Friday, October 6, 2023
The lawsuit, filed in U.S. District Court for the Northern District of California, claims PayPal's anti-steering rules violate state and federal antitrust laws, as well as state consumer protection laws. It seeks repayments to consumers who have used PayPal or Venmo since 2019. It also seeks an end to those anti-steering rules.
"PayPal's excessive fees are enforced through its merchant agreement and anti-steering rules," the law firm Hagens Berman said in statement to prospective class members. The filed lawsuit names just two members of the class.
According to Hagens Berman attorneys, PayPal's anti-steering rules drive-up costs for all customers of ecommerce sites accepting PayPal and/or Venmo.
The rules are baked into the user agreement merchants must sign to accept PayPal or Venmo. The rules require that the merchant not offer any discounts or other inducements that persuade customers to use other, lower cost, payment options. Such discounts are treated as "surcharges" on PayPal transactions, which are prohibited under PayPal's anti-steering rules. Merchants are even barred from presenting other forms of payment earlier in the checkout process, the lawsuit maintains.
It's been a sweet deal for PalPal, which generated over $27 billion in revenues last year, with most of that money coming from fees, Hagens Berman stated in a press release.
"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 at the firm. "For a service named for its friendliness, PayPal is far from consumer friendly."
More than 400 million consumers have PayPal accounts, including 75 percent of all Americans, the lawsuit notes. Nearly a million U.S. ecommerce merchants accept PayPal as a means of payment, and the company reported that it processes 41 million transactions a day.
According to the lawsuit, PayPal's transaction fees are among the highest paid by merchants, with ecommerce merchants paying 3.5 percent on each transaction.
If the particulars of this class-action lawsuit seem familiar, that's because a similar lawsuit was filed against Visa, Mastercard and American Express more than a decade ago. That lawsuit was brought by the U.S. Department of Justice and 17 states in 2010, and took issue with card brand rules against merchants offering customers discounts for cash or lower-cost cards.
Mastercard and Visa immediately settled with the DOJ and the states and eighty-sixed their rules. AmEx fought the challenge, eventually winning its case before the U.S. Supreme Court.
"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," Berman said. 
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