UK Local Authorities Could Seek Damages Over Alleged Pre-Paid Cards Cartel as Payment Services Regulator Issues a Statement of Objections Fining Parties £32 Million

7th April 2021


The Payment Services Regulator (PSR) issued its first decision enforcing competition law in the payments sector on 31st March 2021. The PSR is a concurrent competition regulator for the payments sector along with the Competition & Markets Authority (CMA). This is the first time the PSR it has used its competition powers since it became a concurrent competition regulator in 2015.

The PSR provisionally decided that five parties were guilty of taking part in a cartel in relation to pre-paid cards used by local authorities to distribute welfare payments to vulnerable members of society, such as the homeless, victims of domestic violence and asylum seekers contrary to Chapter I of Competition Act 1998. The PSR alleged that Mastercard, allpay, APS, PFS and Sulion all engaged in anti-competitive behaviour by agreeing not to compete or poach each other’s clients.

The PSRs provisional decision was in the form of a Statement of Objections (“SO”) served on the parties outlining its case and the penalty it proposes to impose. As it is a provisional decision only it does not necessarily lead to an infringement. Parties now have the opportunity to make written and oral representations on the matters set out in the SO.

If the PSR’s provisional findings are upheld and the parties are found guilty of cartel behaviour their customers most notably local authorities can sue to recover any loss or damage they suffered due to the operation of the cartel. This could include damages for any inflated prices they were made to pay for purchasing the pre-paid cards.

The Parties

Mastercard is a payment system operator which is active worldwide, including in the UK. It operates a four-party card scheme whereby a card payment by a consumer to a merchant is facilitated by a number of intermediary parties, including card issuers and acquirers. Mastercard licences its brand to issuers and acquirers who meet the requirements of the Mastercard membership scheme. Three other parties, APS, Prepaid Financial Services (PFS) Limited (“PFS”) and allpay are all Electronic Money Institutions, licensed issuers of Mastercard and Mastercard Programme Managers (PMs) . They all issued prepaid card services to the public sector. The final member of the alleged cartel, Sulion, provided services to Mastercard for which Sulion was paid. Their mandate was to promote the use of pre-paid cards in the public sector. This was achieved through the setting up of the National Prepaid Cards Network (Network), whose members were the public sector bodies potentially interested in prepaid cards (local authorities, etc) and the Mastercard PMs.

Three out of five parties have already admitted liability for breaching competition rules under the settlement procedure and agreed to pay maximum penalties totalling over £32million as part of settlement.

The Alleged Cartel Behaviour

In its SO the PSR alleges that there were two principal infringements of the Competition Act 1998 that took the form of market sharing/customer allocation. The first lasted over six years (between 2012 and 2018) and involved all five parties. The other lasted two years (between 2014 and 2016) and involving APS and PFS. The parties now have the opportunity to make representations on the provisional findings set out in the SO.

The PSR commenced its investigation in October 2017 and in February 2018, carried out unannounced searches at a number of the companies’ premises. In the SO the PSR provisionally concluded that the parties coordinated their commercial behaviour to share the market and allocate customers in relation to the supply of prepaid card services used for welfare disbursements to public bodies in England, Scotland and Wales. The pre-paid cards operated on just the Mastercard card scheme. Other than for a short period in 2016, Mastercard sponsored and wholly funded the National Prepaid Cards Network (“Network”), whose members were the public sector bodies potentially interested in prepaid cards (local authorities, etc) and the Mastercard programme managers (PMs).

The Network was central to one of the cartel allegations investigated by the PSR, which took place between 2012 and 2018. The PSR provisionally concluded that during this period the five parties arranged for the PMs which were members of the Network not to target or poach each other’s public sector customers that were in contract with other Network PM or were being provided services through a pilot programme by other Network PM. In the early days of the Network, the parties also colluded to exclusively allocate the leads from Network promotional events between the Network PMs.

In relation to the second allegation of cartel activity the PSR provisionally found that between 2014 and 2016 APS and PFS arranged not to target each other’s public sector customers when a contract was up for renewal, including through a public tender.

As a consequence of this alleged collusion, public bodies were limited in the choice of suppliers of pre-paid cards services, and potentially deprived of lower prices and a better quality of service.

Settlement Procedure

In February 2021 Mastercard, allpay and PFS agreed to settle with the PSR and admitted that they took part in the alleged anticompetitive arrangement(s). In the event that the PSR ultimately concludes that that the competition rules have been infringed Mastercard, allpay and PFS have agreed to pay maximum fines totalling over £32million. These fines will be reduced due to their cooperation in the inquiry and admission of their part in the cartel. It is understood that the remaining parties have not admitted liability in relation to the PSR’s allegations in the SO.


The PSR’s current inquiry into cartel activities in the pre- paid card sector targeted the public purse through increasing costs for local authorities in providing welfare payments to some of them most vulnerable in society. The regulator has decided that it is appropriate to use its competition law powers for the first time since becoming a concurrent regulator. Its choice of competition law powers was probably primarily influenced by the fact conduct amounting to customer allocation and market sharing is best dealt with under competition law powers. Secondly but no less importantly it means that should the infringements be proved local authorities adversely impacted by the alleged cartel will be able to bring actions for damages in the UK courts to recover the artificially inflated prices they may have charged as a result of any anti-competitive behaviour.