NaCC says PAN, Banks infringed Competition Act in interchange fees ‘collaboration’

The Namibian Competition Commission (NaCC) has concluded its investigation against the Payment Association of Namibia (PAN) and nine (9) registered commercial banks, for alleged collaboration regarding interchange fees, which give rise to possible price fixing or market conditions.

The Commission found that the relevant provisions of Part I of the Namibian Competition Act No.2 of 2003 (Competition Act) have been infringed, more specifically Section 23(1) read with Section 23(2)(a) and 23(3)(a), based on the multilateral agreement through the PAN, to fix the interchange fees. However, it is important to note that no final decision has been made and the Commission wishes to invoke the process contemplated by Section 36 of the Competition Act and afford the affected undertakings or parties an opportunity to make written submissions and/or oral representations to the Commission.

The undertakings whose conduct constituted an infringement of the Competition Act and against whom relief is sought, comprise PAN, a statutory body established in terms of the Payment System Management Act No.18 of 2003 for the management, administration, operation, regulation and supervision of payment, clearing and settlement systems in Namibia; and registered commercial banks, namely, First National Bank of Namibia (FNB), Bank Windhoek Ltd (Bank Windhoek), Standard Bank Namibia Ltd (Standard Bank), and Nedbank Namibia Ltd (Nedbank).

The commercial banks whose conduct did not amount to a contravention of the Competition Act, but may be affected by the Commission’s decision, are Banco Atlantico Europa – Namibian Branch (Atlantico); Bank BIC Namibia (Bank BIC); Letshego Namibia t/a Letshego Bank Namibia (Letshego); Trustco Bank Namibia (Trustco); and Nampost t/a Nampost Savings Bank (Nampost). Additionally, the Bank of Namibia (BoN), which is the central bank of Namibia, is considered by the Commission as an interested party that may be affected by the Commission’s decision.

“The Commission is of the considered view that because commercial banks are competitors in the markets for issuing cards and acquiring card transactions, those same banks should not be allowed to collectively set interchange fees. Being competitors, commercial banks should independently determine their own respective fees as determined by their cost and other revenue considerations. Collectively setting fee levels, the involvement of the banks constituted a horizontal agreement between competitors to fix prices/market conditions which is a conduct that is per se prohibited.

“The Commission, therefore, makes a proposed decision that the parties have engaged in a prohibited conduct by agreeing to fix interchange fees in the Card Schedule. To this end, the Commission gives the concerned parties a period of 30 days within which to make any written submissions or indicate whether they would need an opportunity to make oral representations, in terms of Section 36 and 37 of the Competition Act, respectively. Upon consideration of any written and oral representations by the concerned parties, the Commission may institute proceedings in the High Court against the parties, in terms of Section 38 of the Competition Act,” NaCC said.

The Conduct

PAN and the noted commercial banks adopted the Payment Clearing House Card Schedule (Card Schedule or PCH), which caters for the settlement and clearing rules. Card Schedules however, fixes the interchange fees agreed between Namibian banks. This conduct had been ongoing for a number of years, at least since 2014 and until 2020, when the exemption application was granted with conditions.

PAN and the relevant commercial banks, have in terms of this schedule, multilaterally agreed to interchange/settlement fees. According to the extract from “Schedule 5C” of the PCH, “there will be no bilaterally negotiated interchange fees between participants and that all participants will pay the interchange fee rates agreed to by the industry.”

Reasons for infringement

The parties have contravened Section 23(1) read with Sections 23(2)(a) and 23(3)(a) of the Competition Act, due to the following reasons:

Fixing of prices or market conditions is an agreement (written, verbal, or inferred from conduct) amongst competitors that raises, lowers, or stabilizes prices or competitive terms. Such conduct is considered a collusion between competitors to replace the independent market practice or setting of prices by market participants, with their own determination of prices.

Price fixing is regarded to constitute a per se contravention of competition laws.  This means that price fixing is deemed as being anti-competitive by its very nature. Once price fixing is proven to have taken place, the parties are found to have transgressed competition laws.

The Commission is of the considered view that there exist no legal instruments, at least at the time of initiation of this investigation, that makes provision for the setting of the interchange fees by the parties.

As noted earlier, the parties admitted that the PCH fixes interchange fees agreed between Namibian banks. There is nothing illegal about competitors independently setting prices that are similar. Indeed, in a perfectly competitive market, one would expect retailers to sell their goods at the same prices. The offence lies in their setting (or raising or maintaining) of prices by entering into agreements with one another.

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