Paypal investigated by German antitrust watchdog

Online payment provider Paypal is under investigation by the Federal Cartel Office (FCO) in Germany. The company has allegedly hindered market and price competition in its terms and conditions, the German watchdog says.

Paypal is currently one of the leading online payment methods in Germany: it is used by over 50 percent of German online shoppers. The German watchdog announced its investigation  into the payment giant this week.

Restrictions for merchants

According to the German FCO, Paypal has possibly restricted market competitors in its user agreement. Merchants are currently not allowed to offer their goods and services at a lower price to customers who choose a cheaper payment method than PayPal. In addition, retailers are barred from expressing a preference for other payment methods or make their use more convenient for customers.

‘Abuse of dominant position’

“These clauses might restrict competition and violate the prohibition of abuse of a dominant position”, cartel office chief Andreas Mundt says. “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.”

“These clauses might abuse a dominant position.”

The cartel office chief further explains: “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.”

Major market player in Germany

PayPal is used by over 50 percent of Germans, making it one of the most popular payment methods. It is not only a major player in the market, the FCO writes, but also one of the most expensive. Paypal’s German rates are currently 2.49 to 2.99 percent of the payment amount plus up to 39 cents per payment.