Background
The Bundeskartellamt, Germany’s competition authority, issued a preliminary finding on Wednesday that the surcharge‑ban policy implemented by PayPal may contravene German and European competition law. The authority formally notified three PayPal entities – PayPal Holdings, Inc., PayPal (Europe) S.à.r.l. et Cie. S.C.A., and PayPal Limited – of its assessment concerning the company’s rules that prohibit merchants from charging customers extra fees for using PayPal.
Regulatory Findings
The regulator explained that the prohibition could restrict competition between payment services because PayPal prevents merchants who accept its payment method from passing on the transaction costs to the end‑consumer. Andreas Mundt, president of the Bundeskartellamt, noted that many online merchants find it difficult to refrain from offering PayPal, while PayPal’s fees are comparatively higher than those of other payment methods. Consequently, the surcharge ban forces merchants to spread PayPal’s processing costs across all customers through product pricing, even for those who use alternative payment options. The regulator also highlighted that PayPal users lack cost transparency and have no incentive to switch to cheaper alternatives.
Legal Context and Potential Consequences
PayPal has enforced the surcharge prohibition since 2018 and retains the right to terminate business relationships with merchants who breach the rule. Under German law, merchants may charge customers for PayPal usage provided the fees do not exceed the actual costs incurred; however, extra charges are prohibited for certain other payment methods such as consumer credit cards and SEPA transfers. The Bundeskartellamt warned that the ban may prevent cheaper payment providers from competing effectively with PayPal, thereby reducing consumer incentives to adopt alternative methods. The authority indicated that the practice may violate both the prohibition of anti‑competitive agreements and the prohibition of abusive practices under German and EU competition law, and it is also considering the disgorgement of any economic benefits derived from the alleged infringement.
Procedural Status
PayPal now has the opportunity to respond to the preliminary assessment, which does not constitute a final decision. The proceeding was originally opened on 23 January 2023, and the current finding represents an intermediate step in the investigation.