Giant payment platform PayPal is currently dealing with a fresh antitrust lawsuit that accuses it of engaging in practices that suppress competition, particularly with rivals like Stripe and Shopify.
According to an independent investigation by U.S. law firm Hagens Berman, it disclosed that PayPal has subjected consumers to excess charges when purchasing from merchants that accept PayPal or Venmo.
The suit further states that PayPal’s merchant agreements, which all merchants must sign to accept payments via its platform, lead to consumers paying more to make purchases.
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This implies that if a merchant made a payment to a retailer that accepts PayPal or Venmo, that merchant was bound by PayPal’s agreements, meaning they paid an excess price.
Furthermore, attorneys at the U.S. court said that all consumers using non-PayPal methods of payment may have a claim and right to reimbursement, alleging that if PayPal’s agreements were transparent, consumers would quickly see a price difference between PayPal and its competitors.
PayPal’s anti-steering rules do not allow discounts on non-PayPal transactions and PayPal’s industry high fees are baked into the prices consumers pay when they purchase goods online.
In a statement, the attorneys representing the class said: “Consumers end up paying more for all transactions as a result of PayPal’s policies and industry-high rates. PayPal generated total revenues in 2022 exceeding $27 billion, most of it coming from these fees.”
Also, merchants cannot tell customers that other payment methods are more cost-effective or preferred, according to the complaint. They are even barred from presenting other forms of payment earlier in the checkout process.
The lawsuit seeks repayment to merchants who paid excessive fees due to PayPal’s anti-steering rules, as well as a request to the court to put an end to PayPal’s policies and merchant agreements that enforce these rates.
Notably, these legal actions underscore concerns about PayPal’s market dominance and its potential impact on stifling innovation and limiting choices for consumers.
PayPal for a long time has been a major player in the fintech sector, with a significant market share in various financial services, including online payments, digital wallets, and peer-to-peer transfers. Some argue that its dominant position can make it challenging for smaller fintech startups to compete effectively.
While Fintech is known for offering a wide array of financial services and products, however, if one company has too much dominance in the market, it could limit consumers’ choices by influencing which fintech services gain prominence.
This action highlights the need for regulatory authorities to closely examine the fintech industry to maintain fair competition and encourage a diverse marketplace. It is important to strike a balance between fostering innovation and ensuring a fair marketplace.