The regulator said on Wednesday that the payment company’s rules may violate competition law by preventing online retailers from passing payment-related costs on to customers. The preliminary assessment marks a further development in an investigation that the authority opened in 2023.
PayPal’s policy prevents merchants from imposing an additional charge on customers who choose its service. According to the regulator, the restriction could reduce consumers’ incentives to select alternative payment methods, weakening competitive pressure on PayPal’s transaction fees.
The Federal Cartel Office also said PayPal charges merchants above-average fees compared with other payment methods and holds a substantial market share in Germany. It argued that the combination of those factors and the restrictions placed on merchants could make it more difficult for competing payment providers to attract customers.
PayPal disputed the regulator’s preliminary assessment, saying it did not share the authority’s conclusions but would continue to engage constructively with the proceedings. The company has been allowed to respond before the regulator reaches a final decision.
The authority is also considering whether PayPal could be required to surrender profits obtained through the practice. Such a measure would represent a significant financial consequence if the regulator ultimately establishes that the company breached competition rules.
The investigation highlights the regulatory challenges facing major digital payment platforms as online commerce becomes increasingly dependent on electronic transactions. Payment providers benefit from scale, consumer familiarity and merchant acceptance, but those advantages can also create barriers for smaller competitors seeking to enter the market.
For retailers, payment fees form part of the cost of processing online transactions. The ability to reflect those costs in pricing decisions may influence which payment services merchants promote or make available to customers.
The case also has implications beyond Germany. Regulators across major markets are examining the influence of large technology and financial services companies over digital infrastructure, consumer choice and commercial relationships.
However, the German proceedings remain at the preliminary stage. PayPal has not been found to have committed a final infringement, and the regulator must consider the company’s response before determining whether further action is justified.
The outcome could influence how payment providers structure merchant agreements and compete for customers in one of Europe’s largest digital commerce markets.
Republished from the existing Aldrenor collection. Aldrenor editorial archive.
