Ofgem issues statement of objections to PayPoint
Ofgem has issued a statement of objections, under the Competition Act 1998 (“CA98”) to PayPoint plc (“Paypoint”), a company that provides over-the-counter payment services to prepayment energy customers in the United Kingdom (“UK”) alleging that this company breached competition law.
The statement of objections alleges that:
- PayPoint held a dominant position in the market for over-the-counter payment services for prepayment energy customers for at least the period running from April 2009 to October 2018; this meant that PayPoint had a special responsibility not to act in a way that would impair its rivals’ ability to compete.
- PayPoint included exclusivity clauses in most of its contracts with energy suppliers and retailers, a practice that limited their ability to use rival services, thus excluded its competitors from the market.
- These actions harmed competition to the detriment of consumers, and amounted to an abuse of a dominant position, which breaches Chapter II of the CA98 and/or Article 102 of the Treaty on the Functioning of the European Union (“TFEU”).
At this stage of the investigation, our findings are provisional and no conclusion should be drawn that there has been an infringement of competition law at this stage. We will carefully consider any representations from the company before deciding whether the law has in fact been broken.
The case will be considered by Ofgem’s Enforcement Decision Panel (“EDP”) in due course.
Notes to Editors
- Our 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 27,000 outlets in Great Britain, typically newsagents or local supermarket chains. These retailers are paid a commission for hosting a physical terminal or till software capable of receiving payments, as well as benefitting from increased footfall. PayPoint then manages the transfer of payments to energy suppliers, in exchange for a transaction fee.
- 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 that were conditional on whether those customers used rival providers in addition to PayPoint (with the same effect in practice).
- The Gas and Electricity Markets Authority (“GEMA”) proposes to find that PayPoint Plc and its subsidiaries including PayPoint Network Limited, PayPoint Collections Limited and PayPoint Retail Solutions Limited (together, “PayPoint”) have infringed the prohibition imposed by section 18 of the Competition Act 1998 (the “Chapter II Prohibition”) and/or Article 102 of the Treaty on the Functioning of the European Union (“TFEU”). Chapter II of the CA98 and Article 102 of the TFEU prohibit parties from engaging in conduct which amounts to an abuse of a dominant position.
- GEMA has concurrent powers with the Competition and Markets Authority (“CMA”) under the CA98 to investigate and take enforcement action in relation to suspected infringements of UK and EU competition law. Ofgem is the Office of Gas and Electricity Markets, which supports GEMA, the regulator of the gas and electricity industries in Great Britain. Our principal objective when carrying out our functions is to protect the interests of existing and future electricity and gas consumers. The Authority's powers are provided for under the Gas Act 1986, the Electricity Act 1989 and the Utilities Act 2000.
- A statement of objections gives notice of a proposed infringement decision under the CA98 to the parties being investigated. The parties then have the opportunity to make written and oral representations in response to the case set out by Ofgem. It is standard practice for competent authorities to issue such notices as part of its investigations and no assumption should be made that there has been an infringement of the CA98.
- GEMA, Ofgem’s governing body, may impose a financial penalty on any business found to have infringed the Chapter II CA98 and/or the Article 102 TFEU prohibition of up to 10% of its annual worldwide group turnover. In calculating financial penalties, GEMA takes into account a number of factors including seriousness of the infringement(s), turnover in the relevant market and any mitigating and/or aggravating factors.
- Information about how GEMA applies the CA98 and the TFEU can be found in, ‘Competition Act 1998: The application in the Energy Sector'. Guidance issued by the CMA on the CA98 can be obtained online.
- The Enforcement Decision Panel (EDP) was established in June 2014 to take important decisions in contested and settlement enforcement cases on behalf of the Gas and Electricity Markets Authority (our governing body). Members of the EDP are appointed by the panel Chair to case decision panels or settlement committees, to hear and take decisions in individual cases.
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