Preliminary antitrust probe into possible collusion in money transfer market launched

In February 2016, it was reported that the European Commission is undertaking a preliminary antitrust investigation in relation to possible collusion in the money transfer market, continuing the trend of the Commission focussing on the financial sector in recent years.

Focus of the Commission’s antitrust investigation

Western Union, a US based money transfer services provider, has received a request for information from the Commission in relation to its activities in Europe focusing on whether agreements between Western Union and its agents are anti-competitive. The Commission’s investigation centres on allegations that Western Union entered into exclusive contracts with agents that might block competitors from entering the multibillion dollar money transfer services market. The Commission is also investigating allegations that banks agreed to close the accounts of other smaller money-transfer providers (on the basis, for example, of money laundering concerns), thereby preventing them from competing in the market. Smaller remittance firms in Europe rely on banks to provide banking services so that the money transfer providers can in turn provide their transfer services to customers.

A spokesman for Western Union confirmed in an email that it is cooperating with the Commission’s investigation. Western Union is arguing that competition is strong in the money transfer services market, with customers able to take advantage of options including money transfer operators, digital operators, prepaid cards, mail and courier services, mobile operators, travel cards and ATM transfers. Ricardo Cardoso, spokesperson for the Commission, is reported to have said that the antitrust authority “is closely monitoring competitive conditions in the money transfer market”.

Commentary

The preliminary investigation into the money transfer services market is the most recent investigation launched by the Commission focussing on the financial sector. The Commission continues its investigations into ethanol benchmarks, Euro interest rate derivatives (EIRD) and the manipulation of foreign exchange benchmarks, having previously investigated Yen interest rate derivatives and the manipulation of Swiss Franc LIBOR.

If the case proceeds, it will be interesting to see how the Commission frames its case against Western Union and what it makes of the other money transfer options available to customers. An increasingly digital world has arguably made money transfers overseas easier and possibly increased competition in the money transfer services market.

The stakes in the financial sector in particular are extremely high both in terms of possible levels of fines and the possible extent of antitrust damages claims. The same is true in the money transfer services case, with reports citing World Bank research that states the global remittances market is expected to be worth approximately US $441bn.