24/06/2024 8:58 AM


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PSR fines five companies for cartel behaviour in the prepaid cards market

In March last year Payments Cards & Mobile reported that the Payment Systems Regulator (PSR) has set out provisional accusations for five payments companies including Mastercard, in which it stated the companies violated antitrust laws, by operating a cartel for prepaid card services over six years.

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PSR fines for cartel behaviour in the prepaid cards

Today, the PSR has imposed fines against Mastercard(1), allpay(2), Advanced Payment Solutions (APS)(3), Prepaid Financial Services (PFS)(4) and Sulion(5) after concluding that the five parties infringed competition law by agreeing not to compete or poach each other’s customers in the prepaid card market in Great Britain.

The prepaid cards in question were used by local authorities to distribute welfare payments to vulnerable members of society, such as the homeless, victims of domestic violence and asylum seekers.

This decision concludes the PSR’s investigation that was opened in October 2017 following a complaint made by allpay about one of the infringements.

In February 2018, the PSR carried out unannounced searches at the premises of some of the parties. The PSR announced its provisional findings in this case in March 2021. During the course of the investigation, all parties settled and admitted breaking the law.(6&7)

In its infringement decision issued today, the PSR has imposed fines totalling more than £33 million for each party’s participation in the illegal conduct. The fines for each company include: Mastercard: £31,560,062; PFS: £916,746; allpay: £28,553; APS: £755,419 and Sulion: £572.(8&9)

“This investigation and the significant fines we have imposed send a clear message that the PSR has zero tolerance for cartel behaviour,” comments Chris Hemsley, Managing Director of the Payment Systems Regulator.

“We will intervene and enforce the law strictly to ensure there is effective competition in payments markets. This case is particularly serious because the illegal cartel behaviour meant there was less competition and choice for local authorities. This means they may have missed out on cheaper or better-quality products which were used by some of the most vulnerable in society.”

What the PSR found in its decision

In its decision(10), the PSR found there were two market sharing cartels in the prepaid cards market in violation of the Competition Act 1998(11).

  • The first cartel involved all five parties and lasted from 2012 to 2018 (although some parties participated in the infringement for a shorter period of time)
  • The second cartel involved APS and PFS and lasted two years (between 2014 and 2016).

The first cartel developed against the backdrop of the National Prepaid Cards Network (Network). The Network brought together public sector bodies (such as local authorities, housing associations etc.) that were potentially interested in prepaid cards and Mastercard programme managers (PMs). Mastercard sponsored and, other than for a short period in 2016, wholly funded the Network.

In the context of the Network, the five parties arranged for the Network PMs (allpay, APS, PFS) not to target or poach each other’s public sector customers that were either already in contract with another Network PM or were being provided services through a pilot programme by another Network PM. In the early days of the Network, the parties also colluded to exclusively allocate between each of the Network PMs potential new public sector customer contacts obtained from Network promotional events.

The second cartel involved a separate arrangement between APS and PFS not to target each other’s public sector customers when a contract was up for renewal, including through a public tender.

  1. Mastercard is a payment system operator active worldwide, including in the UK. It operates a four-party card scheme “whereby a card payment by a consumer to a merchant is facilitated by a number of intermediary parties, including an issuer and an acquirer”. Mastercard licences its brand to issuers and acquirers who meet the requirements of scheme membership. The decision is addressed to Mastercard UK Management Services Limited, Mastercard Europe SA (formerly Mastercard Europe SPRL), Mastercard Europe Services Limited, and their ultimate parent company Mastercard Incorporated.
  2. allpay is an electronic money institution (EMI) as well as a programme manager (PM) and card issuer providing, among other things, prepaid card services to the public sector. allpay is a licensed issuer of Mastercard. The decision is addressed to allpay Limited.
  3. Advanced Payment Solutions Limited is an EMI as well as a PM and card issuer having provided, among other things, prepaid card services to the public sector until 2016 as a licensed issuer of Mastercard. The decision is addressed to Advanced Payment Solutions Limited.
  4. Prepaid Financial Services Limited is an EMI as well as a PM and card issuer providing, among other things, prepaid card services to the public sector. PFS is a licensed issuer of Mastercard. The decision is addressed to Prepaid Financial Services Limited and its parent company Prepaid Financial Services (Ireland) Limited.
  5. Sulion Limited’s key function was to provide services to Mastercard for which Sulion was remunerated. Its mandate was to promote the use of prepaid cards in the public sector. This was achieved through the setting up of the National Prepaid Cards Network. The decision is addressed to Sulion Limited. The PSR found Sulion acted as facilitator of the first market sharing cartel.
  6. Mastercard, allpay and PFS settled the investigation with the PSR before the issuing of Statement of Objections (which contains the provisional findings). The other two parties, APS and Sulion, agreed to settle after that. Settlement means the parties admitted they breached competition law, agreed to pay a maximum penalty and agreed to a streamlined administrative procedure for the remainder of the investigation.
  7. PFS also approached the CMA with an application for leniency under the CMA’s leniency policy in February 2018, after the start of the PSR’s investigation, once the PSR had executed warrants to carry out unannounced searches at the premises of some of the parties. Under leniency arrangements, a business that has been involved in a cartel may be granted immunity from penalties or a significant reduction in penalty in return for reporting cartel activity and assisting the PSR with its investigation (provided the business satisfies the criteria set out in the CMA’s leniency policy). A business may qualify for immunity or a reduced penalty where it has a genuine intention to confess that it has engaged in cartel conduct and provides information that adds significant value to the PSR’s investigation. The PSR does not offer immunity from criminal offences; however, individuals involved in cartel activity may also in certain circumstances be granted immunity from criminal prosecution by the CMA for the cartel offence under the Enterprise Act 2002.
  8. The individual fines for each of the parties are: (i) Mastercard: £31,560,062; (ii) PFS: £916,746; (iii) allpay: £28,553; (iv) APS: £755,419 and (v) Sulion: £572. The fines are in accordance with the settlements agreed with the PSR. In calculating fines, which can reach up to 10% of an undertaking’s worldwide turnover, the PSR takes into account a number of factors including seriousness and duration of the infringement, turnover in the relevant market, any mitigating and/or aggravating factors, deterrence and the proportionality of the penalty relative to each company’s individual circumstances. PFS received a reduction under leniency arrangements (see Note 7) and the parties were also each handed reduced fines as settling parties (see Note 9). Sulion’s fine would have been higher but was reduced to ensure that it did not exceed 10% of its worldwide turnover, which is the statutory maximum that the PSR can impose for an infringement of competition law. Differences in fines should not be taken to indicate relative culpability.
  9. In return for settlement, the PSR applied a discount to the penalty that would otherwise have been imposed. The settlement discount was 20% for allpay, PFS and Mastercard, reflecting that settlement with these parties was reached before the issuing of the SO on 31 March 2021 and 10% for APS and Sulion, reflecting that those parties agreed to settle after the SO had been issued.
  10. A non-confidential version of the PSR’s decision will be published on the PSR’s website in due course.
  11. The decision concerns infringements of the Chapter I prohibition of the Competition Act 1998. The Chapter I prohibition covers anti-competitive agreements, concerted practices, and decisions by associations of undertakings which have as their object or effect the prevention, restriction or distortion of competition within the UK or a part of it and which may affect trade within the UK or a part of it.

MasterCardPrepaid CardAllpaySulioncartelAdvanced Payment Solutions (APS)Prepaid Financial Services (PFS)

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