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PayPoint to pay £12.5m to close exclusivity clauses investigation

Emma Lunn
Written By:
Emma Lunn

Ofgem has ended its competition probe into the in-store payment services firm after PayPoint agreed to make the payment.

PayPoint provides services to energy suppliers which enable their prepayment meter customers to top up their credit, either in person at one of 28,000 PayPoint retail outlets in the UK, or remotely online or over the phone.

Retailers are paid a commission for top-up payment transactions made using a PayPoint terminal. PayPoint then transfers these payments to the relevant energy supplier, in exchange for a transaction fee.

Ofgem launched an investigation in August 2017 to look at whether PayPoint had abused a dominant position by using exclusivity clauses in its contracts with energy suppliers and retailers. The regulator was concerned the firm’s actions could restrict or distort competition in the market for the provision of over-the-counter (OTC) energy prepayment services.

Ofgem has now accepted commitments from PayPoint and a donation of £12.5m to Ofgem’s Energy Industry Voluntary Redress Scheme, following an investigation into whether PayPoint infringed the Competition Act 1998.

Ofgem suspected that PayPoint’s actions distorted competition and consumer choice in this market to the detriment of prepayment energy customers.

As a result of this investigation, PayPoint has agreed to remove these exclusivity provisions concerning energy prepayment services from current contracts and any future contracts entered into during the next five years with energy suppliers and retailers.

The firm also agreed to offer separate contracts to energy suppliers for the provision of over the OTC and non-OTC energy prepayment services. This would mean that energy suppliers and retailers will be free to contract with other payment service providers and to use other providers’ equipment for processing OTC and non-OTC payments for their prepayment energy customers.

Ofgem believes that the commitments offered by PayPoint address its competition concerns and will ensure that competition is not distorted. It said that accepting these commitments means that the investigation closes with no decision made on whether competition rules were infringed.