German antitrust authority probes PayPal’s no-surcharge policy

Germany’s competition watchdog has PayPal’s fee rules in its sights. The Federal Cartel Office, known as the Bundeskartellamt, has issued a preliminary assessment saying PayPal’s ban on merchants adding surcharges for its payment option may hinder competition.

The authority also says the practice could violate both German and EU competition law. It is weighing whether PayPal may have to hand back profits earned through the rule, which raises the stakes well beyond a simple clause rewrite.

What the watchdog is objecting to

The setup is fairly simple. Merchants that accept PayPal agree to contractual terms that stop them from charging shoppers extra for choosing PayPal at checkout.

Those clauses have been in place since 2018, according to the research findings. The Bundeskartellamt opened its proceedings on January 23, 2023, so this has been a slow burn rather than a surprise raid.

The concern is about who pays for what. PayPal charges merchants a standard fee of 2.49% to 2.99% of each transaction, plus a fixed charge of 34 to 39 cents per payment. The watchdog describes those fees as above average.

Because merchants cannot pass that cost on to PayPal users specifically, the expense gets spread across everyone. A shopper paying by a cheaper method ends up quietly covering part of the bill for the shopper who clicked the PayPal button.

The Bundeskartellamt argues this arrangement weakens the incentive for consumers and merchants to look for less expensive options.

Mundt’s case and PayPal’s pushback

Authority president Andreas Mundt framed the issue around price competition. He said such surcharge bans may stifle it, particularly by limiting the room for new or cheaper payment solutions to grow.

That point matters because of PayPal’s position in the market. The watchdog notes PayPal holds a high market share in German payment services, which is what turns a contract clause into a competition question.

PayPal, for its part, is not conceding the point. The company said it does not share the Bundeskartellamt’s view, but it is willing to engage constructively with the authority.

PayPal now has the opportunity to formally respond to the preliminary findings before the office reaches any final decision.

The remedies on the table

Two potential outcomes stand out. The first is an order requiring PayPal to lift its ban on surcharging, which would let merchants charge extra when customers choose it.

The second is profit disgorgement. The office said it is considering whether PayPal may have to surrender profits gained through the contested practice.

Neither remedy is final. This is a preliminary assessment, not a ruling, and the investigation remains ongoing.

A broader regulatory pattern

The case fits into a wider push by the Bundeskartellamt to scrutinize how digital platforms set their rules. The authority has been sharpening its focus on platform policies with the stated aim of protecting fair competition and consumer choice.

The EU law dimension also matters. If the authority concludes the rules breach European competition law, not just German law, the reasoning could carry weight in discussions well beyond Germany’s borders.

What this means for merchants, rivals and PayPal

For merchants, the most immediate implication is choice. If the surcharge ban falls, online sellers in Germany could start pricing payment methods differently, nudging customers toward options that cost them less to process.

That would be a meaningful shift. With fees running between 2.49% and 2.99% plus a fixed per-transaction charge, a merchant on thin margins has a clear reason to steer buyers elsewhere if it is allowed to.

For rival payment providers, the opportunity is visibility. Mundt’s argument is essentially that newer or cheaper services cannot compete on price when the price difference is hidden from shoppers.

For PayPal, the risk runs in two directions. A forced end to the ban could pressure its pricing in Germany if surcharges push customers away, and a disgorgement order would add a direct financial hit on top.