According to its recent press release, the CNMC (Spanish Competition Authority) is currently investigating potential anticompetitive practices, prohibited by Article 1 of the Spanish Competition Defense Law and Article 101 of the TFEU, consisting of a systematic and unjustified refusal to grant access to certain financial entities, to a network of Automated Teller Machines (ATMs), in the same favorable conditions offered to other entities. Such practice has presumably taken place for several years until now, with the main objective of affecting the competitive capacity of certain entities in the market of the payment methods’ provision.
Nonetheless, the CNMC has not provided any concrete numbers, nor the name of the entities involved, which shows that the investigation is still on a preliminary stage, even though there is evidence of the possible existence of one or several cartels.
Dawn raids on September 2019
The CNMC has not officially revealed any name, but it is currently evaluating the creation of a cartel in the ATM business, consisting of a market with 51.391 ATM which generate around 18.000 operations, with which more than 900 million a year of economic transactions are conducted in Spain.
Last September 25th and 27th, dawn raids were carried out in the headquarters of several companies operating in this market, of both the financial entities and the network administrators. Such dawn raids were indeed part of the investigation opened by the CNMC, as a result of the reception of a complaint, which is currently being dealt with [i].
These dawn raids are a preliminary step in the investigation process of these alleged anticompetitive conducts and do not prejudge the results of the investigation or the guiltiness of the companies who are being investigated. In case that, as a result of this investigation, evidence of prohibited practices is found, the CNMC will proceed to the opening of a formal disciplinary procedure.
Regulatory background
In a scenario where bank offices’ closing is growing fast, the new “battle” to get cash has moved to ATMs. The initial suspicions started in November 2015, when the former Spanish Minister of Economy, Luis de Guindos, changed the Spanish regulation to adapt it to the Directive 2015/2366, of the European Parliament and of the Council, of 25 November 2015, on payment services in the internal market (“PSD2”). This regulation change entailed the prohibition of the “double-commission” on ATMs, impeding thus the ATM’s owner to charge the client directly. With this change in regulation, the card’s issuing bank became the one to decide if the commission which the ATM’s owner charges for the service is passed on or not to the client, and if so, whether totally or partially. In this context, banking entities who own an ATM network have two ways of establishing charges, (1) through an agreement between the card’s issuing bank and the ATM owner, or (2) by setting the commission unilaterally.
In such scenario, new operators on the market, as well as banking entities with a limited geographical presence, depend on the existence of multilateral agreements with other (larger) entities in order to allow their clients to use ATMs owned by other banks. Therefore, these smaller banking entities, who do not ATMs, cannot offer their clients a proper service if they do not reach an agreement with their competitors who do own ATMs. Larger entities have hence a head-start on the smaller ones because they own most of the ATM’s network.
However, instead of choosing the way of the agreements, following the change in regulation in 2015, Caixabank, who is the leading entity on installed ATMs, decided unilaterally to increase up to two euros the commission charged to those who get money out of any of its ATMs without being a Caixabank client. Banco Santander and BBVA followed Caixabank shortly after, applying similar commissions. As a result of such practices by the three largest entities, the three main technological platforms operating in Spain (Servired, Euro 6000 and 4B) reinforced their agreements from 2015, and recently, in February 2018, the Spanish Competition Authority approved with commitments the merger of these three platforms, with the objective of facilitating a larger competition and creating a single payments system [ii].
With such alliances, small financial entities, as well as foreign banks, such as ING, who operates via internet, were left out and witnessed how their clients’ possibilities of getting cash out of other banks’ ATMs were reduced, while their costs increased. According to the 2018 CNMC’s report, Caixabank, Banco Santander and BBVA together control around 61% of the ATM network (2017), which “can entail a competitive advantage for these entities over those owning a smaller amount of ATMs”, and this heterogeneity of the operators on the market “could affect the structure of the market”[iii].
Therefore, since these practices could indeed result into an increase of costs for smaller banking entities and slow down their potential growth on the market, ever since the CNMC has been closely following the conduct of these three entities and its effects on the market, which has led to the opening of the current investigations on September 2019.
Enterprises involved
The entity which has reported such anticompetitive practices is thought to be ING, which considers that certain entities have celebrated agreements in order to slow down its growth on the market, by increasing its costs and hindering the use of ATMs. Neither the CNMC nor ING have commented this information.
Until 2015, ING did not charge their clients for getting money out of ATMs because the commissions agreed with the three systems were lower and hence assumed by the Dutch bank. Nowadays, ING has only twenty-nine offices in all Spain and just around one hundred owned ATMs, so it still depends on the agreements reached with larger entities to offer its clients a proper service. In the past few years, the Dutch bank has installed ATMs in shopping centers in order to provide its clients with cash services, and it has created “Twyp”, which is a system allowing to get cash out of a stores network when paying with card.
Nonetheless, ING still needs the massive ATM network owned by the largest banks in order to be able to provide its clients with a wider service. Indeed, in its 2018 report, the CNMC admitted that, due to the rise on commissions, ING and EVO had been the most active entities in searching agreements and relieve its small ATM network [iv].
In this context, whereas the largest banks have enough market power to settle commissions unilaterally, smaller entities, such as ING and EVO, keep seeking to expand their agreements in order to lower the commissions to pay, assuming thus the commissions payed by the issuing banks and/or passed-on to clients as a competitive variable.
What to expect now
In its recent press release, the CNMC recalls that “agreements between competitors constitute a very serious infringement of the competition legislation, which can entail fines up to 10% of the total business volume of the offending companies”, and that “[…] the CNMC counts on its Clemency Program, which allows enterprises involved in cartels practices to benefit from an exemption for the payment of the fine, as long as they provide useful evidence allowing the CNMC to detect such practices, or to get a reduction of the total amount of the fine they might get”, depending on the value of the information provided.
In other words, one might reach the conclusion that the CNMC is trying to get any financial entity to act as a an informer, in order to determine if there was an agreement between banks to set prices relating to the ATM charges and, particularly, if they have been boycotting any financial entity in particular, whose clients would be now facing greater difficulties than the rest of the users to get money out of an ATM.
Unfortunately, we will have to wait until further information relating to these investigations is released, to ascertain whether these conducts constitute or not an infringement of Article 101 of the TFEU. We will follow-up on this important issue in due course.
[i] See Spanish Competition Authority (Comisión Nacional de los Mercados y la Competencia), Press Release of 30th September 2019, para 2-3. [https://www.cnmc.es/prensa/cnmc-investiga-acceso-cajeros].
[ii] See Spanish Competition Authority (Comisión Nacional de los Mercados y la Competencia), Press Release of 1st February 2018 [https://www.cnmc.es/2018-02-01-la-cnmc-autoriza-con-compromisos-la-fusion-de-los-tres-sistemas-de-pago-con-tarjeta-que].
[iii] Spanish Competition Authority (Comisión Nacional de los Mercados y la Competencia), INF/DC/176/18 “Informe de la CNMC sobre las comisiones por la retirada de efectivo en los cajeros automáticos”, 19 de diciembre de 2018, pág. 6/30.
[iv] Idem, pág. 19/30.
November 2019
Ángel Valdés Burgui – Partner
Lupicinio International Law Firm