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Regulator fines companies £33m+ over cartel behaviour in prepaid cards market used by councils and housing associations to distribute welfare payments

The Payment Systems Regulator (PSR) has concluded that five parties infringed competition law by agreeing not to compete or poach each other’s customers in the prepaid cards market in Great Britain.

The pre-paid 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.

The PSR imposed the following fines (after the application of discounts following settlement):

  • Mastercard: £31,560,062;
  • Prepaid Financial Services: £916,746;
  • Allpay: £28,553;
  • Advanced Payment Solutions: £755,419; and
  • Sulion: £572. [This fine would have been higher but was reduced to ensure that it did not exceed 10% of the company's worldwide turnover, which is the statutory maximum that the PSR can impose for an infringement of competition law.]

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

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In its decision, the PSR found there were two market sharing cartels in the prepaid cards market in violation of the Competition Act 1998:  

  1. 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). It had developed against the backdrop of the National Prepaid Cards Network which brought together public sector bodies such as local authorities and housing associations that were potentially interested in prepaid cards and Mastercard programme managers (PMs). The parties arranged for the Network PMs (allpay, APS and 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.
  2. The second cartel involved APS and PFS and lasted two years (between 2014 and 2016). It 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.

During the course of the investigation, all parties settled and admitted breaking the law. Settlement meant 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.

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

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