Payment Systems Abuse of Dominance - Indian Competition Commission Closes Case

The Competition Commission of India (CCI) has closed an abuse of dominance investigation against ACI Worldwide Solutions on the grounds that there was inadequate evidence to show that the electronic payments company was dominant.  The case will be of interest to participants in the payments sector internationally against mounting regulatory scrutiny of the industry.

The CCI overturned a decision of its Director General (DG) (the investigating arm of the CCI) which found that ACI had abused its dominant position.  Apparently 77 per cent of India’s ATMs rely on the US-based ACI’s software.  A rival had claimed that ACI was using its dominant position in the upstream market for electronic payment systems to exclude competitors.  It claimed that ACI had imposed exclusivity arrangements on banks preventing or restricting them from using software of ACI’s competitors. 

However, the CCI found that the DG’s market definition was flawed and failed to take into account non-bank customers that use ACI software.  The DG also failed to take into account alternatives to electronic payments including mobile banking and cross-border money transfers.  Describing the DG’s market definition based on supply to a limited class of user (i.e. banks) as “fallacious” the CCI rejected the claim that ACI was dominant in the relevant market and did not consider the question of abuse. 

The decision of the CCI contrasts with that of the dissenting member SL Bunker who recommended a fine of 45 million rupees (equivalent to EUR 625,000) and which would represent 5 per cent of ACI’s turnover. 

The case is symptomatic of the growing interest  by regulators around the world in competition and innovation in the payments industry.  On 1 April 2014, the Payment Systems Regulator (PSR) was established as the regulator for payment systems in the UK. The PSR is a subsidiary of the Financial Conduct Authority with its own statutory objectives and board.  In addition to its regulatory remit the PSR has been given concurrent competition law powers under the UK Competition Act 1998 (and Enterprise Act 2002) in relation to participation in payment systems.  As of 1 April 2015 it will be able to apply the UK and EU competition law prohibitions on restrictive agreements and abuse of a dominant position in the UK payments industry.  In contrast with the CCI in the Indian payments context, the PSR will have a number of regulatory tools at its disposal in addition to competition law.  These include:  to give a direction or to impose a requirement on regulated participants; to require the operator a regulated payment system or a payment services  provider with direct access to grant access to that payment system; to change the fees, charges, terms and conditions of an agreement relating to a regulated payment system; and (controversially) to require the disposal of an interest in the operator of a regulated payment system. 

Suzanne Rab is the author of “Indian Competition Law, an International Perspective” (first published by Wolters Kluwer, May 2012; with a supplement of cartel regulation published in January 2013). The book is the first-of-its-kind international comparative analysis of the Competition Act 2002 published contemporaneously with the coming into force of Indian competition law and merger control.

Suzanne is also co-author of "Media Ownership and Control: Law, Economics and Policy in an Indian and International Context" (Hart Studies in Competition Law, 2014).