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Hagens Berman: Class-Action Lawsuit Accuses PayPal of Anticompetitive Pricing Rules Affecting Millions of Consumers

Attorneys say PayPal’s “draconian” policies are illegally anticompetitive and led to consumers paying higher prices for e-commerce transactions

Consumers today filed a class-action lawsuit against leading e-commerce payment supplier and owner of Venmo, PayPal, alleging it enacts illegally anticompetitive policies through its anti-steering rules that ultimately lead to millions of consumers paying excess charges annually, according to attorneys at Hagens Berman.

The lawsuit was filed in the U.S. District Court for the Northern District of California and accuses PayPal’s anti-steering rules of stifling competition against lower cost payment platforms like Stripe and Shopify. According to attorneys, PayPal’s anti-steering rules prevent merchants from discounting products purchased with these more cost-effective methods of payment. Consumers end up paying more for all transactions as a result of PayPal’s policies and industry-high rates, the lawsuit states. PayPal generated total revenues in 2022 exceeding $27 billion, most of it coming from these fees.

If you have used a means of payment other than PayPal to purchase goods online since 2019, you were likely overcharged, and may have rights to repayment. Find out more about your consumer rights.

“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,” said Steve Berman, managing partner and co-founder of Hagens Berman. “For a service named for its friendliness, PayPal is far from consumer friendly.”

Per the firm’s lawsuit, more than 400 million consumers have PayPal accounts, including 75 percent of all Americans. Nearly 1 million U.S. eCommerce websites accept PayPal as a means of payment, and PayPal processes 41 million transactions daily.

PayPal’s Unfriendly Fees & Policies

PayPal’s anti-steering rules are written into its user agreement that all merchants must sign in order to accept PayPal or Venmo payments. These rules dictate various aspects of merchants’ actions, and attorneys say without them, consumers would be able to make an informed choice between payment platforms and discern a clear cost difference revealing PayPal and Venmo as the more expensive option.

Per PayPal’s anti-steering rules, if a retailer accepts PayPal or Venmo payments, they agree not to offer any discounts or inducements to persuade consumers to use other payment options that have a lower cost. These discounts are treated as a “surcharge” on PayPal transactions and prohibited by PayPal’s anti-steering rules.

Merchants also cannot tell customers that other payment methods are more cost-effective or preferred, according to the complaint. Merchants are even barred from presenting other forms of payment earlier in the checkout process.

PayPal’s anti-steering rules state, “In representations to your customers or in public communications, you must not mischaracterize any PayPal or Venmo services or exhibit a preference for other payment methods over PayPal or Venmo services. Within all of your points of sale, you agree not to try to dissuade or inhibit your customers from using PayPal or Venmo services or encourage the customer to use an alternate payment method.”

“These draconian anti-steering rules are similar to rules Visa and MasterCard used to impose before they were sued by the Department of Justice in 2010,” Berman said. “Visa and MasterCard rescinded their anti-steering rules to resolve the Justice Department’s claims, and now we see PayPal doing precisely the same thing.”

Without PayPal’s anti-steering rules, attorneys say, the difference between PayPal and Venmo compared to competing payment options would be clear: facing PayPal’s industry-high fees, a merchant could charge $5.83 for a box of Kleenex when PayPal is used as the payment method, and less than $5.83 when the consumer paid with credit card or other payment. Or, a merchant could maintain the same $5.83 sticker price but provide consumers with a discount when they paid with a method other than PayPal or Venmo. “Either way, the price differential would result in consumers paying lower all-in prices,” the lawsuit says.

“The Anti-Steering Rules forbid normal price competition that would otherwise benefit consumers. In the absence of the Anti-Steering Rules, Plaintiffs and members of the proposed Class would have paid lower retail prices in eCommerce, output and innovation would be enhanced, and consumers would be able to make more informed market choices among payments solutions,” the lawsuit states.

The lawsuit brings claims of violation of federal and state antitrust laws, as well as state consumer-protection laws, and seeks repayment to those who paid excessive prices due to PayPal’s anti-steering rules, as well as injunctive relief to put an end to PayPal’s anticompetitive policies.

Find out more about the antitrust consumer lawsuit against PayPal for ecommerce transaction fees.

About Hagens Berman

Hagens Berman is a global plaintiffs’ rights complex litigation law firm with a tenacious drive for achieving real results for those harmed by corporate negligence and fraud. Since its founding in 1993, the firm’s determination has earned it numerous national accolades, awards and titles of “Most Feared Plaintiff’s Firm,” MVPs and Trailblazers of class-action law. More about the law firm and its successes can be found at Follow the firm for updates and news at @ClassActionLaw.


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