Competition in the Payments Sector – a year in review of the PSR


Speech by Carole Begent, PSR Head of Legal, at Osborne Clarke LLP, on 20 April 2016 in London.

This is the text of the speech as drafted and may differ from the delivered version.

Good afternoon,

It is a pleasure to be asked to speak this afternoon about competition in the payments sector and to reflect on the past year’s work of the PSR.


Paul (Anning, Osborne Clarke) asked me to focus on three particular areas of the PSRs’ work – Concurrency, Innovation and the Indirect Access Market Review. So I will begin where Zoe (Hare, Osborne Clarke) left off – Concurrency.



You can approach the subject of concurrency in several ways and it can be a significant topic of its own. I shall focus on three aspects: the historical, the practical and the substantive.

The historical perspective

The debate around concurrency hotted-up with the reform of the anti-trust law when the Competition Act 1998 was introduced.

Concurrency had existed already amongst the some of the regulators responsible for utility sectors. These are most commonly referred to as economic regulators. The introduction of the Competition Bill invited fresh consideration of the organisation of powers within the UK, in particular who should have them.

Many of the significant decisions made at the time remain true today:-

The economic regulators would have competition powers, as did the leading competition authority - then the OFT (Office of Fair Trading), now the CMA (Competition and Markets Authority). That is, they would have powers under the Competition Act 1998 – which addresses anti-competitive agreements or conduct.

The only exception would be that the OFT, now the CMA, would investigate and pursue cartels.

The regulators would also continue - like the OFT - to be able to refer markets to the Competition Commission (CC) for phase 2 investigations. This is now within the CMA. The ongoing Retail Banking Market Investigation is, of course, an example of such a reference (though in fact referred by the CMA phase 1 to itself at Phase 2).

Almost at the same time, the reforms of antitrust law in Europe were under discussion and the UK Government also determined that the same economic regulators with concurrent powers under the UK regime would also have the equivalent European antitrust powers as the UK competition authority (the CMA).

Mergers were outside the  concurrency debate (although no less a tool) and the situation then, as now, is that the  lead competition authorities (OFT/CC - now the CMA) would have responsibility for decision making on mergers except when the merger was within the EU jurisdiction – in which case generally DG Comp is the decision maker.

Why did they give the regulators the anti-trust powers?  There were several reasons including:

  • First and foremost - recognition that the regulator likely had the greater and more detailed knowledge of the sector (essential when thinking about whether there is a competition problem)
  • Second - it would enable the  national competition authority to focus on the unregulated markets, of which there are many
  • Third, I would suggest, to foster a competition approach by the regulator. At the time there was talk about halting the increase and ultimately reducing the number of licence conditions that regulated firms were subject to. I will come back to this point shortly.

The practical perspective

Right from the outset it was clear that there was a need to coordinate amongst the economic regulators and the national competition authority.

In Europe, the Commission had similar thoughts. In both cases the networks were set up, underpinned by legislation. These apply today though the names have changed and perhaps the underpinning is strengthened.

Zoe has mentioned the UKCN, and there is also the ECN. The PSR is a member of each in its own right.

The need for coordination appeared at first to be focused on case work allocation but with business and other persons under investigation in mind. With so many authorities with overlapping jurisdictions, it was important to develop a mechanism to ensure that they were not tripping over themselves and the industry was not being investigated by more than one authority on the same issue.

There were also sensible resource implications for the regulators. The case allocation system enables the lead competition authority to step in and take over an investigation in certain circumstances, for example if it considers that the investigation has potential precedent value more generally (for example, it would be applicable to other markets).

This can be particularly helpful at achieving consistency of approach across national boundaries.

Discussions between the regulators continue today - in fact is required of them at certain stages in their case work. But co-ordination amongst the authorities achieves more than case allocation – it helps us exchange knowledge and experience which improves the overall quality of decision making.

In the payments sector we work closely with the UK authorities (including the CMA and FCA) and also with DG Comp, which you may know not only applies anti-trust law but also has responsibility for the recently introduced Interchange Fee Regulation.

It means that in both the UK and Europe the task of competition and regulatory authority in relation to payment systems is combined.

This takes me to the third aspect I wanted to cover today.

The substantive perspective

I mentioned the ambition that regulators would, over time, reduce their regulatory interventions. The aspiration was that the need for regulation through licence conditions would be reduced as markets became more competitive.

I am not going to delay discussing the PSR and its work any longer to stray into a discussion of how successfully this aspiration is met.

So you might be thinking, what has this to do with the PSR?

Our role

The PSR was set up by FSBRA with three objectives:

  1. To promote effective competition (both the market for payment sys