PayPoint receives ‘letter before action’ correspondence
PayPoint faces ‘letters before action’ over competition rows for energy meter prepayment and re-tendering deals with customers
- PayPoint said it would “respond firmly” to the correspondence received
- Group provides services to energy suppliers to upgrade prepaid meters
Payment point has received letters before action from a small number of market participants regarding commitments made to Ofgem in 2021 due to competition concerns.
The prepaid meter group came to an agreement with Ofgem in 2019 after the regulator raised concerns about a possible violation of competition laws as a result of PayPoint writing exclusivity clauses in contracts with energy suppliers and retailers.
PayPoint agreed to shake up its services and donate £12.5m to Ofgem’s recovery fund, which the regulator claimed at the time would ‘ensure competition is not distorted’.
But the group has now received pre-action letters, which are the first step in a formal debt collection process sent by a creditor’s attorney to inform a debtor of its intent to take legal action against them.
Correspondence: PayPoint has received “letter before action” correspondence from a small number of market participants, the company said
The payments system company told investors on Wednesday it “plans to respond vigorously” to the letters, while continuing to “seek legal advice.”
PayPal said it had contacted customers in the energy sector to waive the exclusivity rights in its agreements.
It has also re-tendered on a non-exclusive basis to some of its clients in the energy sector.
The group provides services to energy suppliers so that customers with prepaid meters can top up their inventory online or via PayPoint terminals in stores across the country.
PayPoint then transfers these payments to the relevant energy supplier in exchange for transaction costs.
When Ofgem first launched an investigation into PayPoint in August 2017, the watchdog looked into whether the company had abused its power by including exclusivity clauses in contracts with energy suppliers and retailers, which undermined competition and choice for consumers, many of whom were financially vulnerable.
Ofgem expressed concern that PayPoint’s actions distorted competition and consumer choice in this market to the detriment of prepaid energy customers.
PayPoint also agreed in 2019 to remove exclusivity clauses from its contracts with energy suppliers for prepay customers who upgrade their meters using the company’s services.
The group said the move would allow suppliers and retailers to sign contracts with other payment service providers and use other providers’ equipment to process payments for energy replenishment.
In November 2021 Ofgem said, ‘Ofgem believes that PayPoint’s commitments address its competition concerns and will ensure that competition is not distorted.
Ofgem has now accepted our commitments as a solution to its concerns. PayPoint will now implement the commitments with all relevant stakeholders in a timeframe agreed with Ofgem.”
PayPoint Shares were down today, falling 1.09 percent or 5.05p this morning to 456.45p, after falling more than 23 percent in the past year.