Simple, convenient and fast: the online payment service PayPal is very popular in Germany.

Various studies see him as the leading provider in this market.

But the strong position may have a downside: The Federal Cartel Office suspects that PayPal is using its role as favorite to hinder competitors and keep prices high.

On Monday, the Bonn competition authority therefore initiated proceedings against the Luxembourg-based European company.

Helmut Buender

Business correspondent in Düsseldorf.

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Specifically, it is about two clauses from the terms of use in Germany.

In its “rules on surcharges”, the payment service prohibits affiliated trading companies from discounts on goods and services if customers choose a cheaper payment method than Paypal.

The Cartel Office has already taken similar action against other online platforms such as Booking.com, which are trying to force the best prices for themselves.

The competition watchdogs also do not want to accept that PayPal prohibits merchants from expressing preferences for other payment methods or making their use more convenient for customers.

High fees?

"These clauses could restrict competition and constitute a violation of the ban on abuse," said Cartel Office President Andreas Mundt.

If merchants were prevented from taking into account the different costs of different payment methods through surcharges or discounts, other payment methods would be crowded out or not even come onto the market.

“Consumers would then suffer in particular, as they ultimately pay these higher costs indirectly through the product prices,” said Mundt.

A reaction from PayPal was initially a long time coming.

Paypal shares fell more than 2 percent in premarket US trading, but that could also be related to reports of a new rival product.

In the next step, the Cartel Office now wants to examine more closely to what extent online retailers are dependent on offering Paypal as a payment method.

The Händlerbund, an industry association of online retailers, refers on its website to an analysis by Statista Global Consumer Survey, according to which PayPal is highly valued by online buyers.

With a popularity value of 93 percent, PayPal achieved by far the best value in this survey, ahead of competitors such as Klarna, Amazon Pay and the payment services from Google and Apple.

While the payment is free for buyers, Paypal asks retailers to pay heavily: the cartel office refers to investigations that show that the company is one of the most expensive online payment services.

According to the PayPal price list, the standard fee in Germany is currently 2.49 to 2.99 percent of the payment amount.

In addition, there would be 34 to 39 cents per payment.

Unlike the shipping costs for the packages, these costs are usually not shown separately on the end customer invoice.

The proceedings against Paypal are being conducted using the “classic” instruments of competition law.

The special regulations for the digital economy, which give the Cartel Office greater rights and shorten the court process, are not applied.

These apply to Internet companies with "outstanding cross-market importance" for competition.

So far, the Cartel Office has classified Apple, Google, Amazon and Facebook (Meta) in this category.