I did not even occur to me they would be charged a fee in the resulting charge-back.
They were already charged a fee for processing your payment, which they would have been out regardless of them choosing to refund you, cancel the order, or any other step.
The chargeback fee on top of that is something that every card company does. PayPal is extreme with it, but
any chargeback from
any card company is going to come with a fee to the merchant.
So, basically, they would be out Processing Fee + Chargeback fee.
And even if they just refunded you when you asked, they would still be out Processing Fee.
I'm honestly not sure how one can conduct business using a card (even strictly on the consumer end) and not know this.