Press release: The Competition Authority seeks views on its investigation into the competitive conditions related to payment services in Iceland

The Competition Authority has published a discussion paper on its website concerning payment services in Iceland and the project of Fjölgreiðslumiðlun (FGM). The paper is part of the Competition Authority's review of FGM's request for an exemption from the prohibition on collusion. Given the close interconnection between the operations of FGM and Reiknistofan bankanna (RB), the document also discusses the latter's activities. The Competition Authority is seeking views and comments on the discussion paper.

The importance of safeguarding effective competition in the financial market, where payment services are one of the cornerstones, needs no elaboration. Under the current circumstances, it is particularly important to strengthen competition in key markets in order to accelerate the development of the business sector. [See the Competition Authority's report for more details] No. 2/2009, Robust development – opening up markets and boosting business activity]

The discussion paper provides a detailed account of the aforementioned activities and seeks answers to numerous questions concerning the competitive conditions in the financial market. Among these, questions are asked about the following points:

• Is the current ownership and structure of FGM normal, or would it be preferable for it to be different, and if so, how?
• What are the arguments for and against FGM developing and operating a transaction referral system, the XPS system, for the payment processors Valitor and Borgun?
• Is it possible that the current arrangement and implementation of safety standards by FGM could be or is anti-competitive in vehicle recovery in this country, or in individual aspects of that activity?
• Is it likely/possible that the current arrangement and implementation of microprocessorisation by dealers could be or is anti-competitive in transaction processing or in individual aspects of that activity?
• To what extent are there barriers to access to the payment clearing system, which may include legal, technical, pricing or other factors?
• Is RB's current operating model as a charitable organisation appropriate? What are the arguments for and against it?
• Does the current operating structure of RB prevent new entrants from entering the Icelandic financial market? If so, how can this be prevented?

The Competition Authority has already sent the discussion paper to many stakeholders and parties with expertise in payment systems. The Authority is now giving everyone an opportunity to submit their views on the matter. This can be done by sending a submission to the Authority, or by sending an email to the address samkeppni@samkeppni.is, marked „Competitive conditions in payment services“.

See Discussion document.

Background information:
In 2008, the Competition Authority made a decision concerning serious restrictions of competition in the payment card market and related activities (decision No. 4/2008 Breach by Greiðslumiðlun hf., Kreditkort hf. and Fjölgreiðslumiðlun hf. of the prohibition provisions of the Competition Act).  Fjölgreiðslumiðlun hf. (FGM), which was partly a party to the restrictions in question, has requested an exemption from the prohibition on the Competition Authority for its activities to the extent that they may contravene the prohibition in the Competition Act on anti-competitive collusion. An exemption is sought from the prohibition clause on the grounds, among other things, that the cooperation FGM wishes to engage in, which may impede competition, is in the best interests of consumers.

Fjölgreiðslumiðlun hf. (FGM) operates and develops a payment system (JK system) for Icelandic banks and savings banks, and a joint electronic payment channel (RÁS service) for payment card transactions in Iceland. The company also oversees standards and security matters related to the issuance and use of payment cards, and manages various agreements and rules that have been developed in cooperation with companies in the Icelandic financial market. FGM is owned by all commercial banks in Iceland, with the exception of MP Bank, savings banks, the card companies Valitor hf. and Borgun hf., and the Central Bank of Iceland.

Under the provisions of competition law, the Competition Authority may grant an exemption from the relevant prohibition if the benefits of a particular collaboration are considered to outweigh the disadvantages. The Authority is working to assess whether to grant FGM the requested exemption. It is crucial that the Authority reaches a decision that is in the public interest, as FGM's activities affect the important markets for banking and payment services.

In order to examine FGM's request for an exemption from the prohibition clause of the Competition Act and with a view to exploring the views of all relevant parties, the Competition Authority has prepared a discussion paper on the main aspects of the activity in question. The Competition Authority has therefore sought the views of stakeholders on the markets related to general commercial banking, the issuance of payment cards, acquiring, advising and settlement and to parties that accept payments by means of payment cards, such as retailers and other sellers of goods and services. Views are requested on individual aspects of FGM's activities covered by the company's exemption request, as described in the document. This document is part of the Competition Authority's proceedings concerning the aforementioned exemption request. The discussion paper is intended to help ensure that the Authority's decision in the matter has a positive effect on competition.