PayPal faces class-action lawsuit for stifling competitors.
PayPal Faces Class-Action Lawsuit for Allegedly Stifling Competition
PayPal, the popular payment processor, is facing a class-action lawsuit that accuses the company of limiting competition by restricting users to its own website. The lawsuit, filed by law firm Hagens-Berman, claims that PayPal’s merchant agreements force consumers to pay more and prevent sellers from offering discounts for using alternative payment processors.
The Impact on Consumers
The suit argues that if PayPal’s agreements were more transparent, consumers would see a noticeable price difference between PayPal and its competitors, such as Venmo. Additionally, the plaintiffs allege that PayPal prohibits sellers from informing customers about cheaper payment options available through other processors.
For example, the lawsuit provides a scenario where consumers could pay $5.83 for a product using PayPal, but less than $5.83 if they used a credit card. Alternatively, a merchant could maintain the $5.83 price but offer a coupon for customers who choose a payment option other than PayPal or Venmo. In both cases, consumers would benefit from lower prices.
Unfair and Anti-Competitive Practices
The suit argues that PayPal’s payment restrictions are “draconian” and “illegally anti-competitive,” comparing them to practices previously employed by Visa and Mastercard. These practices were challenged by the Justice Department in 2010. PayPal is currently reviewing the lawsuit, according to a spokesperson.
The Widespread Impact
If successful, the lawsuit would affect all 400 million PayPal users, including 75% of all Americans. Additionally, there are over 35 million merchant accounts on the platform in 2022, as reported by company data.
Read more: The Washington Examiner
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