Paypoint offers to pay £12.5m into Ofgem redress fund

A prepayment services provider for energy customers has offered to pay £12.5 million into Ofgem’s voluntary redress fund following an investigation into whether it breached competition rules.

Paypoint allows energy customers to top up their prepayment meters in local supermarkets and newsagents, or remotely via mobile. The retailers are paid a commission for the transactions made using a Paypoint terminal. Paypoint then transfers these payments to the relevant energy supplier in exchange for a transaction fee.

It operates in around 28,000 outlets in Great Britain.

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.

In September last year, Ofgem issued a provisional view that between 2009 and 2018 exclusivity clauses in contracts between Paypoint and its customers, namely energy suppliers and local retailers, meant they were left with limited ability to use rival services, potentially breaching competition rules.

As a result of the investigation Paypoint has offered a series of commitments which have now been put to consultation by Ofgem, which has said it is minded to accept them and close the investigation.

They include removing  exclusivity provisions concerning energy prepayment services from current contracts and any future contracts entered into during the next five years.

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 means customers 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.

Additionally, Paypoint has offered to make a £12.5 million donation to Ofgem’s Energy Industry Voluntary Redress Scheme which is administered by the Energy Saving Trust.

The regulator said its provisional view is that the commitments offered by Paypoint address its concerns and, if implemented, should ensure that competition is no longer distorted.

Before it makes a formal decision on whether to accept the commitments, Ofgem has opened a public consultation to consider views from the sector.

Ofgem further stressed that the offer of commitments does not constitute an admission that there has been an infringement of Chapter II of the Competition Act.

Commenting on the matter, Paypoint said in a statement: “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.

“In making these proposals, Paypoint is reaffirming the importance of delivering value, service and support to its clients, retailers and the communities it serves. This commitment sits at the heart of Paypoint’s strategy to deliver sustainable value to all stakeholders supported by the appropriate governance and oversight.”