PayPal sued in US consumer case over ‘industry-high’ transaction fees

Payments giant PayPal was hit with a consumer antitrust lawsuit on Thursday in San Jose, California, federal court for allegedly fashioning agreements with e-commerce merchants that artificially maintain high transaction fees.

The prospective class-action lawsuit from two consumers in California and Georgia alleged PayPal’s contracts bar merchants from using price incentives to steer consumers to potentially more cost-effective payment options.

The lawsuit said PayPal, which owns Venmo, imposes the highest transaction fees among payment processors.
The case is the first ever to accuse PayPal of violating U.S. competition law through its “anti-steering” rules, said Steve Berman, one of the plaintiffs’ lawyers leading the case.

In a statement, Berman said “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.”

PayPal said in a statement it was reviewing the lawsuit. “PayPal continues to put our customers first in everything that we do, and we take this responsibility seriously,” the statement said.

The lawsuit seeks unspecified monetary damages and an injunction against alleged anticompetitive practices.
PayPal has more than 430 million active accounts and processes 41 million transactions daily, according to the complaint.

The consumers’ lawyers said PayPal’s “anti-steering rules do not serve any plausible procompetitive purpose.”
Eliminating PayPal’s merchant restrictions would let sellers “competitively price transactions,” they said, and allow “consumers to secure discounts at checkout.”

The lawsuit said Visa and MasterCard in 2010 agreed to strike rules restricting price competition in a settlement with the U.S. Justice Department.

“With payments transitioning into the digital realm, PayPal has simply ripped a page right from the Visa and MasterCard playbook,” the lawsuit said.

The case is Christian Sabol and Samanthia Russell v. PayPal Holdings, U.S. District Court, Northern District of California, No. 5:23-cv-05100-NC.