PayPal (PYPL) may be impeding competition among online payment providers, Germany's antitrust watchdog, the Bundeskartellamt, said Wednesday following a preliminary assessment of certain terms and conditions imposed by the US payments giant.

Bundeskartellamt said its findings showed PayPal charges "above-average" fees compared with other payment methods, hitting merchants.

PayPal prohibits merchants from passing these higher costs directly to PayPal users, the German regulator said. Merchants must therefore pass PayPal's higher costs on to "all" their customers, including those who do not use the US company as a payment method.

The restrictions also prevent merchants from making payment cost differences visible to consumers, limiting incentives to use cheaper alternatives, the agency said.

The investigation concerns PayPal's surcharge restrictions, which have applied since 2018, it said. The Bundeskartellamt said the company has enforced the rules and can terminate business relationships with merchants that breach them.

The Bundeskartellamt emphasized that its assessment is not a final decision and PayPal has been given an opportunity to respond to the findings.