PayPoint has agreed to remove exclusivity clauses from its contracts that prevent stores and suppliers from working with rival payment services.
The move follows pressure from energy regulator Ofgem last year. Following a three-year investigation it found PayPoint was harming utilities customers through abusing its market-leading position. At the time Ofgem warned it may take legal action against the company.
However, on 11 August Ofgem said it was planning to accept binding commitments proposed by PayPoint and close its investigation. These commitments included removing exclusivity clauses from supplier and retailer contracts for at least the next five years, and paying £12.5m to Ofgem’s Energy Redress Scheme.
A statement from Ofgem said the changes would allow energy suppliers and retailers to work with several online and in-store payment services providers to provide pre-pay meter top-ups.
For retailers, the removal of exclusivity clauses from their contracts is unlikely to make an immediate difference. Speaking to RN last year after Ofgem’s initial statement, PayPoint chief executive Nick Wiles suggested the company was already moving away from enforcing the exclusivity clauses. “Coercing retailers is normally a really bad way to run a business and that’s not what we’re seeking to do,” he explained.
The removal of exclusivity clauses in retailer and supplier contracts are also limited to “ in relation to the provision of over-the-counter and digital energy prepayment services.”
A more noticeable change for stores may be in energy suppliers being able to work with both Payzone and PayPoint, potentially adding to the range of utility services some stores can provide through their existing bill payments partner.
Ofgem had opened its investigation into whether PayPoint was abusing its dominant position in 2017. Further pressure grew on PayPoint after a major systems outage left thousands of vulnerable households without access to gas or electricity. Then in January 2020, British Gas’ switch from PayPoint to Payzone also left customers struggling to top up their meters.
In a message to its shareholders announcing the pledges to Ofcom, PayPoint commented: “The Board believes these voluntary commitments are in the best interests of our clients, retailer partners and their customers and provides a constructive and timely route to the resolution of Ofgem’s provisional findings.”
Ofgem’s consultation on whether to accept PayPoint’s proposed commitments and close the investigation will remain open until 15 September.