On 30 September 2020, Ofgem, the UK energy regulator, announced that it had issued a Statement of Objections (“SO”) to PayPoint Plc and its subsidiaries (“PayPoint”) in its investigation into a suspected abuse of dominance contrary to Article 102 of the Treaty on the Functioning of the European Union (“TFEU”) and/or the Chapter II prohibition of the Competition Act 1998. This represents the formal start of proceedings in Ofgem’s investigation.
PayPoint provides over-the-counter payment services to prepayment energy customers in the UK. (See link to Ofgem press release: https://www.ofgem.gov.uk/publications-and-updates/ofgem-issues-statement-objections-paypoint)
Prior to the issue of the SO, Ofgem had originally launched its investigation in August 2017 and after a preliminary consideration of the matter decided to continue its investigation in December of that year. At that stage, as is common practice, it did not mention the name of the party or details of the allegations. Therefore the issue of the SO marks the first time that Ofgem has provided details of the breach and the name of the party/(ies) under investigation.
The allegations in the SO are as follows:
– Dominance: PayPoint 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. Therefore, it was in a position of dominance within the meaning of Article 102 TFEU and /or Chapter II of Competition Act 1998.
– Abuse: PayPoint committed an abuse of that position by including exclusivity clauses in most of its contracts with energy suppliers and retailers. This had the effect of limiting the ability of those energy suppliers and retailers to use rival services, thereby foreclosing its competitors from the market. The exclusivity clauses in question were often of several years’ duration. These clauses therefore had the direct effect of restricting PayPoint’ s customers from using rival OTC payment services providers. However certain variations of these clauses offered discounts that were conditional on PayPoint’ s customers using only Paypoint thereby excluding their competitors. This had the same effect of ensuring exclusivity for PayPoint.
– Adverse Effect on Competition: By these actions the SO alleges that PayPoint harmed competition in the market to the detriment of consumers by limiting their energy customers’ choice of supplier for over-the-counter payment services and that this amounted to an abuse of a dominant position in breach of Article 102 TFEU and/or the Chapter II prohibition.
The next stage of the proceedings will give PayPoint the opportunity to respond to the allegations in the SO. Ofgem will then review its response before deciding whether to take a decision that PayPoint infringed competition law or not.
If Ofgem does decide to issue an infringement decision the regulator can impose a substantial fine of up to 10% of PayPoint’s worldwide turnover and the clauses in their supplier and retailer contracts will be void and unenforceable. Ofgem can also issue cease and desist orders in relation to PayPoint’s other abusive behaviour covered by the SO.
An adverse competition ruling by Ofgem would also leave PayPoint exposed to possible follow on actions in damages before the Courts by aggrieved energy suppliers and retailers who have loss as a result of PayPoint’s alleged anti-competitive behaviour.
