ISLAMABAD - The Competition Commission of Pakistan (CCP) has imposed a total penalty of Rs 770 million including Rs 50 million on 1-Link (Guarantee) Limited and Rs 50 million each on its 11 founding member banks and Rs 10 million on each of its 17 non-founding member banks for imposing uniform customer charges for Off-Us ATM cash withdrawal transactions in violation of Section 4 of the Competition Act, 2010.
A CCP Bench comprising of Chairperson, Rahat Kaunain Hassan, Member, Abdul Ghaffar and Member, Dr Joseph Wilson, passed an Order on June 28, 2012 in respect of the proceedings initiated against 1-Link and its member banks for imposing uniform customer charges for Off-Us cash withdrawal transactions, which amounts to violate Section 4 of the Competition Act.
The detail of fines imposed by the Commission is as follows: Rs 50 million on 1-Link; Rs 50 million on each founding members namely; National Bank of Pakistan, Allied Bank Limited, Habib Bank Limited, Bank Al-Falah Limited, Askari Bank Limited, Soneri Bank Limited, NIB Bank Limited, United Bank Limited, Standard Chartered Bank Pakistan Limited, Faysal Bank Limited and Bank AL Habib Limited; and Rs 10 million on each non-founding members namely; Albaraka Bank Pakistan Limited, Burj Bank Limited, Meezan Bank Limited, Bank Islami, Khadim Ali Shah Bukhari Bank Limited, Habib Metropolitan Bank Limited, The Bank of Khyber, Dubai Islamic Bank Pakistan Limited, JS Bank Limited, Silk Bank Limited, The Bank of Punjab, Samba Bank Limited, Sindh Bank Limited, Barclays Bank PLC Pakistan Limited, Tameer Microfinance Bank Limited, Kashf Micro Finance Limited and Summit Bank Limited excluding Citi Bank which has not followed the collective behaviour of charging uniform fee for Off Us ATM transaction
However, the Bench has granted exemption to the 1-Link agreement entered into by and between founding members and Inter Bank Fund Transfer (IBFT) Agreement entered into by and between 1-Link and TPS Pakistan (Private) Limited and ABN Amro Bank N.V. (now known as Faisal Bank Limited), to the extent of interchange (bank to bank) fee for ATM cash withdrawal and IBFT services and also Utility Bill Payment Services (UBPS) Agreements entered into by 1-Link with utilities companies.
CCP on its own took notice of the uniform rates implemented by the 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 are also represented 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 (SBP) to enquire whether it has fixed the ATM charges. SBP in response stated 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 an Enquiry Committee was appointed to conduct an enquiry as to whether 1-Link and member banks are engaged in any prohibited activity in terms of Section 4 of the Act and submit a detailed Enquiry Report.
The Enquiry Report concluded that 1-Link Agreement appears to fix Off-Us cash withdrawal charges which the other network parties/members have acceded to by signing an Accession Memorandum. Whereas UBPS Agreement and IBFT Agreement entered into by 1-Link on behalf of its members also apparently fix the charges in respect of both services. Further, 1-Link has issued schedule of charges periodically to its member banks and has, prima facie, taken decisions acting as an association of undertakings to fix interchange (bank to bank) fee in respect of ATM cash-withdrawal and 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 to the member banks by their customers. Such decisions on price fixing by 1-Link, and price fixing agreements acceded to by member banks, prima facie, have object or effect of restricting competition in contravention of Section 4(1), in particular, Section 4(2)(a) of the Act. Based on the findings of the Enquiry Report, CCP initiated proceedings under Section 30 of the Act and issued Show Cause Notice to 1-Link and its member banks on 14 March, 2012.