Ofgem consults on commitments offered by PayPoint Plc following Competition Act investigation
Ofgem, the energy regulator, is consulting on commitments offered by PayPoint Plc and a number of its subsidiaries (PayPoint) in an investigation into whether PayPoint has infringed Chapter II of the Competition Act 1998 (the Competition Act).
PayPoint provides services to its energy supplier clients which enable their energy prepayment meter customers to top up their credit, either in person at one of 28,000 PayPoint retail outlets in Great Britain, or remotely, for example using a website or mobile phone. The retailers are paid a commission for these top up payment transactions made using a PayPoint terminal. PayPoint then transfers these payments to the relevant energy supplier, in exchange for a transaction fee.
Ofgem launched its investigation in August 2017. It considered whether PayPoint had abused a dominant position by using exclusivity clauses in its contracts with energy suppliers and retailers in a way that was likely to restrict or distort competition in the market for the provision of over-the-counter (OTC) energy prepayment services in Great Britain.
Ofgem suspected that PayPoint’s actions distorted competition and consumer choice in this market to the detriment of prepayment energy customers, many of them in vulnerable situations, which may have constituted an abuse of a dominant position and a breach of Chapter II of the Competition Act.
As a result of the investigation, PayPoint offered commitments to remove these exclusivity provisions concerning energy pre-payment services from current contracts and any future contracts entered into during the next five years with its energy supplier clients and retailers. PayPoint has also agreed to offer separate contracts to its energy supplier clients for the provision of OTC and non-OTC energy prepayment services. This would mean that energy suppliers and retailers will be free to contract with other payment service providers and to use other providers’ equipment for processing OTC and non-OTC payments for their prepayment energy customers. PayPoint has offered to make a £12.5 million donation to Ofgem’s Energy Industry Voluntary Redress Scheme (currently administered on Ofgem’s behalf by the Energy Saving Trust).
Ofgem’s provisional view is that the commitments offered by PayPoint address Ofgem’s concerns and, if implemented, they should ensure that competition is no longer distorted. Ofgem will now consider any comments raised in the public consultation before determining whether to accept the commitments. At this stage, Ofgem is minded to close the investigation with the acceptance of these commitments.
Notes to editors
- Ofgem’s is consulting on the commitments.
- Ofgem has the power to investigate potential infringements of UK competition law in Great Britain. These powers are held concurrently with the Competition and Markets Authority and other regulators.
- Where Ofgem has begun an investigation under section 25 of the Competition Act 1998, it may accept commitments to take such action as it considers appropriate for the purposes of addressing the competition concerns it has identified. When Ofgem has formally accepted commitments, it must close its investigation into the conduct that was the subject of the investigation.
- The offer of commitments by PayPoint does not constitute an admission that there has been an infringement of Chapter II of the Competition Act.
- The consultation will be open until 15 September 2021 for responses.
- Ofgem’s investigation concerns PayPoint’s conduct in relation to the provision of over-the-counter (“OTC”) payment services to prepayment energy suppliers. These services facilitate OTC payments to energy suppliers, whereby customers that pay for their energy in advance (“prepayment” customers) can add credit to their gas and electricity accounts in cash, in person in a local shop. For the purposes of collecting OTC payments, PayPoint operates a network of around 28,000 retail outlets in Great Britain, typically newsagents or local supermarket chains. These retailers are paid a commission for top up payment transactions made using a PayPoint terminal, as well as benefitting from increased footfall. PayPoint then manages the transfer of payments to energy suppliers, in exchange for a transaction fee.
- Ofgem considered that there were reasonable grounds for suspecting that PayPoint may have held a dominant position in the market for OTC payment services for prepayment energy customers for at least the period running from April 2009 to October 2018; this would have meant that PayPoint had a special responsibility not to act in a way that would distort competition in this market.
- PayPoint’s exclusivity clauses took the form of contractual provisions, often applying for several years at a time, which either directly restricted its customers (energy suppliers and retailers) from using rival OTC payment services providers, or imposed discounts (rebates) that were conditional on whether those customers used rival providers in addition to PayPoint (with the same effect in practice).
- The Voluntary Redress Scheme provides money to charities to deliver energy related projects that support energy consumers in vulnerable situations. It also helps to deliver benefits to consumers, who were negatively impacted by the specific issue that triggered the redress payment. For more information about Ofgem’s Voluntary Redress Scheme, see: Ofgem appoints Energy Saving Trust to distribute payments from rule-breaking energy companies to charities
For media, contact
James Hotson: 020 7901 7148
Media out of hours mobile: 0792 882 9894 (media calls only)
General enquiries (non-media)
If you are an energy customer looking for help and advice, including complaints about energy firms, please see our Household gas and electricity guide. Citizens Advice also provide a free, impartial helpline service across a range of issues on 0808 223 1133.
We also regularly share news and post general advice to help consumers get the most out of their energy services via our @Ofgem twitter and Facebook pages. If you have an enquiry or complaint relating to Ofgem’s policies or functions, contact us at email@example.com or on 020 7901 7295.
For all other non-media related enquiries, please visit our Contact us page.
Ofgem is Britain’s independent energy regulator. Our role is to protect consumers now and in the future by working to deliver a greener, fairer energy system. We do this by:
- Working with Government, industry and consumer groups to deliver a net zero economy at the lowest cost to consumers.
- Stamping out sharp and bad practice, ensuring fair treatment for all consumers, especially the vulnerable.
- Enabling competition and innovation, which drives down prices and results in new products and services for consumers.
Latest News from
Carbon capture and clean hydrogen technology will drive growth and generate jobs on Humberside – Ofgem CEO19/01/2024 09:25:00
Tens of thousands of new jobs across Britain must be created across the country to underpin the growth of the carbon capture and storage industry, according to Ofgem CEO Jonathan Brearley.
Ofgem sets out prepayment meter expectations to energy bosses as EDF, Octopus and Scottish Power meet regulator’s restart conditions08/01/2024 15:15:15
Energy supplier CEOs have been reminded of their responsibility to treat customers fairly when installing involuntary prepayment meters, often called ‘Pay as you Go’ meters, and that they must follow Ofgem's new rules or face tough action and fines.
Charities, community projects and customers benefit from £72million payments thanks to Ofgem enforcement action28/12/2023 13:10:00
Millions of pounds recovered from firms by Ofgem have been used to help communities across the country in 2023.
Energy regulator steps up action against festive fraud26/12/2023 11:20:00
Energy suppliers have been urged by regulator Ofgem to do more to protect customers as energy theft and scams escalate over the festive period.
Energy regulator sets out proposals to help ensure customers at risk of getting into debt are better supported15/12/2023 15:10:00
Energy regulator Ofgem is today consulting on plans to protect the energy market and consumers from the growing risk of ‘bad debt'.
Ofgem kickstarts conversation on future energy price controls funding to pave the way for net zero14/12/2023 10:05:00
A major consultation to decide the 2026-2031 electricity transmission and gas network price controls has been launched by Ofgem yesterday (Wednesday 13 December) - covering a critical five-year period on the transition to net zero.
Ofcom proposes ban on inflation-linked mid-contract price rises13/12/2023 14:20:00
Telecoms customers must be told upfront in pounds and pence about any price rises their provider includes in their contract, under new consumer protection plans set out yesterday by Ofcom.
Tackling consumer confusion about broadband technology13/12/2023 13:20:00
Ofcom is today issuing new guidance to broadband providers to ensure consumers are given clear information about their service when signing up to a new deal.