The Federal Cartel Office says that PayPal’s terms and conditions mean that merchants are not allowed to offer their goods and services at lower prices if customers choose to pay with a method that is cheaper than the US giant.

The regulator cites studies suggesting that not only is PayPal the leading online payment scheme in Germany but also one of the most expensive options. The firm’s standard rate is 2.49%-2.99% of the payment amount plus 34-39 cents per payment.

Andreas Mundt, president, FCO, says: "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.

"If merchants are prevented from taking into account the differences in costs of various payment methods by imposing surcharges or granting discounts, it is more difficult for other and new payment schemes to compete successfully in terms of price and quality or to enter the market in the first place.

"Powerful payment schemes could thus obtain additional pricing leeway. Consumers in particular would also suffer since in the end they are the ones indirectly paying for these higher costs via the products’ prices."