PayPal faces class-action suit claiming anticompetitive pricing rules

The suit, filed in California by consumers represented by law firm Hagens Berman, says that PayPal’s anti-steering rules stifle competition against lower cost payment platforms like Stripe and Shopify.

The rules, written into user agreements that all merchants must sign to accept PayPal and Venmo payments, mean that retailers have to agree not to offer any discounts or inducements to persuade consumers to use other payment options that have a lower cost, say the attorney.

Merchants also cannot tell customers that other payment methods are more cost-effective or preferred, according to the complaint.

For example, says Hagens Berman, 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.