Regional court Munich surprises with decision on PayPal Surcharging
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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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For now, the decision is without legal capacity as the parties have the right to appeal. The economic interest on FlixMobility to do so however may be low. The company already reacted and going forward refrains from surcharging on any payment method. The opinion of the court will hopefully shed some light on the decision and its reasoning. Nevertheless, an assertion of a higher instance which then has the chance to once more evaluate the technical details and specific characteristics of payment schemes with more clarity and intensity is scientifically interesting and practically desirable.
In a surprising step, Munich’s regional court reached a decision on Thursday, December 13th, 2018 in favour of the German association to combat unfair competition (Wettbewerbszentrale) in its battle with FlixMobility regarding Surcharging when using PayPal. Wettbewerbszentrale, after collecting a number of complaints, sued FlixMobility for violating novelised section 270a of the German Civil Code (BGB). Contrary to the common discourse, Wettbewerbszentrale prevailed in court.
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, the implementation of the second Payment Services Directive (PSD2) prohibits Surcharging in Germany. In the case of PayPal (as well as other Payment Initiation Service providers – PISPs, such as Sofortüberweisung) the application of section 270a BGB was disputed.
PayPal, with its about 21 million users in Germany may have established itself as a “common” means of payment. Payments through PayPal do however not directly access the payer’s bank account, but operates through e-money. PayPal-issued e-money is stored in a staged wallet. This negates the application of section 270a BGB even if the e-money may be acquired through the above mentioned payment schemes. In the case of PayPal, customers may store account or payment card details, but are not required to do so. The covered type of wallet is called pass-through wallet which stores the card or account details and the payment transaction goes “directly” from the payer to the payee via the SEPA or card payment scheme without conversion into e-money at the wallet provider. This is a significant technical distinction and the court’s assessment remains incomprehensible (at least until the publication of the reasons for the decision). Undoubtedly the decision recommendation of the Finance Committee of the German Bundestag which indicates that payments with PayPal are intentionally not mentioned in section 270a BGB was neglected. Consequentially, the decision does not only apply to PayPal, but also PISPs in general. The boundaries of section 270a BGB’s wording are tested.
