FCO Examines PayPal’s Rules on Surcharges
The Federal Cartel Office (FCO) in Germany has announced an investigation into PayPal’s rules on surcharges, citing concerns that the restrictions imposed by the company could be harming competitors and inflating costs for consumers. The regulator is examining clauses in PayPal’s terms that prohibit merchants from offering their goods and services at lower prices if customers choose a cheaper payment method than PayPal.
Restrictions on Merchants
The FCO has identified two key issues with PayPal’s rules:
- Price restrictions: Traders are not allowed to offer their products at lower prices if customers choose a cheaper payment method than PayPal.
- Payment preference: Sellers are restricted from expressing any preference for payment methods other than PayPal, or making alternative payment technologies more convenient for customers.
Fees and Costs
The fees paid by sellers for using a payment service vary significantly depending on the payment method. Retailers typically pass these costs onto consumers, who ultimately bear the burden of the payment services, even if these costs are not reported separately to consumers.
Market Dominance
According to market studies, PayPal is not only the leading provider of online payments in Germany but also one of the most expensive online payment services. The company’s standard fee in Germany is currently 2.49 – 2.99 percent of the payment amount plus 34-39 cents per payment.
FCO Investigation
Commenting on the investigation, Andreas Mundt, president of the FCO, stated: "These clauses could restrict competition and constitute a violation of the prohibition on abuse. We will now examine what market power PayPal has and to what extent online retailers are dependent on offering PayPal as a payment method."
Potential Consequences
If merchants are prevented from taking into account the different costs of various payment methods with corresponding surcharges or discounts, other and new payment methods may struggle to compete in the price and quality competition. This could result in payment services with market power gaining further leeway for their own pricing.
Antitrust Action in Europe
The FCO’s investigation is part of a broader trend of antitrust activity in Europe, where regulators are increasingly scrutinizing the practices of digital giants. In 2021, Germany updated its competition rules, arming the FCO with greater powers to proactively address market power.
Classic Competition Rules
In this case, the FCO will be applying "classic" competition rules, which means that the regulator will first need to determine whether PayPal has a dominant position in the market before examining the company’s practices.
Related News
- FAA had to divert flights because of SpaceX Starship explosion
- TikTok CEO plans to attend Trump inauguration
- TikTok ban poised to be delayed as Trump explores ways to extend deadline
Stay Up-to-Date
To stay informed about the latest developments in antitrust regulation and digital policy, follow TechCrunch’s coverage of these topics.
