PayPal sued over high transaction fees and anti-steering policy

PayPal has been accused of artificially maintaining high transaction fees via agreements with e-commerce merchants, a consumer antitrust lawsuit has alleged.

According to the class-action lawsuit from two consumers in California and Georgia, PayPal forces merchants to agree to contracts that prevent them from using price incentives to steer customers to potentially more cost-effective payment options. The lawsuit also alleges that the Venmo owner imposes the highest transaction fees among payment processors.

This is the first time PayPal has faced a legal challenge that accuses it of violating US competition laws through its anti-steering rules.

The plaintiffs are seeking unspecified monetary damages along with an injunction against alleged anticompetitive practices.

The lawsuit argues that PayPal's "anti-steering rules do not serve any plausible procompetitive purpose,” and that "with payments transitioning into the digital realm, PayPal has simply ripped a page right from the Visa and MasterCard playbook," referring to a 2010 settlement between Visa and MasterCard in 2010 which agreed to strike rules restricting price competition.

Steve Berman, one of the lawyers representing the plaintiffs, said in a statement: "if consumers were allowed to see behind PayPal's pricing veil, they would see a clear and distinct difference between using PayPal and Venmo to complete their transactions and using its competitors."

In its own statement, PayPal said that it was reviewing the lawsuit: "PayPal continues to put our customers first in everything that we do, and we take this responsibility seriously.”

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