The Competition Commission of Pakistan (CCP) has issued show cause notices to 1-Link Guarantee Limited (1-Link) and its member banks for, prima facie, fixing the charges of ATM cash withdrawal services, utility bills payment services (UBPS) and inter-bank fund transfer (IBFT) services, thereby violating Section 4 of the Competition Act, 2010 (the “Act”). CCP on its own took notice of the uniform rates implemented by the most of banks in Pakistan for ATM cash withdrawal transactions. In preliminary fact finding it was observed that 1-Link holds 80% of market share in shared ATM network services in Pakistan and is a consortium of 11 major banks that also represent on its Board of Directors while the other 20 banks are its members. To further assess the matter CCP approached the State Bank of Pakistan whether it has issued any regulation/directive regarding ATM service charges, however, SBP confirmed that it does not fix the ATM charges and that the banks are free to determine these charges. Moreover, in response to letters sent to various banks seeking rationale for uniform rates, two member banks of 1-Link confirmed that they have to comply with the schedule of charges devised by the 1-Link. Given facts and circumstances raised a suspicion that 1-Link and its member banks may be engaged in any suspected collaborative activity to fix the rates of ATM transactions. Therefore, in order to verify such collaboration/arrangement and to collect evidence regarding the modality of fixing the ATM charges, CCP conducted search and inspect the office of 1-Link in Karachi. Shaista Bano (Director), Nadia Nabi (Sr. Joint Director) and Muhammad Qasim Khan (JEO) were appointed as Enquiry Officers to conduct an enquiry based on the impounded documents/ data as to whether there is any collusion/cartelization in respect of aforementioned charges between 1-Link and member banks and submit a detailed Enquiry Report. In terms of the Enquiry Report, it appears that the founding members of 1-Link have executed ‘1-Link Agreement’ that provides for the contractual arrangement for any bank to join 1-Link. Banks on 1-Link network, prima facie, have signed Accession Memorandum to the ‘1-Link Agreement’ to become its member and are bound to follow the terms and conditions laid therein including the fixed ATM cash withdrawal charges. Similarly, 1-Link has signed ‘Utility Bill Payment Agreements’ with utility companies and ‘Internet Fund Transfer Agreement’ with TPS Pakistan (Pvt) Limited which, prima facie, fix the rates for UBPS and IBFT transactions respectively. Whereas member banks accede to the UBPS and IBFT Agreements by executing the Participation Memorandum to the said agreements. In terms of the Enquiry Report, it appears that 1-Link has not only entered into the aforementioned agreements, it also has, prima facie, provided a forum acting as an association of undertakings to its member banks. It appears that owner banks of the 1-Link consortium, in board meetings of 1-Link, have discussed matters of common interest including the rates of ATM cash withdrawal transactions, UBPs and IBFT services. In light of these discussions, it appears that 1-Link has issued schedule of charges periodically to its member banks and taken decisions to fix interchange fee paid by issuer bank to acquirer bank in respect of ATM cash-withdrawal services, interchange fee paid by sending bank to beneficiary bank in respect of IBFT services and bill payee bank fee in respect of UBPS and also the rates of ATM cash withdrawal and UBPS charges to be paid by the customers of member banks. Fixing interchange fee, and maintaining uniform rates to be charged from customers in respect of inter-bank ATM transactions deprives banks to individually bargain or negotiate these rates based on their own business dynamics. Such arrangement appears to have the object or effect of restricting competition leaving no option for the consumer to choose between the services and is therefore, prima facie, in contravention of Section 4(1), in particular, Section 4(2)(a) of the Act. As per the estimate given in the Enquiry Report, Inter-bank ATM cash withdrawal transactions at the rate of 15 rupees, IBFT at the rate of 15 rupees and UBPS at the rate 8 rupees is carried out on the switch of 1-Link. 1-Link provides services to its 30 member banks on 4,572+ ATMs in 200+ cities nationwide. Card base of its member banks has exceeded 11.71 million in the year 2010. Whereas number of transactions during the period of six months (Jan-Jun 2011) only in respect of cash withdrawal is 17.52M resulting into total revenue for member banks of around 203.36M PKR with the interchange fee of Rs.11.68. Only six banks namely; ABL, Alfalah, Al-Habib, HBL, Soneri, UBL (who represent on 1-Link’s Board) collected 122.38 M PKR which is 60.2% of total revenue generated in afore-mentioned six months. Similarly, 19 member banks are offering IBFT services and the total number of transactions during the period of Jan-Jun 2011 is 1.4 Million resulting into revenue of 16.25 Million PKR with the interchange rate of Rs.11.61. In respect of UBPS, 14 banks are offering this service. Total 1.04 M UBPS transactions were carried out from Jan-Jun 2011 that generated a revenue of 5.83 Million PKR with the interchange rate of Rs. 5.61 for the participating bank .
The Competition Commission of Pakistan (CCP) has issued show cause notices to 1-Link Guarantee Limited (1-Link) and its member banks for, prima facie, fixing the charges of ATM cash withdrawal services, utility bills payment services (UBPS) and inter-bank fund transfer (IBFT) services, thereby violating Section 4 of the Competition Act, 2010 (the “Act”). CCP on its own took notice of the uniform rates implemented by the most of banks in Pakistan for ATM cash withdrawal transactions. In preliminary fact finding it was observed that 1-Link holds 80% of market share in shared ATM network services in Pakistan and is a consortium of 11 major banks that also represent on its Board of Directors while the other 20 banks are its members. To further assess the matter CCP approached the State Bank of Pakistan whether it has issued any regulation/directive regarding ATM service charges, however, SBP confirmed that it does not fix the ATM charges and that the banks are free to determine these charges. Moreover, in response to letters sent to various banks seeking rationale for uniform rates, two member banks of 1-Link confirmed that they have to comply with the schedule of charges devised by the 1-Link.
Given facts and circumstances raised a suspicion that 1-Link and its member banks may be engaged in any suspected collaborative activity to fix the rates of ATM transactions. Therefore, in order to verify such collaboration/arrangement and to collect evidence regarding the modality of fixing the ATM charges, CCP conducted search and inspect the office of 1-Link in Karachi. Shaista Bano (Director), Nadia Nabi (Sr. Joint Director) and Muhammad Qasim Khan (JEO) were appointed as Enquiry Officers to conduct an enquiry based on the impounded documents/ data as to whether there is any collusion/cartelization in respect of aforementioned charges between 1-Link and member banks and submit a detailed Enquiry Report. In terms of the Enquiry Report, it appears that the founding members of 1-Link have executed ‘1-Link Agreement’ that provides for the contractual arrangement for any bank to join 1-Link. Banks on 1-Link network, prima facie, have signed Accession Memorandum to the ‘1-Link Agreement’ to become its member and are bound to follow the terms and conditions laid therein including the fixed ATM cash withdrawal charges. Similarly, 1-Link has signed ‘Utility Bill Payment Agreements’ with utility companies and ‘Internet Fund Transfer Agreement’ with TPS Pakistan (Pvt) Limited which, prima facie, fix the rates for UBPS and IBFT transactions respectively. Whereas member banks accede to the UBPS and IBFT Agreements by executing the Participation Memorandum to the said agreements.
In terms of the Enquiry Report, it appears that 1-Link has not only entered into the aforementioned agreements, it also has, prima facie, provided a forum acting as an association of undertakings to its member banks. It appears that owner banks of the 1-Link consortium, in board meetings of 1-Link, have discussed matters of common interest including the rates of ATM cash withdrawal transactions, UBPs and IBFT services. In light of these discussions, it appears that 1-Link has issued schedule of charges periodically to its member banks and taken decisions to fix interchange fee paid by issuer bank to acquirer bank in respect of ATM cash-withdrawal services, interchange fee paid by sending bank to beneficiary bank in respect of IBFT services and bill payee bank fee in respect of UBPS and also the rates of ATM cash withdrawal and UBPS charges to be paid by the customers of member banks.
Fixing interchange fee, and maintaining uniform rates to be charged from customers in respect of inter-bank ATM transactions deprives banks to individually bargain or negotiate these rates based on their own business dynamics. Such arrangement appears to have the object or effect of restricting competition leaving no option for the consumer to choose between the services and is therefore, prima facie, in contravention of Section 4(1), in particular, Section 4(2)(a) of the Act.
As per the estimate given in the Enquiry Report, Inter-bank ATM cash withdrawal transactions at the rate of 15 rupees, IBFT at the rate of 15 rupees and UBPS at the rate 8 rupees is carried out on the switch of 1-Link. 1-Link provides services to its 30 member banks on 4,572+ ATMs in 200+ cities nationwide. Card base of its member banks has exceeded 11.71 million in the year 2010. Whereas number of transactions during the period of six months (Jan-Jun 2011) only in respect of cash withdrawal is 17.52M resulting into total revenue for member banks of around 203.36M PKR with the interchange fee of Rs.11.68. Only six banks namely; ABL, Alfalah, Al-Habib, HBL, Soneri, UBL (who represent on 1-Link’s Board) collected 122.38 M PKR which is 60.2% of total revenue generated in afore-mentioned six months. Similarly, 19 member banks are offering IBFT services and the total number of transactions during the period of Jan-Jun 2011 is 1.4 Million resulting into revenue of 16.25 Million PKR with the interchange rate of Rs.11.61. In respect of UBPS, 14 banks are offering this service. Total 1.04 M UBPS transactions were carried out from Jan-Jun 2011 that generated a revenue of 5.83 Million PKR with the interchange rate of Rs. 5.61 for the participating bank .
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