1-Link, member banks issued notices for illegal practices
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, colluding to fix 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 CCP had earlier taken notice of uniform rates implemented by most banks in Pakistan for ATM cash withdrawal transactions.
In the course of investigation, the CCP approached the State Bank of Pakistan (SBP), which confirmed that it does not fix ATM charges and that banks are free to determine them.
Moreover, in response to letters sent to various banks seeking a rationale for uniform rates, two member banks of 1-Link confirmed that they have to comply with the schedule of charges devised by the consortium.
The facts acquired raised suspicions that 1-Link and its members may be engaged in illegal collaborative activity to fix rates of ATM transactions. In order to collect further evidence, the CCP also conducted a search of the office of 1-Link in Karachi.
According to the Enquiry Report submitted after analysing evidence, it appears that banks have signed an Accession Memorandum to a ‘1-Link Agreement’, and are bound to follow the terms and conditions laid therein – including fixed ATM cash withdrawal charges. Similarly, 1-Link has signed ‘Utility Bill Payment Agreements’ with utility companies and an ‘Internet Fund Transfer Agreement’ with TPS Pakistan (Pvt) Limited, it appears, to fix rates for UBPS and IBFT transactions respectively.
It also appears that 1-Link has provided a forum in which owner banks of the 1-Link consortium have discussed matters of common interest, including rates of ATM cash withdrawal transactions, UBPs and IBFT services. It appears that in light of these discussions, 1-Link has issued a schedule of charges regarding interchange fees and ATM rates periodically to its member banks.
Fixing interchange fee and maintaining uniform rates to be charged from ATM customers deprives banks to individually bargain or negotiate these rates. Such an arrangement appears to restrict competition and is therefore, prima facie, in contravention of Section 4(2)(a) of the Competition Act.
As per estimates given in the report, the number of cash withdrawal transactions during January to June 2011 is 17.52 million – resulting in total revenue of around Rs203.36 million at Rs11.68 interchange fee. 60.2% of this revenue went to only six banks: Allied Bank, Bank Alfalah, Bank Al-Habib, HBL, Soneri and UBL collectively pocketed Rs122.38 million. Similarly, 19 member banks who offer IBFT services recorded 1.4 million transactions in the same period, resulting in revenues of Rs16.25 million at Rs11.61 interchange rate. With respect to UBPS, 14 banks offering this service recorded 1.04 million transactions that generated revenues of Rs5.83 million at Rs5.61 interchange rate.
1-Link provides services to its 30 member banks on more than 4,572 ATMs in more than 200 cities nationwide. The card base of its member banks exceeded 11.71 million in 2010.
Published in The Express Tribune, March 16th, 2012.
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What else can u expect from these purveyors of usury?