• Clarify the key characteristics of the card market
• Identify key agents in the market and their respective interests
• Identify the form and vehicle of collusion
• Think about factors impacting on the stability of the collusive agreement
• Identify firm characteristics affecting collusion
• Identify market characteristics affecting collusion
• Identify cartel characteristics affecting collusion
• Identify any impediments to collusion
• Think about the role of the involved firms
• Think about the role of regulation and the regulator
• Consider the effects of collusion on the key agents and the economy

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The UK's payments regulator has accused five companies including card group Mastercard of operating a cartel that took advantage of "some of the most vulnerable people in society" over six years. The Payment Systems Regulator, a subsidiary of the Financial Conduct Authority, said the companies which were all members of an industry group funded by Mastercard agreed to share leads and not poach clients from each other under an agreement that lasted from 2012 until 2018, when the regulator raided several of the companies' offices. The accusations focus on prepaid card services used by local authorities to distribute welfare payments to groups such as homeless people, victims of domestic violence and asylum seekers. Financial services UK regulator accuses 5 companies of operating cartel in card marketMastercard among the groups watchdog says took advantage of vulnerable consumers over 6 years

The other four companies accused of being members of the cartel are Allpay, Prepaid Financial Services, Sulion and APS better known as Cashplus. Allpay, PFS and APS issued prepaid cards using Mastercard's card scheme. Sulion promoted the use of such cards in the public sector and set up the National Prepaid Cards Network that the regulator said was central to the cartel. APS and PFS are also accused of making a separate arrangement between 2014 and 2016 whereby they would not target each other's customers when contracts were up for renewal. APS, which recently received a banking licence under its Cashplus brand, stopped operating in the market in 2016. "Prepaid card services like these can provide significant benefits to local authorities as one way to make welfare payments to some of the most vulnerable people in society," said Chris Hemsley, managing director of the Payment Systems Regulator. But "collusion in payments is absolutely unacceptable. Where we see it happening, we will take action, stop it, and seek to impose significant penalties". The regulator stressed that Wednesday's "statement of objections" was a provisional decision and would not necessarily lead to a final decision that there had been an infringement. However, Mastercard, Allpay and PFS have admitted that they took part in the arrangement and agreed to settle. They will pay maximum fines of about 32m if the PSR confirms its view that there were infringements. Mastercard will pay the majority of the fines 31.5m based on its much larger size. It blamed the wrongdoing on the actions of two former employees. It said: "We have taken this issue, which was isolated to UK prepaid cards, very seriously and have put further controls and training in place to ensure it cannot occur again, while working with the PSR to settle this matter at the earliest possible opportunity." The three-and-a-half year investigation marks the first public competition enforcement action taken by the PSR since it was established in 2015. Cashplus said that its business providing cards for local authorities was only ever a "very small" proportion of its revenues. It added: "We are currently evaluating the statement of objections received this morning, but we are confident that our activities in this market did not cause any customer or market detriment. We have co-operated fully with the PSR's investigation to date and will continue to do so."

Copyright The Financial Times Limited 2021. All rights reserved. Allpay said its staff were responsible for alerting the PSR to the potential breaches of competition law. It said it co-operated fully with the investigation and accepted the regulator's decision. PFS had not responded to a request for comment by publication time. Sulion could not be reached for comment.