PayPal faces class action lawsuit over consumer price allegations

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A class-action lawsuit has been filed against PayPal in California over the alleged use of anticompetitive rules resulting in excess consumer fees.

In the filing, law firm Hagens Berman, representing a number of customers, accuses the payments firm of having “anti-steering” policies in place that essentially prevent the use of other payment platforms which offer lower costs, ie. Stripe or Shopify.

Some of these policies include clauses that forbid merchants who want to accept PayPal and Venmo payments from promoting and suggesting the use of other platforms that are more cost-effective or preferred, Hagens Berman explained. 

One of the real-life examples given by the law firm suggest that a box of Kleenex could cost $5.83 when a merchant sells it through PayPal, but the same box could also be bought for less if the payment method used is a credit card. 

“The Anti-Steering Rules forbid normal price competition that would otherwise benefit consumers,” the lawsuit said. “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.”

Steve Berman, Managing Partner and co-founder of Hagens Berman, added: “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. For a service named for its friendliness, PayPal is far from consumer friendly.”

This is not the first time PayPal has been accused of anti-consumer practices, with similar concerns previously being raised across the pond in Europe where German regulators found reasons to believe that the company is using its policies to undermine competition in the local market.