PayPal Accused of Unfair Competition in New Lawsuit

Global payment processor, PayPal, is facing a class-action lawsuit over allegations that it stifles competition with lower-cost payment platforms like Stripe and Shopify. The lawsuit has been filed by consumers represented by Hagens Berman, a law firm.

Accusations of Excess Charges

According to an investigation by the law firm’s consumer rights attorneys, PayPal has reportedly subjected consumers to excess charges when purchasing from online merchants that accept PayPal or Venmo. The lawsuit claims that PayPal’s merchant agreements result in consumers paying more for their purchases.

PayPal’s anti-steering rules stipulate that if a retailer accepts PayPal or Venmo payments, they cannot offer discounts or incentives to encourage consumers to use other payment options that cost less. These discounts are seen as a “surcharge” on PayPal transactions and are prohibited by the rules.

Complaint Details

The complaint, filed in the U.S. District Court for the Northern District of California, also states that merchants are prohibited from informing customers that other payment methods might be more cost-effective or preferred. They are also not allowed to present other forms of payment earlier in the checkout process.

Comparisons to Visa and Mastercard

The attorneys have compared PayPal’s anti-steering rules to those that Visa and Mastercard used to impose before they were sued by the Department of Justice in 2010. The policies have been described as “draconian” and “illegally anticompetitive.”

PayPal’s Response

In response to the lawsuit, PayPal stated, “PayPal continues to put our customers first in everything that we do, and we take this responsibility seriously. We are reviewing the filing and have no further information to share at this time.”

PayPal’s Market Presence

According to the lawsuit, over 400 million consumers have PayPal accounts, including 75% of all Americans. Nearly 1 million U.S. e-commerce websites accept PayPal as a means of payment, and PayPal processes 41 million transactions daily.