PayPal Surcharging: FlixMobility appeals decision of Munich Regional Court
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As co-head of the global Finance & Financial Regulation Practice Groups and head of the German Finance & Financial Regulation Practice Group, I advise on national and international finance and capital markets law as well as on commercial and corporate law. I am also a member of the international steering group of our Financial Services Sector Group.
Partner
Germany
As partner in our Finance & Financial Regulation Group in Frankfurt, I advise our national and international clients on banking regulatory issues and finance law.
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FlixMobility responds with an appeal to a surprising decision of the Regional Court of Munich I (LG München) from December 2018 in favor of the German association to combat unfair competition (Wettbewerbszentrale) which prohibits surcharging for the use of PayPal. A written statement to the court is expected soon bringing the dispute to the Higher Regional Court of Munich (OLG München).
Surcharging adds a fee to a purchase price when using specified means of payment. For “common” means of payment as SEPA direct debit, SEPA credit transfer and most payment cards, section 270a BGB as part of the implementation of the second Payment Services Directive (PSD2) prohibits surcharging in Germany. In the case of PayPal (as well as other Payment Service Providers such as Sofortüberweisung) the norm’s application is disputed. As the list of covered payment schemes seems exhaustive, its boundaries were tested by the decision of LG München.
LG München offered a broad scope of application of section 270a BGB. While we wait for a written statement of the appeal’s rational, one of FlixMobility’s options in the appeal may be to ask the court for a new and more detailed assertion of the technical details and specific characteristics of payment schemes. A PayPal transaction is no transaction between bank accounts of the vendor and customer. It is neither a remittance, nor a debit transaction. Instead PayPal uses e-money that is transferred through a staged wallet. Staged wallets function in three steps. First, the customer exchanges fiat money for PayPal-issued e-money which is credited to the customer’s PayPal account. Payers (here the customer) may store account or payment card details, but are not required to do so. The e-money is used as a cash equivalent for transactions between PayPal account holders. This step is the relevant payment that is significant for the possible application of section 270a BGB which, however, does not list e-money transactions. The exchange back into fiat money is a transaction between PayPal and the payee (here the vendor), or payee may keep the e-money and use it for future PayPal transactions.
So-called pass-through wallets would demand a different treatment. They provide a scheme for the direct transaction between bank accounts of customer and vendor through the deposited account or card details. Pass-through wallets do not convert fiat money into e-money. This, however, is not how PayPal functions.
A second rationale for the appeal may lie in the legislative process. The decision recommendation of the Finance Committee of the German Bundestag explicitly excludes PayPal from section 270a BGB.
FlixMobility adapted its surcharging practices even before the decision. Also, the decision is only applicable to this particular case. The undoubted signaling effect of the verdict, however, makes the appeal scientifically relevant and practically desirable.
