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Rs770m fines imposed on 1-Link, 28 banks

July 03, 2012

The CCP on its own took notice of the uniform rates implemented by the banks for ATM cash withdrawal transactions. - File photo

ISLAMABAD: The Competition Commission of Pakistan (CCP) has imposed a penalty of Rs770 million on the ATM service provider and the banks for uncompetitive behaviour and deciding the uniform service rate.

The penalties of Rs50 million has been imposed on 1-Link Limited and Rs50 million each on its 11 founding member banks and Rs10 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 Chairperson Rahat Kaunain Hassan and members Abdul Ghaffar and 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.

A fine of Rs50 million each has been imposed on founding members namely, National Bank, Allied Bank, Habib Bank, Bank Alfalah, Askari Bank, Soneri Bank, NIB Bank, United Bank, Standard Chartered Bank, Faysal Bank and Bank Al-Habib Limited.

And Rs10 million fine has been imposed on each non-founding members namely Albaraka Bank Pakistan, Burj Bank, Meezan Bank, BankIslami, KASB Bank, Habib Metropolitan Bank, Bank of Khyber, Dubai Islamic Bank Pakistan, JS Bank, Silkbank Limited, Bank of Punjab, Samba Bank, Sindh Bank, Barclays Bank Plc Pakistan, Tameer Microfinance Bank, Kashf Microfinance Limited and Summit Bank.

However no penalty has been imposed on Citi Bank which has not followed the collective behaviour of charging uniform fee for use of ATM transaction from the facilities of these banks.

The CCP on its own took notice of the uniform rates implemented by the banks for ATM cash withdrawal transactions.

In preliminary fact finding it was observed that 1-Link holds 80 per cent 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.

The 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,” the CCP has said.

However, the CCP observed that ‘Price fixing agreement may be considered under rule of reason when parties collaborate like a joint venture for creating significant and beneficial efficiencies that could not otherwise be accomplished.”

However, the bench granted exemptions subject to the condition that the network parties/member banks should have a non-proprietary structure of 1-Link (switch/network) or at least have a corporate model which does not allow owner banks to have influential decision making rights by virtue of Board Directorship.