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EU Commission will investigate banks over e-payments competition fears

The European Commission is investigating whether members of a banking standards body are unlawfully restricting other institutions from using an online payment process they developed.

The Commission will look into whether a standards system locks out other organisations, including non-banks, and restricts the ability of those organisations to trade. The investigation has been prompted by a complaint, it said.

The European Payments Council (EPC) developed standard payment schemes and frameworks for electronic payments after the Commission, EU governments and the European Central Bank tasked industry with creating harmonised systems that would promote the single euro currency.

A host of major banking institutions, including Barclays, BNP Paribas, Deutsche Bank and HSBC, are members of the EPC which developed the self-regulatory systems which it operates in the Single Euro Payments Area (SEPA). SEPA consists of the 27 EU countries plus Iceland, Norway, Liechtenstein, Switzerland and Monaco.

"Within SEPA, bank customers can make electronic euro payments across 32 countries under the same basic rights and obligations," a statement on the EPC website said.

The European Commission said it will look into whether the banks are preventing other payment providers from using the system.

"The Commission intends to investigate whether the e-payments standardisation process will not unduly restrict competition, for example through the exclusion of new entrants and payment providers who are not linked to a bank," the Commission said in a statement.

"Such restrictions, if established, could harm merchants and consumers in the market of e-payments. This could breach EU rules on restrictive business practices. The Commission has received a complaint which will form part of this investigation," the Commission said.

"The initiation of proceedings does not imply that the Commission has made a definitive finding of an infringement but means that the Commission will deal with the case as a matter of priority," it said.

The European Commission is responsible for investigating competition-restricting agreements between two or more firms under the Treaty on the Functioning of the European Union (TFEU).

Under the TFEU "all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between member states and which have as their object or effect the prevention, restriction or distortion of competition with the internal market" are generally prohibited.

Exceptions apply if the agreements can be shown to contribute to "improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit" providing any restrictions that are imposed are "indispensable to the attainment of these objectives" and do not create the situation where competition can be eliminated "in respect of a substantial part of the products in question".

The Commission said it was supportive of standardised e-payment systems "in principle", but that banks should not be allowed to "unnecessarily restrict opportunities for non-participants".

"Use of the internet is increasing rapidly making the need for secure and efficient online payment solutions in the whole Single Euro Payments Area all the more pressing," Joaquín Almunia, vice president of the European Commission who is in charge of competition policy, said.

"I therefore welcome the work of the European Payments Council to develop standards in this area. In principle, standards promote inter-operability and competition, but we need to ensure that the standardisation process does not unnecessarily restrict opportunities for non-participants," Almunia said.

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