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Germany probes PayPal over cartel claims

Bundeskartellamt already had a bite at FAANG firms, now former Musk co is starting to look appetizing

German antitrust enforcers known for leveling charges against high-profile tech companies have a new target for accusations of dominant market position abuse: PayPal.

PayPal is a very popular payment method in Germany, with a 2020 survey pinning it as "the most popular" method to pay online there, used by 57 percent of customers who have a preferred payment method.

Citing "market studies," the Bundeskartellamt said that PayPal isn't only the leading online payment platform in Germany, but also one of the most costly for sellers, with surcharges averaging between 2.49 and 2.99 percent plus 34 to 39 cents per payment. 

The Bundeskartellamt said yesterday that it had initiated proceedings against PayPal "on account of practices possibly foreclosing competitors and restricting price competition," the watchdog said in a statement.

At issue are two sections of PayPal's German user agreement: One that deals with surcharge rules and another on the presentation of PayPal by vendors. Per the cartel office, those clauses say that German merchants aren't allowed to offer lower prices when customers choose a different payment method to avoid PayPal's steep fees, nor are sellers allowed to express a preference or make non-PayPal payment methods more convenient.

Bundeskartellamt President Andreas Mundt said those clauses run afoul of the German Competition Act's (GWB) section 19, which prohibits abuse of a dominant market position, and GWB section 20, which separately covers "abuse of a position of relative or superior market power."

In addition, PayPal might also be violating section 1 of the GWB, which bans anticompetitive agreements between vendors – like PayPal and its German vendors. 

"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," Mundt said. "If merchants are prevented from taking into account the differences in costs of various payment methods by imposing surcharges or granting discounts … consumers in particular would also suffer since in the end they are the ones indirectly paying for these higher costs via the products' prices." Mundt added.

According to PayPal's latest figures, 45 percent of its active user accounts were outside the US as of September 30, 2022.

The boys in Bund are coming for you

If the EU is antitrust Disney World, then Germany is The Magic Kingdom and the Bundeskartellamt is Cinderella's iconic castle at the center of it all. That's not great for PayPal, who is joining the entire FAANG lineup (sans Netflix) in a list of the German cartel office's investigative targets.

In addition to the new PayPal proceeding, the Bundeskartellamt has also made Meta decouple its VR glasses from Facebook accounts, forced Amazon to adopt Ts&Cs friendlier to its sellers and targeted Apple for anticompetitive behavior and self-preferencing

The German antitrust body also recently opened an investigation of Google for making it difficult for users to opt in or out of data collection. 

In addition to ongoing cases, Mundt said conclusions were reached last year in investigations of Meta, Amazon and Google, which he said is proof of the effectiveness of extended abuse controls targeting large international digital companies added to the GWB in 2021 (section 19a).

"The digital economy remains of course at the top of our agenda," Mundt said, adding that decisions made in 2022 were the "first tangible improvements for competition and consumers." 

Of the cases that are ongoing – or those that were just opened – Mundt issued a warning to those thinking a year of results means the Bundeskartellamt is going to take a break. 

"We attach great priority to the proceedings which are still ongoing," Mundt said.

We have asked PayPal to comment. ®

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