Mastercard accused of ‘cartel behaviour’ in the pre-paid card market

Mastercard is one of five companies accused of breaching competition rules by engaging in ‘cartel behaviour’ in the pre-paid cards market.

The Payments Systems Regulator (PSR) has issued a statement of objections against Mastercard, allpay, APS, PFS, and Sulion, which alleges that these companies agreed to “not compete with or poach each other’s clients.”

The UK watchdog said that three out of the five parties had already admitted liability for breaching competition rules and have agreed to pay maximum penalties totalling more than £32 million. The PSR did not reveal which companies had admitted to the allegations.

The regulator claims that there were several infringements of the Competition Act 1998, including one lasting six years between 2012 and 2018, which involved all five parties, and the other lasting two years between 2014 and 2016, involving APS and PFS.

“Pre-paid card services, like these, can provide significant benefits to local authorities as one way to make welfare payments to some of the most vulnerable people in society,” said Chris Hemsley, managing director, PSR. “By colluding in this way, we consider the parties were acting as a cartel. Because of the reduced competition local authorities may have been missing out on an alternative supplier or products that were either cheaper or better suited to both their needs and the needs of those using the pre-paid cards.”

The PSR began its investigation in October 2017 and in February 2018 carried out unannounced searches at a number of premises.

It found that parties coordinated their commercial behaviour to share the market and allocate customers in relation to the supply of prepaid card services used for welfare disbursements to public bodies in England, Scotland and Wales, with the cards operating only on Mastercard's card scheme.

The authority said that other than for a short period in 2016, Mastercard sponsored and wholly funded the National Prepaid Cards Network (Network), whose members were the public sector bodies potentially interested in prepaid cards (local authorities, etc) and the Mastercard programme managers (PMs).

According to the regulator, the network was central to one of the cartels investigated by the PSR, which took place between 2012 and 2018.

“The PSR has provisionally found that during this period the five parties arranged for the PMs which were members of the Network not to target or poach each other’s public sector customers that were in contract with other Network PM or were being provided services through a pilot programme by other Network PM,” it said. “In the early days of the Network, the parties also colluded to exclusively allocate the leads from Network promotional events between the Network PMs.”

Additionally the organisation discovered that between 2014 and 2016 APS and PFS arranged not to target each other’s public sector customers when a contract was up for renewal, including through a public tender.

This meant public bodies were limited in the choice of suppliers of pre-paid cards services, and potentially deprived of lower prices and better quality for those services.

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