Financial Services (Banking Reform) Act 2013 Explanatory Notes

Regulatory and competition functions

Sections 54 to 58: Powers of Regulator

235.Sections 54 to 58 set out the regulatory powers of the Payment Systems Regulator. The Payment Systems Regulator has the following powers: to give directions to participants in regulated payment systems (section 54); to impose certain requirements on the operator of a regulated payment system concerning the rules of the system (section 55); to order the provision of access to a regulated payment system (section 56); to vary the fees and charges payable under, and other terms and conditions of, an agreement concerning access to a regulated payment system (section 57); and to require the disposal of an interest in the operator of a regulated payment system (section 58). The powers to order the provision of access to a payment system and to vary agreements can only be exercised where an application has been received by the Payment Systems Regulator. The power to order the disposal of an interest in a regulated payment system can only be exercised if the Payment Systems Regulator is satisfied that, if the power were not exercised, it is likely that there would be a restriction or distortion of competition in the market for payment systems or for services they provide (section 58(2)). The exercise of this power is subject to the consent of the Treasury (section 58(3)).

Sections 59: The Regulator’s functions under Part 4 of the Enterprise Act 2002

236.Section 59 confers on the Payment Systems Regulator certain of the competition functions of the CMA under Part 4 of EA02, so far as those functions relate to participation in payment systems. The Payment Systems Regulator will only have a market study function concurrently exercisable with the CMA (whose Board exercises this function); the Payment Systems Regulator does not have the concurrent function of conducting market investigations, which remains solely that of the CMA (which convenes a group to conduct such investigations). The Payment Systems Regulator will be able to conduct a market study the purpose of which is, amongst other things, to consider the extent to which a matter in relation to participation in payment systems used to provide services in the United Kingdom has or may have effects adverse on the interests of consumers. Having conducted a market study, the Payment Systems Regulator can then refer the relevant market to the CMA which has the power to conduct a market investigation and, if necessary, use its powers in Part 4 of the EA02 to remedy any distortion or restriction of competition that it finds in the market. Certain functions of the CMA (relating to the maintenance of registers and publishing of guidance) contained in Part 4 of EA02 are excluded from those that the Payment Systems Regulator may exercise concurrently.

Section 60: Restrictions on exercise of functions under Part 4 of the Enterprise Act 2002

237.Section 60 imposes a requirement on the CMA and the Payment Systems Regulator to consult each other before exercising any of their concurrently exercisable competition functions. Subsection (2) prevents one exercising functions in relation to a matter if the other had already exercised those functions in relation to that matter. Subsections (4) and (5) make similar provisions for co-ordination between the Payment Systems Regulator and the FCA, which also have concurrent competition functions under Part 4 of EA02 as a consequence of sections 129 and Schedule 8 (which are explained separately below).

Section 61: The Regulator’s functions under the Competition Act 1998

238.Section 61 confers on the Payment Systems Regulator certain competition functions under Part 1 of CA98. Such functions are exercisable concurrently by the Payment Systems Regulator and the CMA. Those functions concern investigations of, and powers to address, restrictions and distortions of competition, so far as the agreements, decisions, concerted practices or conduct in question relate to participation in payment systems. Subsection (3), in conjunction with subsection (5), excludes certain functions of the CMA contained in Part 1 of CA98 from those that the Payment Systems Regulator can exercise concurrently.

Section 62: Duty to consider exercise of powers under Competition Act 1998

239.Section 62 imposes a requirement on the Payment Systems Regulator, before exercising any of the powers mentioned in subsection (2), to consider whether it would be more appropriate to take action under its new powers in CA98. Subsection (3) prohibits the Payment Systems Regulator from exercising a power mentioned in subsection (2) if it considers that it would be more appropriate to proceed under CA98.

Sections 63 to 67: The Regulator’s competition powers

240.Sections 63 to 67 make further provision concerning the Payment Systems Regulator’s competition powers, including requiring it to provide relevant information and assistance to a CMA group carrying out a market investigation in response to a market investigation reference made by the Payment Systems Regulator. It is also required to keep under review the market for payment systems and the markets for services provided by payment systems. Subsection (1) of section 67 gives the Payment Systems Regulator the power to apply to the court to make a disqualification order against a person who is a director of a company which has committed a breach of competition law. Subsection (2) has the effect of ensuring that the Payment Systems Regulator is a National Competition Authority for the purposes of EU competition law. Subsection (3) amends section 136 of EA02, to ensure that the Payment Systems Regulator would receive a copy of a CMA report where the CMA Board had made a market investigation reference, for consideration by a CMA group, concerning participation in payment systems. Subsection (4) amends section 52 of the Enterprise and Regulatory Reform Act 2013 so that the power for the Secretary of State to remove from a regulator any of its concurrent competition functions would extend to the Payment Systems Regulator’s concurrent competition functions. Subsection (5) ensures that the CMA is required to report on the exercise by the Payment Systems Regulator of its concurrent competition powers.

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