Paypoint offers to pay £12.5m into Ofgem redress fund

Payment services provider Paypoint has offered to pay £12.5 million into Ofgem’s voluntary redress fund following an investigation into whether it breached competition rules.

The investigation was opened in 2017 and looked into whether the company had abused a dominant position in a way that was likely to restrict or distort competition in the market for the provision of over the counter (OTC) energy prepayment services.

PayPoint provides services to its energy supplier clients which enable their energy prepayment meter customers to top up their credit, either in person at one of 28,000 PayPoint retail outlets in Great Britain, or remotely, for example using a website or mobile phone. The retailers are paid a commission for these 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 its investigation in August 2017. It considered whether PayPoint had abused a dominant position by using exclusivity clauses in its contracts with energy suppliers and retailers in a way that was likely to restrict or distort competition in the market for the provision of over-the-counter (OTC) energy prepayment services .

Ofgem suspected that PayPoint’s actions distorted competition and consumer choice in this market to the detriment of prepayment energy customers, many of them in vulnerable situations, which may have constituted an abuse of a dominant position and a breach of Chapter II of the Competition Act.

As a result of the investigation, PayPoint offered commitments to remove these exclusivity provisions concerning energy pre-payment services from current contracts and any future contracts entered into during the next five years with its energy supplier clients and retailers. PayPoint has also agreed to offer separate contracts to its energy supplier clients for the provision of 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. PayPoint has offered to make a £12.5 million donation to Ofgem’s Energy Industry Voluntary Redress Scheme (currently administered on Ofgem’s behalf by the Energy Saving Trust).