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1. In November 1980 the Monopolies and Mergers Commission (MMC) published a report of its investigation into the supply of trading checks franchise and financial services (the 1980 report).1

2. ‘Trading checks’ were defined by the Director General of Fair Trading in his reference to the MMC as including ‘trading vouchers’ and ‘trading bonds’.2 Trading checks were described by the MMC as documents ‘which can be used by the customers of the check traders to acquire goods and services from nominated retailers’3(see paragraphs 9 and 10 for further details).

3. In the 1980 report, the MMC found that a monopoly situation in favour of Provident Financial Group Limited (Provident) existed in the supply of trading checks financial services and trading check franchise services in the UK by virtue of section 7(1)(a) of the Fair Trading Act 1973 (FTA). The MMC found that Provident had around a 66 per cent share of the trading checks franchise and financial services market. 4 The MMC also found that some of the trading practices used by Provident contributed to that monopoly situation, namely the restriction which prevented retailers with agreements with Provident from accepting any other supplier’s trading checks.

1 Trading Check Franchise and Financial Services: a report on the supply of trading check franchise and financial services in the United Kingdom, dated 10 December 1981 (the MMC’s decision was made on 28 November 1980). http://www.competition-commission.org.uk/rep_pub/reports/1981/148trading_franchise_financial_serv.htm.

2 1980 report, paragraph 1.1.

3 1980 report, paragraph 2.1. ‘Trading check financial services’ were defined in the reference to the MMC as ‘a financial accommodation by way of the issuing of trading checks for the acquisition of goods or services other than solely from the person issuing the checks’. ‘Trading checks franchise services’ were defined as ‘the undertaking and performance of engagements with suppliers of goods or services to pay for goods or services supplied in transactions involving the use of trading checks’.

4 1980 report, paragraph 9.2.2

4. On 5 March 1982, undertakings from Provident (the Undertakings) were accepted pursuant to section 88 of the FTA5. The effect of the Undertakings was that Provident could no longer insist on retailers (with one exception6 ) only accepting Provident’s trading checks.

5 http://www.oft.gov.uk/shared_oft/monopolies/tradingcheckfranchiseandfinancia.

6 The exception was for retailers who were ‘scheme operators’, which is a retailer permitted by Provident (or one of its subsidiaries) to sell goods/services direct to the consumer in the consumer’s home (either by accompanying a Provident agent or relying on the Provident agent to make the sale).

7 In this instance, the Act provides in Schedule 24, paragraph 16 that undertakings accepted by the Secretary of State under section 88 of the FTA may be superseded, varied or released by by the Competition Commission. The Undertakings were specified for the purposes of the Act in SI 2006 No.355, which also transferred responsibility for enforcement to the OFT. http://www.legislation.gov.uk/uksi/2006/355/pdfs/uksi_20060355_en.pdf.

8 http://www.oft.gov.uk/shared_oft/monopolies/advice/trading-check.pdf.

5. The Office of Fair Trading (OFT) has a duty to consider whether, by reason of any change of circumstances, enforcement undertakings are no longer appropriate and need to be varied or revoked. The Enterprise Act 2002 (the Act) provided for the continued enforcement of undertakings and orders made under the FTA and the transfer of responsibility for enforcement to the competition authorities when the FTA was superseded.7

6. In October 2011, the OFT published its advice (the OFT’s advice)8 to the Competition Commission (CC) that a change of circumstances made it appropriate for the CC to consider whether Provident should be released from the Undertakings. The change of circumstances was that the products which were the subject of the Undertakings were no longer offered by Provident and were unlikely to be reintroduced.

7. In light of the change of circumstances advised by the OFT, we have examined the 1980 report and the terms of the Undertakings in order to determine whether Provident should be released from the Undertakings.

8. In making our assessment, we have considered whether trading checks are still supplied by Provident and, if not, whether they are likely to be reintroduced. To do this, we first consider in more detail what trading checks were. We then consider what changes have occurred since the 1980 report.

9. The 1980 report9contained a detailed description of the form of the products provided by Provident, how these products were issued by Provident and how they were used. In summary:

10. In each case the product was issued to a Provident customer by a Provident agent or at a Provident branch office and payments were made by customers on a weekly basis to Provident agents who called at the customer’s nominated collecting address.

9 1980 report, Appendix 1.

11. The 1980 report found that the market for trading checks was one that was ‘in long-term decline’.10 One of the factors cited by the MMC for this decline was the growth

10 1980 report, paragraph 9.21.

11 1980 report, paragraphs 9.10–9.13.

12 Home credit market investigation, 30 November 2006. http://www.competition-commission.org.uk/rep_pub/reports/2006/fulltext/517.pdf.

13 See, for example, paragraph 2.60 of the 2006 home credit report.

in the variety and attraction of alternative forms of consumer credit. In particular, check trading companies had begun to offer personal loans using the same agent collection system as for trading checks. The MMC said that the advantage of these personal loans over trading checks was that the loan was paid in cash to the customer and so may subsequently be spent as the customer chooses rather than at a selected list of retailers.11

12. In 2006, the CC published a report following its investigation into home credit (the 2006 home credit report).12‘Home credit’ covers the provision of credit, typically small-sum cash loans, the repayment for which are collected in instalments (often weekly or fortnightly) by collectors who call for that purpose at the customer’s home. The definition of ‘home credit’ in the terms of reference included the provision of shopping vouchers, hampers and other goods on credit when these are used to attract customers for cash loans. The home credit products investigated by the CC were therefore the same as the ‘personal loan’ products that the MMC noted were emerging at the time of the 1980 report in competition with trading checks. Home credit providers examined in the 2006 home credit report included Provident and Cattles plc—the two providers that had over 75 per cent of the trading checks market in the 1980 report.

13. The 2006 home credit report did not consider trading checks as a possible alternative to home credit products. Instead, the 2006 home credit report noted that the main products offered by home credit providers were cash loans and voucher products (see paragraph 15 below). 13

14. The OFT advised that, during its review of the Undertakings, Provident had said that neither it nor any of its subsidiary companies now offered trading checks, trading bonds or trading vouchers (in the form described in the 1980 report) as forms of payment method to consumers.

15. Provident told the OFT that it offered ‘Love2Shop’ voucher products, which in the year to 31 December 2010 represented only 1.6 per cent of Provident’s home credit lending in the UK. However, ‘Love2Shop’ voucher products are a different type of product to the trading vouchers in the Undertakings. First, Love2Shop vouchers are owned (and also offered) by HighStreetVouchers.com, part of Park Group Ltd. Second, in contrast to trading checks, which were only accepted at ‘one or more of a selected list of shops’,14 Love2Shop vouchers are accepted by multiple retailers (over 20,000 retailers in the UK).15The concerns that the MMC had in relation to restrictions placed on retailers accepting rivals’ trading checks do not therefore apply to Love2Shop voucher products and the Undertakings could not be interpreted as applying to these successor voucher products.

17. The CC now gives notice of its intention to release Provident from the Undertakings. The CC invites written representations from any person or persons who wish to comment. Representations should reach the CC by 22 December 2011 and be sent to:

T J Oyler

Remedies Manager

Competition Commission

Victoria House

Southampton Row

London

WC1B 4AD

or email: tim.oyler@cc.gsi.gov.uk

18. The CC will have regard to any representations made in response to this Notice and may make modifications to its provisional decision as a result. In the absence of any written representations, or in the event that the CC decides on consideration of representations made, not to change its provisional decision, the CC proposes to release Provident from the Undertakings. If the CC considers that any representation necessitates any material change to its provisional decision the CC will give notice of the proposed modifications.