federal Cartel Office said on Wednesday that PayPal’s ban on online merchants charging customers extra fees for using its payment service could restrict competition and violate antitrust law.

Germany’s Federal Cartel Office said on Wednesday that PayPal’s ban on online merchants charging customers extra fees for using its payment service could restrict competition and violate antitrust law.

The authority said its preliminary assessment focused on a PayPal policy that prevents merchants from passing on payment-processing costs specifically to customers who use the service.

PayPal, one of Germany’s most widely used online payment services, said it disagreed with the regulator’s preliminary assessment but would continue to engage constructively in the proceedings.

The cartel office, which opened an investigation in January 2023, said PayPal charged merchants above-average fees compared with other payment methods and had a very strong market position.

The authority said the restriction could make it harder for cheaper payment services to compete because merchants were unable to reflect differences in payment-processing costs in the prices charged to customers. As a result, customers had fewer incentives to choose alternative payment methods, potentially reducing competitive pressure on PayPal’s fees, it said.

“As long as PayPal has to be offered without extra charge, consumers have fewer incentives for using another payment method, which would also reduce the competitive pressure on PayPal’s merchant fees,” the authority said.

The regulator said it was also considering whether PayPal could be required to surrender economic benefits gained through the practice if a competition-law infringement were established.

PayPal has been given an opportunity to respond to the authority’s preliminary findings. No final decision has been made.