PayPal Holdings is being under investigation by the Federal Trade Commission (FTC), due to possible unfair practices by the company’s payment service Venmo, said the company in a SEC filing Thursday.
The Federal Trade Commission is investigating the payment service because it violated the Federal Trade Commission Act. Which is a federal law that protects consumers from unfair and deceptive practices in the marketplace, as well as to prevent businesses from engaging in monopolizing practices.
The demand against PayPal was issued on March 28, by the law firm in charge of the case, Faruqi & Faruqi, LLP, which is an important national security law firm. The national security law firm Faruqi & Faruqi.
— PayPal (@PayPal) April 27, 2016
PayPal filed a quarterly report on Form 10-Q, a month later, saying what the Federal Trade Commission was doing. The report stated that they received the Civil Investigative Demand on March 28, by the Federal Trade Commission. The demand requested documents and written questions related to Venmo.
“CID could lead to an enforcement action and/or one or more consent orders, which may result in substantial costs, including legal fees, fines, penalties, and remediation expenses and actions, and could require us to change aspects of the manner in which we operate Venmo,” said the company on the report.
Peer-to-peer payment service
PayPal stock went down to 2.71 percent, to $38.99, on Friday morning, right after the company made the report about the Federal Trade Commissions’ investigation on Venmo.
— Kevin Zemnickis (@KevZem) April 28, 2016
Venmo is a peer-to-peer payment service that allows user to transfer money online. This service processed $3.2 billion payments in total, during the first quarter of 2016.
The founder of The Street, Jim Cramer, said that analysts are being somewhat skeptical, since these analysts on Wall Street are too old, and they do not use PayPal or Venmo. On Wednesday, PayPal said it added 4.5 million new customers in the beginning of 2016.
Source: The Street