PayPoint Sued Over Blocking Rival From Entering UK Market

August 1, 2023
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GLOBAL-365 has filed a multi-million-pound lawsuit against over-the-counter payment provider PayPoint claiming it shut out rivals from energy prepayment services.

GLOBAL-365 has filed a multi-million-pound lawsuit against over-the-counter (OTC) payment provider PayPoint claiming it shut out rivals from energy prepayment services.

In a claim filed at the UK Competition Appeal Tribunal, GLOBAL-365 alleges that PayPoint abused its dominant position by signing exclusivity contracts with the largest UK energy suppliers for the topping up of prepay energy meters.

GLOBAL-365 is seeking £172.2m in compensation for the alleged anti-competitive conduct.

PayPoint is a fintech company that offers a variety of payment services for public and private sector entities, including OTC payment services via local convenience stores for prepay energy customers.

GLOBAL-365 describes itself as a socially motivated enterprise that aims to reduce fuel poverty by lowering the cost of topping up prepay meters and providing an alternative to leading service providers such as PayPoint and Payzone.

Energy customers who fall behind on their bill payments can often be pushed onto prepay meters by their suppliers.

According to comparison site Uswitch, there were 7.5m gas and electric prepay meters installed in UK households at the end of 2022.

GLOBAL-365 was planning to launch its SMARTprepay system in 2019 to enable energy customers to pay via an online customer portal or online banking, as well as at retail premises.

However, the company claims it found itself shut out of the market after it learned that PayPoint had entered into exclusive contracts with the big six energy suppliers (British Gas, EDF, E.ON, OVO, SSE, Scottish Power).

These contracts effectively prevented the energy suppliers from contracting with alternative providers.

Years of litigation

In 2017, GLOBAL-365 filed a complaint with UK energy regulator Ofgem relating to the exclusivity agreements.

Four years later, in 2021, Ofgem provisionally concluded that PayPoint abused its dominant position in the market for the provision of OTC payment services to energy suppliers.

To end the proceedings, PayPoint agreed to drop the exclusivity contracts and pay £12.5m into a voluntary redress scheme.

The case was closed without a final finding of infringement against PayPoint.

GLOBAL-365 now asks the court to declare that PayPoint abused its dominant position and pay damages in the sum of £172.2m.

The company alleges that PayPoint’s anti-competitive conduct not only delayed its market entry, but it is “likely” to mean that GLOBAL-365’s SMARTprepay will capture a lower total market share upon entry than if it had been able to enter as planned in 2019.

Utilita claim

In parallel to the GLOBAL-365 claim, PayPoint is also facing another lawsuit related to issues uncovered by the Ofgem investigation in 2021.

In March, pay-as-you-go energy supplier Utilita accused PayPoint of abusing its dominant position in the market for OTC prepayment services offered to energy suppliers and the closely associated market for other non-OTC prepayment services.

According to Utilita, PayPoint’s exclusionary clauses hampered its competitors’ access to these markets, reducing the choice for the provision of prepay payment services.

Utilita also accused PayPoint of imposing non-compete restrictions that prevented Utilita from developing and deploying a non-OTC prepayment facility using its own My Utilita app.

If these restrictions were not in place, Utilita alleged it would have paid less for PayPoint’s services.

Utilita is seeking £46.3m in total damages from PayPoint.

VIXIO reached out to PayPoint but did not receive a reply by the time of publication.

In its annual report, published on Friday (July 28), PayPoint said it is “confident that it will successfully defend the claim by Utilita which does not provide any clear evidence to support the cause of action or the amount claimed”.

PayPoint added it believes it will also “successfully defend” the lawsuit brought by GLOBAL-365.

PayPoint said the lawsuit “fundamentally misunderstands the energy market and the relationships between the [PayPoint] companies and the major energy providers, whilst also over-estimating the opportunity available, if any, for the products offered by GLOBAL-365”.

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