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£31.5m fine for Mastercard over illegal UK prepaid cards cartel

MasterCard has been fined £31.5 million (€35 million) by the UK’s competition watchdog for operating an illegal cartel in the market for prepaid cards.

The Competition and Markets Authority (CMA) said MasterCard had breached competition law by agreeing with two other firms, Viabuy and PFS, not to compete against each other in the sale of prepaid cards to UK consumers.

Prepaid cards are a type of debit card that can be used to make payments and withdraw cash. They are typically reloadable and can be used anywhere that accepts MasterCard payments.

The watchdogs said that by restricting access to lower-cost alternatives, the vendors may have denied councilors access to more cost-effective products and that vulnerable people may have missed out on higher quality care.

The cards in question were used to disburse cash benefits such as food stamps, tax credits, and disability payments to people who are unable to support themselves financially.

In October 2017, the PSR began an inquiry and conducted early-morning raids on properties in February 2018.

Between 2012 and 2018, the commission said five firms – Mastercard, allpay, Advanced Payment Solutions (APS), Prepaid Financial Services (PFS), and Sulion – were part of a cartel.

The cartel was established amid the National Prepaid Cards Network, which was sponsored by Mastercard and gathered public sector bodies that were considering prepaid cards and programme managers.

The five companies agreed to prevent the programme managers from targeting or poaching one another’s customers, and they coordinated on the distribution of possible business contacts that resulted from network activities.

There was a second cartel involving APS and PFS from 2014 to 2016, with the firms agreeing not to target each other’s public sector clients when a contract was up for renewal, including through tendering.

Despite the rule-breaking discovered by the inquiry, vulnerable individuals would still have received their entire benefits, however councils may have paid greater costs than in a competitive market, and there was no push for providers to improve service quality.

The Financial Conduct Authority (FCA) is expected to launch a review of the sector after the introduction. The FCA hasn’t yet decided whether or not it will carry out an investigation, but Chris Hemsley, the company’s managing director, said that one should be conducted. “This investigation and the significant fines we have imposed send a clear message that the PSR has zero tolerance for cartel behaviour.”

He added: “This case is particularly serious because the illegal cartel behaviour meant there was less competition and choice for local authorities. This means they may have missed out on cheaper or better-quality products which were used by some of the most vulnerable in society.”

Mastercard, which was fined £31.5m, said in a statement: “Mastercard is committed to upholding all regulatory and legal standards and we apologise that the actions of two former employees resulted in the standards expected of us not being met in this instance.

“We have taken this issue very seriously and have put further controls and training in place to ensure it cannot occur again, while working with the PSR to settle this matter at the earliest possible opportunity.”