An Post - Competition Authority decision involving OTC Bill Payments

JurisdictionIreland
Judgment Date03 April 2002
Date03 April 2002
Docket NumberDecision No: 595
CourtCompetition Authority (Ireland)
Competition Authority Decision of 3 April 2002 relating to a proceeding under Section 4 of the Competition Act, 1991.
Notification No. CA/5/01 – IPSO/An Post (OTC Bill Payments)

Decision No: 595

COMPETITION AUTHORITY

Abstract:

Notification No. CA/5/01 – IPSO/An Post (OTC Bill Payments) Decision No: 595

Notification was made on 10 May 2001 of an agreement between Irish Payment Services Organisation Limited (“IPSO”), acting on behalf of Allied Irish Banks plc, The Governor and Company of the Bank of Ireland, National Irish Bank Limited and TSB Bank Limited, on the one hand, and An Post on the other, with a request for a certificate under Section 4(4) of the Competition Act, 1991 or, in the event of a refusal by the Competition Authority to grant a certificate, a licence under Section 4(2). A Statement of Objections was issued on 29 June 2001 to the notifying parties indicating the Authority’s intention to refuse to issue a certificate or grant a licence in respect of the notified arrangement and an oral hearing was held on 20 September 2001, following which Revised Heads of Agreement were submitted by the parties on 5 October 2001.

INTRODUCTION
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1 Notification was made on 10 May 2001 of an agreement between Irish Payment Services

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Organisation Limited (“IPSO”), acting on behalf of Allied Irish Banks plc, The Governor and

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Company of the Bank of Ireland, National Irish Bank Limited and TSB Bank Limited, on the one

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hand, and An Post on the other, with a request for a certificate under Section 4(4) of the

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Competition Act, 1991 or, in the event of a refusal by the Competition Authority to grant a

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certificate, a licence under Section 4(2). A Statement of Objections was issued on 29 June 2001

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to the notifying parties indicating the Authority’s intention to refuse to issue a certificate or grant

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a licence in respect of the notified arrangement and an oral hearing was held on 20 September

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2001, following which Revised Heads of Agreement were submitted by the parties on 5 October

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2001.

THE FACTS
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(a) The Subject of the Notification

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2.1 The notification concerned arrangements whereby each of the banks involved would ‘migrate’

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over-the-counter (OTC) bill payment services from their respective branches to An Post. This

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would involve each such bank, as and from a specified date, ceasing or commencing to cease to

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provide OTC bill payment services to their customers, subject to as and from such date An Post

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being in a position, through its national post office branch network, to continue to provide

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corresponding OTC bill payment services to such customers.

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(b) The Parties

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3.1 In making the notification, IPSO is acting in a representative capacity, for and on behalf of Allied

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Irish Banks plc, The Governor and Company of the Bank of Ireland, National Irish Bank Limited

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and TSB Bank Limited, which are all licensed banks in the State.

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3.2 An Post is a statutory corporation established pursuant to the Postal and Telecommunications

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Services Act, 1983, whose shareholders are the Minister for Finance and the Minister for Public

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Enterprise. The principal objectives of An Post, as provided for in the Act, include,inter alia, the

following –
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- to provide services by which money may be remitted (whether by means of money

orders, postal orders or otherwise) as An Post thinks fit;
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- to provide OTC services for An Post’s own and Government business and, provided

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that they are compatible with those services and with An Post’s other principal

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objects, for others as An Post thinks fit.

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(c) The Product and the Market

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4.1 The parties submitted that the market affected by the proposed arrangement is that for all forms

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or methods of bill payment services in the State. They also submitted the following breakdown

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of estimated market share per type of participant in the bill payment sector, by reference to all

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payment methods and to cash/cheques respectively. The data in Figure 1 refers, in the case of

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banks, to all of the ‘High Street’ banks, not just to those whom IPSO is representing in this case

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(i.e. AIB, Bank of Ireland, National Irish Bank and TSB Bank).

  1. (a) Bills - Cash and Cheque: 24m

    An Post

    39%

    Banks

    42%

    Utilities

    19%

  2. (b) Bills - All Payment types: 49m

    An Post

    21%

    Banks

    69%

    Utilities

    10%

Figure 1
Source: IPSO and An Post
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4.2 OTC bill payments involve “in person” physical presentation of a bill (e.g. utility bills issued by

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Eircom, Bord Gais etc.) at a bank branch counter. The bill is paid “over the counter” by the bill

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payer, usually by means of cash or a cheque. The presenting bank then arranges for the

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corresponding debit and credit to be processed through existing inter-bank payment/clearing

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systems. The bill payer may also present certain utility bills for OTC payment at any post office

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or, if available, at the offices of the bill-issuing utility (e.g. ESB high street shops). The Authority

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has not been advised of the exact proportion of bills paid by cash/cheque that are paid OTC, only

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that the parties believe that the majority of bills paid in cash and by cheque are paid OTC.

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4.3 The parties claimed that, notwithstanding the historical predominance of cash and cheque

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payments, over other forms of payment, in the Irish economy in general, and in regular bill

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payment in particular, the number and quality of non-paper based methods of bill payment had

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increased significantly in recent times, and now included Direct Debits, Standing Orders, Internet

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Bank Payments, Telephone Bank Payments, Credit Cards, Debit Cards (Laser) and Automated

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Teller Machines.

OTC Payments
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4.4 The parties submitted that OTC payments tend to be paper-based transactions, and are more

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costly and less efficient to process than electronic bill payment methods. They also submitted the

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following data illustrating the difference in cost between such paper-based transactions and

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electronic bill payment methods.

Figure 2
Cost Comparison of Payment Methods
[ ]
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(e) Structure of the Market

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5.1 The processing of payments in the State is conducted by participating banks and financial

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institutions through the auspices of a number of payment systems, each of which is regulated by

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the Central Bank, and is constituted as a company. Examples of the latter areIrish Paper Debit

Clearing Company(DebitCo), Irish Paper Credit Clearing Company(CreditCo), Irish Retail
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Electronic Payments Clearing Company(IRECC) and Laser. DebitCo is responsible for clearing

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payments in the form of debits (e.g. cheques), CreditCo is responsible for clearing credit

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payments, while IRECC is responsible for clearing payments in the form of electronic debits and

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credits. IPSO is an administrative/representative organisation for the payments industry in

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Ireland and, as such, is not itself a payment system. However, all ordinary and associate

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members of the clearing companies are also, by virtue of such membership, entitled to be

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members of IPSO.

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(e) Government Strategies for the Information Society

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6.1 The parties submitted a copy of a Government Paper (1) entitled“Implementing the Information

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Society in Ireland: An Action Plan”. They cited the following extracts from that paper –

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“2. Rapid response is needed to ensure that the benefits of the Information Society

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can be availed of by Irish citizens and Irish businesses, thus contributing to the

ongoing improvement of Ireland's society and economy.”
……………………………………
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“30. The financial institutions will be requested to prepare proposals for appropriate

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systems to facilitate further deployment of electronic payments in the economy.

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Consultations will be held with the various interest groups with a view to agreeing

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mechanisms to take work forward rapidly in this area. Mechanisms to progress this

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area of work, involving representatives of the various interest groups, will be in place

by end March 1999.”
……………………………………
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“49. Electronic payment systems will be developed further within the public service,

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and clients will be encouraged to take up electronic payment options. This will reflect

initiatives to promote electronic payment systems in general.”
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6.2 The parties stated that, in response to the Government request, and technological developments

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generally in the area of payment systems, the banking industry commissioned outside consultants

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to conduct a study in this area. The results of the study were presented to the Government by

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IPSO in December 1999. The parties submitted that the study’s findings highlighted the

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predominance in Ireland of cash and cheques as payment methods, and the insufficient use (by

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comparison with other products) of electronic payment methods; that Ireland was lagging behind

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Europe and the USA in the deployment of electronic payment solutions and methods for

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consumers, business and Government, and that there would be significant economic benefits

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accruing from the increased use of electronic payment. Four key areas were identified, one of

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which was bill payment.

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6.3 The parties also referred to a strategic review of the future of Irish banking, initiated by the

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Minister for Finance. The Minister’s Review Group issued a Report in October 2000 entitled

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“Banking Sector: Some Strategic Issues – Report of the Department of Finance/Central Bank

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Working Group on Strategic Issues facing the Irish Banking Sector”. They cited the following

extracts from that Report –
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- paper-based banking transactions (e.g. OTC bill payments) were costly for banks and

their customers (page 39...

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