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Mastercard fined £31m over ‘cartel behaviour’

Written by: Emma Lunn
The credit card giant was the biggest of five companies fined by the Payment Systems Regulator (PSR) for breaking competition rules in the prepaid cards market.

The other firms fined were allpay (£28,553), Advanced Payment Solutions (£755,419), Prepaid Financial Services (£916,746) and Sulion (£572).

An investigation by the PSR concluded that the five organisations infringed competition law by agreeing not to compete or poach each other’s customers in the prepaid cards market in the UK.

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.

The PSE opened its investigation 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 and announced its provisional findings in this case in March 2021. During the course of the investigation, all parties settled and admitted breaking the law.

The PSR found there were two market sharing cartels in the prepaid cards market in violation of the Competition Act 1998. The first cartel involved all five parties and lasted from 2012 to 2018, while the second cartel involved Advanced Payment Solutions and Prepaid Financial Services and lasted two years (between 2014 and 2016).

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

The investigation found that the five card providers agreed not to target or poach each others’ public sector customers that had come through the network. According to the PSR, the five firms allocated leads from network events between themselves.

The PSR argued that because of this alleged collusion, public bodies were subjected to limited choice, potentially having to pay more for a lesser quality of service than if they were able to pick the provider outright.

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.

Chris Hemsley, PSR managing director, 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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