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Clifford Chance

Clifford Chance

Regulatory Investigations and Financial Crime Insights

Payments Systems Regulator issues first competition infringement decision in the payments sector

The PSR has imposed fines totalling over £33m against five companies. The PSR found that they had infringed competition law by agreeing not to compete or poach each other's customers in the UK prepaid cards market.


On 18 January 2022, the Payment Systems Regulator ("PSR") announced an infringement decision against five firms (Mastercard, allpay, Advanced Payment Solutions ("APS"), Prepaid Financial Services ("PFS"), and Sulio) for participation in cartels in the prepaid cards market. The decision follows a long-running investigation by the PSR which began in October 2017, following a complaint from allpay, and resulted in dawn raids which took place in February 2018. The PSR previously announced that it had issued a Statement of Objections ("SO"), in March 2021, provisionally finding that the parties had breached competition law and that it had settled with three of the five parties (Mastercard, allpay and PFS). In its decision in January 2022, the PSR confirmed that the other two companies also agreed to settle the case, after THE PSR had issued its SO.

The legal framework

Section 2 (Chapter I) of the Competition Act 1998 prohibits, among other things, agreements between undertakings which may affect trade within the UK and have as their object or effect the prevention, restriction or distortion of competition within the UK. That prohibition applies to agreements or practices whereby competitors, for example, share markets or sources of supply or directly or indirectly fix prices or any other trading conditions.

The Competition and Markets Authority ("CMA") is the UK's lead antitrust enforcer, but the PSR has had the power to enforce competition law (including section 2/Chapter I of the Competition Act 1998) in relation to participation in payment systems since April 2015. The basis on which cases are allocated to the CMA or the PSR is the subject of a memorandum of understanding, although ultimately the CMA has the final say. As with any other UK concurrent competition authority, the PSR has the power to impose fines of up to 10% of worldwide turnover if it finds that there has been a breach of sections 2/18 (Chapters I/II) of the Competition Act 1998.

The PSR's decision

In its decision, the PSR found that there had been two market sharing cartels in breach of section 2 of the Competition Act 1998 in the prepaid cards market. Prepaid cards are used by local authorities to distribute payments including to those who are homeless, victims of domestic violence and those seeking asylum.

The first cartel involved all five parties between 2012 and 2018 and took place in the context of the National Prepaid Cards Network. The Network was sponsored by Mastercard and brought together public sector bodies who were interested in prepaid cards and Mastercard Programme Managers (including: allpay, APS and PFS) ("PMs"). As part of the network, the five companies arranged for the PMs not to target or poach each other's public sector customers that were either already in contract with/being provided with services through another PM. During the early period of the infringement, the parties also colluded to exclusively allocate between each of the PMs, potential new public sector customer contracts. The second cartel, involved an agreement between Advanced Payment Solutions and Prepaid Financial Services not to target each other's public sector customers when a contract was up for renewal.

The PSR has imposed fines of over £33m against the participants. The PSR has confirmed that the fines were discounted by 20% for allpay, PFD and Mastercard, reflecting the fact that settlement with these parties was reached before issuing the SO in March 2021. The fines for APS and Sulion were reduced by 10%, reflecting that those parties agreed to settle after the SO had been issued. Furthermore, Sulion's fine would have been higher but was reduced to ensure that it did not exceed the statutory cap of 10% of its worldwide turnover.

The PSR's announcement also confirms that PFS approached the CMA with an application for leniency under the CMA's leniency policy in February 2018, after the start of the PSR's investigation and once the dawn raids had taken place. A business that has been involved in a cartel may be granted immunity from or a significant reduction in penalties in return for reporting cartel activity and assisting with its investigation. While the PSR's announcement does not make clear that PFS benefited from a reduction in its fine as a result of its leniency application, that appears likely to have been the case.

The implications of this case

While this case appears to have involved very specific facts, there are a number of potential implications for the payments services sector.

  • This is the first decision by the PSR finding an infringement of the Competition Act 1998, since it gained those powers almost 7 years ago. While that might, at first glance, indicate that the PSR is not a particularly active antitrust authority, this case shows that it will pursue and impose significant fines for cartel behaviour.
  • In making the announcement, the PSR noted that the case was "particularly serious because the illegal cartel behaviour meant there was less competition and choice for local authorities". In recent years, the antitrust authorities have often focused on conduct which may have an impact on the public sector including, for example, the CMA's focus on the pharmaceutical sector. Therefore, firms should be particularly vigilant where they identify conduct which may have an impact on the public sector.
  • Where firms are the subject of an antitrust investigation, even where dawn raids have already taken place, serious consideration should be given to whether there might be a basis for an immunity/leniency application and/or settlement. As in this case, significant reductions in penalties may be available.
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