Germany: Competition probe into PayPal’s GT&Cs & Landmark Supreme Court decision on judicial review of arbitral awards

Competition probe into Paypal’s GT&Cs

We all use PayPal when shopping online. But did you know that PayPal is one of the most expensive online payment schemes? Fees range between 2.49 and 2.99% of each transaction and are charged to merchants who in turn add the additional cost when calculating their final sales price. To avoid that merchants would favour competing schemes, PayPal’s GT&Cs include “Rules about surcharging” and the “Presentation of PayPal” which effectively prevent merchants from offering lower product prices for transactions that are being settled through schemes the fees of which are lower than PayPal’s (e.g., debit or credit card, BNPL etc.). “These clauses might restrict competition and violate the prohibition of abuse of a dominant position. We will now assess the extent of PayPal’s market power and in how far online sellers depend on offering PayPal as a payment method”, says Andreas Mundt, President of the German Federal Cartel Office (“FCO”).

The investigation was launched in late January and is expected to continue well into 2024. It ties in with a series of investigations into the ‘best-price’ clauses of e.g., HRS, Booking and others seen a couple of years ago. Interestingly, the latest investigation by the FCO into PayPal is based not only on the EU rules on abuse of dominance in Art. 102 TFEU and its German equivalent in Sec. 19 ARC, respectively, but also on the specific German rules on economic dependency (catching abusive behaviour even if applied by non-dominant firms). The FCO’s press release of 23.01.2023 says they will now investigate PayPal’s market position in online payment schemes, and it appears ‘economic dependency’ is the fallback theory of harm for the FCO in case the market data obtained do not support dominance (which typically requires high market shares of 40% or above).

The press release can be found here. Stay tuned to Competitive Edge for any news to come on this interesting case.

Landmark Supreme Court decision on judicial review of arbitral awards

In late 2022, the Federal Supreme Court (“FSC”) clarified that arbitral awards are subject to full judicial review including under the EU and German competition rules. "No legal system can tolerate its own courts upholding violations of fundamental norms regardless of whether these violations are manifest or obvious," the decision states.

The decision puts an end to a long-standing dispute with conflicting Higher Regional Court decisions, some of which held that an arbitral award would not be subject to full judicial review under the German & EU competition rules. The legacy theory was that the standard of review for arbitral awards was limited a violation of the ordre public (i.e., fundamental principles of law). Therefore, while it was recognized that in principle the EU and German competition rules are part of the ordre public, a violation could be argued only if the award allegedly ‘obviously’ violated these rules (whatever that meant in practice).

While the clarification from the FSC is warmly welcomed, it does not come as a surprise. Already in Orange Book Standard (a decision concerning the enforcement of standard-essential patents dating back to 2009) the FSC clarified that the competition rules are fully applicable and enforceable, including before the ordinary patent courts. Back then, the FSC argued that anti-competitive behaviour must not be ordered by an ordinary court. We see no reason why arbitral awards should have benefited from less stringent standards. The interpretation of the competition rules, nationally and on the EU level, has progressed significantly over time with a wealth of case law and guidance from competition authorities globally providing legal certainty including for arbitral tribunals.

Please find the decision here (German only)

For more information, please contact Dr. Stephan Waldheim and Maren Steiert

VISIT OUR COMPETITION & EU HOMEPAGE