Payment service: Cartel Office is examining possible competition violations by Paypal

Dusseldorf. The Federal Cartel Office is targeting the payment service provider Paypal because, according to an initial examination by the authority, its fee policy in online trading could impermissibly restrict competition.

The US group prohibits retailers who offer its payment method in their online shops from charging consumers a separate fee for this, the cartel office announced on Wednesday.

The service provider is comparatively expensive. However, retailers cannot take this into account when setting their prices. Ultimately, all customers would have to pay PayPal's fees. “Paypal does not share the Federal Cartel Office’s preliminary assessment,” said a spokesman for the company.

“If merchants cannot take the different costs of payment methods into account when setting their prices, this could affect competition between payment services,” said Cartel Office chief Andreas Mundt.

“Other, cheaper providers would then have a harder time asserting themselves against Paypal,” he added. And that then has consequences for consumers, who could face higher costs as a result of PayPal's practice.

Paypal is one of the most important payment service providers in online trading in Germany, the cartel office emphasized. Merchants must pay a fee to process payments.

“According to the Federal Cartel Office’s findings to date, Paypal charges above-average fees compared to other payment methods,” said the Bonn authority. Frequent use of Paypal increased merchants' costs for payment processing.

However, due to Paypal's contractual clauses, retailers are not allowed to pass these costs on directly to Paypal users. The result: Online retailers would have to pass on the costs to all customers - including those who used other and possibly cheaper service providers.

“According to the Federal Cartel Office’s preliminary assessment, the ban on fees imposed by Paypal could affect competition in several respects,” concluded the competition watchdogs. The authority could now insist that Paypal stop the practice.

It could also skim off an economic advantage gained through a possible violation of antitrust law. Paypal now has the opportunity to comment on the preliminary assessment.

The cartel office is keeping an eye on the booming Internet economy in order to ensure competition in this area. The authority has already scrutinized a number of online giants.