Ofgem alleges PayPoint breached competition law

Ofgem has issued a statement of objections to PayPoint alleging that it has breached competition law.

It argued that the company 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 – meaning it 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 excluding its competitors from the market.

The Ofgem statement continued that these actions harmed competition to the detriment of consumers, and amounted to an abuse of a dominant position, which breaches Chapter II of the Competition Act and/or Article 102 of the Treaty on the Functioning of the European Union.

“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,” the statement added. “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 in due course.

For the purposes of collecting over-the-counter payments, PayPoint operates a network of around 27,000 outlets in the UK, 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 payment services providers, or imposed discounts that were conditional on whether those customers used rival providers in addition to PayPoint.

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