PayPoint faces ‘letters before action’ over prepayment energy meter competition and renews customer agreements
- PayPoint said it would “respond vigorously” to correspondence received
- The Group provides services to energy suppliers for the recharging of prepaid meters
Point of payment received “pre-action letters” from a small number of market participants regarding commitments made to Ofgem in 2021 regarding competition concerns.
The prepayment meter group reached an agreement with Ofgem in 2019 after the regulator raised concerns about a potential breach of competition laws following PayPoint’s writing of exclusivity clauses in the contracts with energy suppliers and retailers.
PayPoint agreed to shake up its services and donate £12.5million to Ofgem’s redress fund, which the regulator at the time said 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 lawyer to notify a debtor of an intention to take legal action against him.
Correspondence: PayPoint received “letter before action” correspondence from a small number of market participants, he said
The payment system company told investors on Wednesday it “intends to respond strongly” to the letters, while “continuing to seek appropriate legal advice.”
PayPoint said It had approached its energy clients to waive exclusivity rights in its deals.
It also renewed the call for tenders with several of its customers in the energy sector on a non-exclusive basis.
The group provides services to energy suppliers to allow customers with prepayment meters to recharge their supply online or via PayPoint terminals in stores across the country.
PayPoint then transfers these payments to the relevant energy supplier, in exchange for a transaction fee.
When Ofgem first launched an investigation into PayPoint, in August 2017, the watchdog examined whether the company had abused its power by inserting exclusivity clauses into contracts with suppliers and retailers. energy, which could have hindered competition and consumer choice, many of whom were financially vulnerable.
Ofgem has raised concerns that PayPoint’s actions distort 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 providers for prepaid customers, who recharge 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 to top up energy supply.
In November 2021, Ofgem said: “Ofgem believes that the commitments offered by PayPoint address its competition concerns and will ensure that competition is not distorted.
‘Ofgem has now accepted our pledges as a resolution to their concerns. PayPoint will now implement the engagements with all relevant stakeholders in a schedule agreed with Ofgem.’
PayPoint shares fell today and fell 1.09% or 5.05p to 456.45p this morning, after falling more than 23% last year.
