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The German Federal Cartel Office (FCO) announced that it has initiated a proceeding against PayPal Europe on account of practices possibly suppressing competitors and restricting price competition.

Specifically, the proceeding deals with PayPal’s ‘rules about surcharging’ and the “presentation of PayPal’ set out in its user agreement applicable in Germany.

The FCO charges that, 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”. PayPal previously came under EU scrutiny last year when Poland’s market regulator took the company to task over suspected illegal contractual clauses.

Assessing PayPal’s market power

“These clauses might restrict competition and violate the prohibition of abuse of a dominant position”, Andreas Mundt, President of the FCO, said about the case. “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”, Mundt continued.

German antitrust activity has been attracting a lot of attention in recent years, especially after the country updated its competition rules in 2021. That update gave the FCO greater powers to try and contain the market power and pursue antitrust violations of digital giants such as Google and Meta.

Tip: Meta fined €390 million for data processing in personalized ads