Germany’s Federal Cartel Office has issued a preliminary assessment that PayPal’s ban on merchant surcharges could limit competition. The Bundeskartellamt says the rule may breach German and EU competition law. It is also weighing whether PayPal should hand back profits earned through the practice. That makes the case more than a contract dispute.
What the rule does
Merchants that accept PayPal agree not to charge customers extra for using it at checkout. The clauses have been in place since 2018, according to the authority’s findings. The Bundeskartellamt opened proceedings on January 23, 2023. So this has been a slow build, not a sudden raid.
The cost issue sits at the center. PayPal charges merchants a standard fee of 2.49% to 2.99% per transaction, plus a fixed charge of 34 to 39 cents per payment. The watchdog calls those fees above average. Because merchants cannot pass the cost to PayPal users directly, the expense gets spread across all shoppers. Someone paying by a cheaper method ends up covering part of the bill for someone who clicked PayPal. The office argues this weakens the incentive to seek lower-cost options.
PayPal’s response and the market position
Authority president Andreas Mundt has framed the issue around price competition. He says surcharge bans can stifle it, especially by limiting room for new or cheaper payment services to grow. Market share matters here. The watchdog notes PayPal holds a high share in German payment services. That is what turns a contract clause into a competition question.
PayPal says it does not share the Bundeskartellamt’s view. The company says it is willing to engage constructively. It now has a chance to respond formally before any final decision.
Possible remedies
Two outcomes stand out. One is an order to lift the surcharge ban, which would let merchants charge extra when shoppers choose PayPal. The other 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, and the investigation is ongoing.
What it means for merchants and rivals
For merchants, the immediate issue is choice. If the ban falls, online sellers in Germany could price payment methods differently and nudge customers toward cheaper options. For rival providers, the case is about visibility. Mundt’s argument is that newer or cheaper services cannot compete on price when the price gap is hidden from shoppers.
For PayPal, the risk runs two ways. A forced end to the ban could pressure its pricing in Germany if surcharges push customers away. A disgorgement order would add a direct financial hit. The case also fits a wider push by the Bundeskartellamt to scrutinize how digital platforms set rules. If the authority finds a breach of EU law, not just German law, the reasoning could carry weight beyond Germany.
