Payments giant PayPal could be in trouble, as Germany’s antitrust watchdog has launched an investigation into PayPal to examine whether the U.S. online payments giant was using its position to restrict competition in the market.
Investigation of PayPal
The FCO noted that PayPal is the leading payment service in Germany but also the most expensive in the region. S’speaking on this development, FCO president Andreas Mundt said:
“We will now examine how much market power PayPal has and to what extent online retailers are dependent on PayPal’s offering as a payment method.”
Currently, the fees paid by sellers to use PayPal’s service start at 2.49% of the payment in addition to 0.35 euros per transaction. The FCO said merchants are not allowed to offer their goods and services at lower prices if customers choose a cheaper payment service. In addition, merchants cannot even express their preference for payment methods other than PayPal.
The FCO noted that this prevents rival services from entering the market while maintaining the higher surcharges. Andreas Mundt added that such a situation keeps customers at the end of the chain, as “in the end, they pay these higher fees indirectly through the price of the product“.
New legislation that arrived in 2021 gave the FCO, Germany’s antitrust watchdog, broad powers to take action against tech companies that are suspected of abusing their dominant market positions. As a result, the FCO has already opened proceedings against tech giants like Amazon, Google and Facebook.
PayPal and crypto-currencies
During the 2020-21 crypto bull run, PayPal entered the crypto space allowing users to buy and sell digital assets on the platform. Last month, in December 2022, PayPal launched its crypto offering in Luxembourg, making a breakthrough in the European Union.
In addition, PayPal is also looking to expand its crypto services in the market. In October 2022, the payment service provider began allowing its users to exchange bitcoins from the PayPal wallet to other digital wallets.
However, as PayPal continues to move into the crypto space, it must keep up with the growing regulatory scrutiny in the industry.