PayPal Faces Class-Action Lawsuit Alleging Anti-Competitive Practices

class-action lawsuit has been filed against PayPal, alleging that the company engages in anti-competitive practices that result in higher prices for consumers during eCommerce transactions.

The lawsuit, filed by Hagens Berman, a global law firm, claims that the anti-steering rules of the eCommerce payment supplier and owner of Venmo stifle competition and prevent merchants from discounting products purchases with lower-cost payment options, Hagens Berman said in a Thursday (Oct. 5) press release.

Reached for comment by PYMNTS, a PayPal spokesperson provided a statement: “PayPal continues to put our customers first in everything that we do, and we take this responsibility seriously. We are reviewing the filing and have no further information to share at this time.”

According to Hagens Berman, PayPal’s anti-steering rules restrict merchants from providing discounts or incentives to encourage consumers to use alternative payment platforms like Stripe and Shopify. As a result, consumers are forced to pay more for transactions due to PayPal’s policies and high rates, the law firm said in the lawsuit filed in the U.S. District Court for the Northern District of California.

Steve Berman, managing partner and co-founder of Hagens Berman, said in the press release: “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. Visa and Mastercard rescinded their anti-steering rules to resolve the Justice Department’s claims, and now we see PayPal doing precisely the same thing.”

The lawsuit claims that without the anti-steering rules, merchants would be able to charge less for a product purchased with a payment method other than PayPal or Venmo, or retain the same sticker price but offer a discount to consumers paying with another payment method, according to the release.

Claiming violation of federal and state antitrust laws, as well as state consumer-protection laws, the lawsuit seeks repayment to “those who paid excessive prices due to PayPal’s anti-steering rules” and injunctive relief to end those policies, the release said.

In March, a federal appeals court approved a settlement of a class-action lawsuit brought against Visa and Mastercard that involved steering. The settlement resolved retailers’ claims that the payment card networks overcharged them on interchange fees and barred retailers from steering their customers toward other payment methods that did not charge fees.