Paypoint’s exclusivity clauses with both partnered stores and suppliers are in breach of competition law according to utilities regulator Ofgem.
The announcement follows the body’s £1.5m fine issued to British Gas for failing to adequately warn its customers ahead of its top-up service switch from PayPoint to Payzone and the Post Office on 1 January 2020.
In a statement issued on 30 September, Ofgem said it was considering further action against PayPoint after finding that the firm’s use of exclusivity clauses ‘amounted to an abuse of a dominant position’ that had ‘harmed competition to the detriment of consumers.’
It alleged that this would be a breach of both the UK’s Competition Act and EU competition law. If infringement proceedings are undertaken, PayPoint could be fined up to £21.3m – 10% of its global turnover.
Responding to the allegations, Paypoint issued a statement to its shareholders that did not contest Ofgem’s initial findings, but said it would ‘present its case’ to the regulator. PayPoint said that if infringement proceedings were undertaken, it could impact the firm’s “ability to enter into such exclusive arrangements with energy suppliers, and rely on the exclusivity provisions in existing agreements.”
PayPoint contracts ban stores from offering services from its rivals, Payzone and the Post Office. The terms meant that when British Gas switched its top up partners, customers were also forced to switch which local shop they used to access these services. More than 100 customers complained that the move left them without a nearby location to top-up their gas and electricity cards and keys.
In response, PayPoint partnered stores told betterRetailing earlier this year that they had chosen to breach these exclusivity agreements by adding rival services in order to protect customers and preserve their associated footfall.
Asked whether it would be enforcing its exclusivity earlier this year, PayPoint chief executive Nick Wiles told betterRetailing: “ “Coercing retailers is normally a really bad way to run a business and that’s not what we’re seeking to do.
“I hope what you’re seeing from us is a much softer-edged business that’s working hard to be a partner with retailers.”