THE Payment Association of Namibia (PAN) and nine registered commercial banks are being investigated for alleged collaboration regarding interchange fees. The investigation, being conducted by the Namibian Competition Commission, could point to possible price fixing.
In a statement issued last week, the commission emphasised that a final decision has not been reached in this matter.
However, in terms of the Competition Act, the NaCC has provided an opportunity to the entities being investigated to engage the commission for possible settlement of this matter to avoid proceedings under existing legislation.
Commercial banks have recently come under criticism for earning vast profits while their customers struggle, with the Bank of Namibia allowing the status quo.
Deputy finance minister Maureen Hinda-Mbuende recently expressed dissatisfaction with the substantial profits earned by commercial banks while households face challenges in coping with rising living costs.
She is concerned about the growing financial strain on households, who are struggling to manage their finances amid high interest rates, just to meet basic needs.
Speaking at the unveiling of the Bank of Namibia (BoN) 2023 annual report, she emphasised the need for the banking sector to take further action, highlighting that continual interest rate hikes are unsustainable for the market.
“Is there a way that one can balance the way central banks adjust the repo rates to help the individuals or households to pay their mortgages on time and with less financial burden, considering alarming rates of property repossessions,” asked Hinda-Mbuende.
In a statement issued by NaCC spokesperson, Dina //Gowases, the commission noted that PAN and the named commercial banks adopted a Payment Clearing House Card Schedule (Card Schedule or PCH), which caters for the settlement and clearing rules.
“Card Schedules however, fixes the interchange fees agreed between Namibian banks. This conduct had been ongoing for a number of years, at least since 2014 and until 2020, when the exemption application was granted with conditions,” the NaCC stated.
Interchange fees are defined as transaction fees that a merchant’s bank account must pay whenever a customer uses a credit or debit card to make a purchase. The fees are paid to the card-issuing bank to cover handling costs, fraud and bad debt costs and the risk involved in approving the payment.
The commission’s preliminary decision is that the entities being investigated allegedly engaged in prohibited conduct by agreeing to fix interchange fees in their card schedules. For this, the commission has given the concerned parties 30 days within which to make any written submissions or indicate whether they would need an opportunity to make oral representations.
“Upon consideration of any written and oral representations by the concerned parties, the commission may institute proceedings in the High Court against the parties, in terms of Section 38 of the Competition Act,” //Gowases stated.
She added that fixing of prices or market conditions is an agreement (written, verbal, or inferred from conduct) among competitors that raises, lowers, or stabilises prices or competitive terms.
“Such conduct is considered a collusion between competitors to replace the independent market practice or setting of prices by market participants, with their own determination of prices,” the NaCC stated.
Price fixing is a contravention of competition laws. This means price fixing is deemed as being anti-competitive by its very nature. Once price fixing is proven to have taken place, the entities involved are found to have transgressed competition laws.
“The commission is of the considered view that there exist no legal instruments, at least at the time of initiation of this investigation, that makes provision for the setting of the interchange fees by the parties,” the NaCC added.
The commission added that there is nothing illegal about competitors independently establishing similar prices. However, the offence lies in their setting (or raising or maintaining) prices by entering into agreements with each other.
“The commission is of the view that because commercial banks are competitors in the market for issuing cards and acquiring card transactions, those same banks should not be allowed to collectively set interchange fees. Being competitors, commercial banks should independently determine their own respective fees as determined by their cost and other revenue considerations.
“Collectively setting fee levels, the involvement of the banks constituted a horizontal agreement between competitors to fix prices/market conditions which is a conduct that is per se prohibited,” the NaCC stated.
The undertakings whose conduct possibly constituted an infringement of Namibia’s competition laws include PAN, First National Bank of Namibia (FNB), Bank Windhoek, Standard Bank Namibia and Nedbank Namibia. Additionally, the Bank of Namibia (BoN) is considered by the commission as an interested party that may be affected by the final outcome.
-ebrandt@nepc.com.na
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