Veteran tech giant PayPal faces antitrust investigation in Germany. The Federal Cartel Office (FCO) has announced that it is considering rules on penalties.
Regulators are concerned that the restrictions PayPal imposes on merchants could hurt competitors and inflate costs for consumers by limiting price competition.
Provisions in PayPal’s terms that the FCO said it was considering included that traders would not be permitted to offer goods or services at a lower price if the customer chose a cheaper payment method than PayPal. increase. Sellers may not express a preference for payment methods other than PayPal or create alternative payment technologies that are more convenient for their customers.
“The fees a seller pays to use a payment service vary widely depending on the payment method. Retailers typically pass these charges on to the product price, so the consumer ultimately bears the cost of the payment service. Unlike shipping costs, for example, these are not typically reported separately to consumers,” the FCO explained in a press release. [the original is in German; this is a machine translation of that text].
“According to market research, PayPal is not only the leading provider of online payments in Germany, but also one of the most expensive online payment services. 2.49% to 2.99% of the payment amount plus 34 to 39 cents per payment.
FCO President Andreas Mundt said in a statement: Here we examine the market power PayPal has and the extent to which online retailers rely on offering it as a payment method. If merchants cannot take into account the different costs of different payment methods with corresponding surcharges and discounts, other new payment methods will not be able to gain an edge in the price and quality competition, and the market will suffer. You can’t even go out to the market. So market-dominant payment services can afford more leeway in their own pricing. In that case, the victims are especially consumers, who ultimately pay these higher costs indirectly through product prices. “
PayPal has been contacted for a response.
Germany’s antitrust activities have received greater attention in recent years, but after the country updated its competition rules at the start of 2021, the FCO gave it greater powers to aggressively address the market power of digital giants. , but the lawsuit against PayPal is not one of them. Those special abuse management cases.
An FCO spokesman confirmed that in this case they apply the “classic” competition rules. This means that regulators must determine whether they have a dominant position with respect to payments before assessing whether there has been a breach. Therefore, it may take some time to complete the procedure.
In an antitrust lawsuit filed in Europe last year over digital payments, the Dutch Consumer Markets Authority accused iOS maker Apple of accusing a dating app operating on the market of using non-Apple payment technology. Forced to allow to process in-house sales. Apple initially tried to challenge the order, but after a series of penalty payments and months of back and forth, the offer was accepted by Watchdog last summer.
The European Union has also taken notice of online payment technology in recent years, taking action last year against restrictions Apple applies to Apple Pay.
Such interventions foreshadow larger and potentially more impactful changes coming to the European Union’s tech giants this year, with a major competition reform called the Digital Markets Act being applied across the bloc. increase. This “ex-ante” regime requires market power to be assessed by proactively applying a set of fixed rules to platforms designated as competitively important “gatekeepers,” and investigations are conducted prior to remediation. Upends traditional antitrust protocols To respond more quickly and aggressively level the playing field between large companies and smaller competitors who rely on them to reach consumers.
