The German Competition Authority initiates competition infringement proceedings against a payment services provider for possibly foreclosing competitors and restricting price competition (Paypal)

Bundeskartellamt initiates proceeding against PayPal*

The Bundeskartellamt has initiated a proceeding against PayPal (Europe) S.à.r.l. et Cie, S.C.A. on account of practices possibly foreclosing competitors and restricting price competition. The proceeding deals with PayPal’s “Rules about surcharging” and the “Presentation of PayPal” set out in its user agreement applicable in Germany.

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.

Andreas Mundt, President of the Bundeskartellamt: “These clauses might restrict competition and violate the prohibition of 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. Powerful payment schemes could thus obtain 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 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.

According to market studies, PayPal is not only the leading online payment scheme in Germany but also one of the most expensive online payment services. According to the company’s price list, PayPal’s standard rate in Germany currently amounts to 2.49%-2.99% of the payment amount plus 34-39 cents per payment.

The antitrust proceeding is based on the prohibition of abuse of a dominant position (Article 102 TFEU, Section 19 German Competition Act (GWB)) and the prohibition of abuse of a position of relative or superior market power (Section 20 GWB). In addition, PayPal’s conduct might also violate the prohibition of anti-competitive agreements (Article 101 TFEU, Section 1 GWB). The present case thus also ties in with various proceedings already conducted by competition authorities against other online platforms due to so-called most-favoured-nation clauses.

To prevent excessive payment method surcharges for consumers, Article 62(4) of the European payment services directive (Directive (EU) 2015/2366) prohibits sellers from requesting separate charges for certain payment methods which were deemed to involve comparatively low costs. According to a judgment handed down by the Federal Court of Justice on 25 March 2021 (I ZR 203/19), PayPal does not fall under the scope of application of this provision. In the context of the currently ongoing review of the payment services directive, the Bundeskartellamt also called for abolishing the surcharge ban for certain card-based payments since these payment schemes do not always involve low costs (see Bundeskartellamt’s statement of 2 August 2022).

*This is the original title of the press release. The title above has been amended in order to match the e-Competitions format. Individual authors are welcome to provide original independent commentaries on the case law. Articles are subject to approval by the Board of e-Competitions Bulletin before publication based on the Editorial Policy (click here).

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German Competition Authority, The German Competition Authority initiates competition infringement proceedings against a payment services provider for possibly foreclosing competitors and restricting price competition (Paypal), 23 January 2023, e-Competitions January 2023 - II, Art. N° 110702

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