In 1994, eight Dutch banks founded Interpay Nederland B.V. (“Interpay”) as a holding company of a number of inter-banking institutions. The company is an important service centre for inter-banking transactions, electronic payment, credit card payments and payment information services in The Netherlands. In The Netherlands, Interpay provides, amongst other things, services for electronic payments such as network services for debit-card transactions, also known as PIN (Personal Identification Number) transactions.

In 2002, the Dutch Competition Authority (“NMa”) started an official investigation into infringements by Interpay and its shareholders (all major Dutch banks) of Articles 6 and 24 of the Dutch Competition Act (“Mw”). Article 6 Mw prohibits agreements restrictive of competition and Article 24 Mw prohibits abuse of a dominant position.[1]

The investigation of the NMa focussed on network services for PIN transactions. PIN transactions are payment transactions where retail customers pay for products electronically in shops etc. In The Netherlands, these network services are offered solely by Interpay BeaNet B.V. (“BeaNet”). BeaNet is a 100% subsidiary of Interpay.[2] Retailers who want to offer their customers the possibility of electronic payment by using PIN cards (“PIN payments”) have to subscribe with and enter into an agreement with BeaNet. Under these agreements, retailers pay a fixed amount for each PIN transaction.

Following several complaints from retail organisations, the NMa investigated whether the co-operation of the shareholders within Interpay constitutes an infringement of Article 6 Mw. Furthermore, the NMa investigated abuse of dominant position by Interpay as defined in Article 24 Mw by charging excessive tariffs.

According to the NMa, a reasonable suspicion had arisen from its investigation that Interpay and its shareholders had infringed Articles 6 and 24 Mw and that these infringements were attributable to them. After the NMa had concluded its investigation, it sent the interested parties (Interpay and its shareholders) the report with its conclusions and enabled the parties to react before reaching its decision.

Relevant Market

In its decision, the NMa further substantiated its findings included in the report. First of all, it concluded that the market for PIN payments forms a separate relevant market as compared to other payment recourses on retail level. Because a payment transaction is always a bilateral act, the NMa has taken into account the behaviour and the possibilities for substitution of the consumer and the retailer in defining the relevant market.


In its decision, the NMa reasoned that PIN payments have such special product features that other payment resources cannot be regarded, from the consumers’ point of view, as substitutable. According to the NMa this, amongst other things, appears to be so from the fact that consumers are prepared to pay a fee for PIN transactions and that PIN payments lead to a clear accounting overview of payments. Further, according to the NMa, it follows from the Commission’s VISA-decision that, from the users’ point of view, cash is impractical, dangerous to carry around in large amounts and unsuitable for large expenses.


According to the NMa’s findings, retailers find it unthinkable not to offer facilities for PIN payments for the following reasons: improvement of their competitive position in relation to that of other retailers, prevention of loss of turnover, encouragement of impulse buying, display of customer–friendliness, lower costs, low susceptibility to fraud, the achievement of safety both for the customer and the personnel and the possibility of unmanned retail outlets.

Cellophane Fallacy

Normally, the so-called SSNIP-test is applied to indicate what kind of effect a small but significant increase of the existing market price has on the behaviour of buyers with respect to the investigated products so that the substitution possibilities on the demand side can be defined.

However, the NMa came to the conclusion that because of the abusive price-level set by Interpay, in this case the SNIPP-test is not suitable for the definition of the relevant market, because the tariff of the network services for PIN transactions lies above the competitive level. Interpay/BeaNet had achieved remarkably high returns during the period 1998-2001.

In case of prices above the competitive level, as is the case in this case, a SSNIP-test will not give a realistic indication of the relevant substitution possibilities. This is because buyers will tend to consider products to be substitutes, sooner than in a situation where the price is determined by competition, not because of the features of the products but because of the fact that a buyer is already forced by the existing prices being above the competitive level. This may be evidence that the relevant market is defined too broadly. This phenomenon is called a “cellophane fallacy”.

Relevant geographical market

The relevant geographical market of network services for PIN transactions is limited to The Netherlands because there are no connections between the Interpay network and networks in other European countries. So, for retailers in The Netherlands, there are no alternatives for Interpay’s network for PIN transactions.

Agreement restrictive of competition - Article 6 Mw

Article 6 Mw prohibits agreements between undertakings, decisions of associations of undertakings and concerted practices of undertakings, which object or effect is to restrict competition on the Dutch market or on a part of the Dutch market.

The joint venture Interpay was founded by eight Dutch banks by means of a number of agreements. The agreements between the shareholding banks can be qualified as horizontal agreements. For the assessment of the horizontal co-operation, the NMa has taken the guidelines regarding horizontal co-operation agreements of the Commission into consideration.

In the assessment of the joint venture by the NMa, three aspects play a role. Firstly, the establishment of the joint venture; secondly, the realisation of the network for PIN transactions and thirdly, the joint sale of the network services though Interpay.

With respect to the establishment and maintenance of the joint venture and the realisation of the network, the NMa considered that these acts are not in violation of competition law.

However, with respect to the joint offering of PIN network services, the NMa finds differently. The NMa considers that the Interpay network is the only network for PIN transactions in The Netherlands. Also, Interpay is the only supplier of network services for PIN transactions through that network. The decision to offer these services only through Interpay, and not by the individual banks in competition with each other, results in the fact that the retailer is only able to obtain the service from one supplier. This constitutes a restriction of competition. The joint sale of network services through Interpay is not indispensable for the maintenance and exploitation of the network. The shareholder banks would be able to carry out the sales activities themselves. Therefore, the (potential) competition between the shareholder banks has been eliminated completely. By doing so, the shareholder banks have noticeably violated Article 6 Mw.

Imposition of fines for the infringement of Article 6, first paragraph Mw

Seriousness of the infringement

According to NMa’s Fining Policy Guidelines, depending on the seriousness of the restriction of the competition, horizontal restrictions can be regarded as serious or very serious infringements. In this case, the NMa considers that the horizontal co-operation between the banks relating to the sale of network services for PIN transactions has eliminated competition on the relevant market completely. However, when determining the amount of the fine, the NMa took into account that the co-operation between the shareholding banks had contributed to the faster realisation of a well functioning and safe network for electronic payments in The Netherlands. The NMa, therefore, regarded this infringement of Article 6, first paragraph Mw as a serious infringement.

Duration of the infringement

The NMa established the period during which the breach of Article 6, first paragraph Mw occurred from 1 January 1998 until 1 March 2004. For the determination of the amount of fine the NMa took as a basis the turnover involved which is realised in the period from 1 January 1998 until 31 December 2003.

The NMa has imposed the following fines on the shareholding banks for breach of Article 6, first paragraph Mw:

ING Bank N.V. : EUR 3,900,000.--
ABN AMRO Bank N.V.: EUR 3,900,000.--

Coöperatieve Raiffeisen - Boerenleenbank B.A.


EUR 3,900,000.--
Fortis Bank (Nederland) N.V.:EUR 1,900,000.--
SNS Bank N.V.:EUR 1,900,000.--
F. van Lanschot Bankiers N.V.:EUR 500,000.--
Friesland Bank N.V.:EUR 500,000.--
N.V. Bank Nederlandse Gemeenten:EUR 500,000.--

Abuse of dominant position – Article 24 Mw

The NMa found that Interpay, undisputedly, has a dominant position on the relevant market for network services for PIN transactions in The Netherlands, since it is the only supplier on this market. The NMa dismissed Interpay’s argument that it had no dominant position, because it is not capable of independent market behaviour by pointing to its conclusion that Interpay charges excessive prices for its services.

The NMa subsequently investigated whether Interpay has abused its dominant position by charging excessive prices to its customers (retailers) for network services for PIN transactions. Referring to the case law on Article 82 EC, the NMa points out that pricing is considered abusive if the price does not reasonably relate to the economic value of the product or service concerned. Moreover, it points out that a dominant undertaking is often able to pass on the costs of its own inefficiencies to its customers by charging higher prices, as well as realising an excessive return on its costs.[3]

NMa acknowledged that Interpay has incurred considerable expense in setting up the network necessary to provide retailers with network services. This network has made it possible for widespread use to be made of debit-card transactions through a fast and secure network.


In order to establish whether the tariffs charged by Interpay are excessive, the NMa first investigated whether the costs made by Interpay have, from an economic viewpoint, been correctly allocated to the network services for PIN transactions. Unless it finds any evidence that these costs are inefficient, the NMa bases its judgment on the actual costs of Interpay.


Subsequently, the NMa determined the return made by Interpay by subtracting the costs from the turnover realised. In order to establish whether Interpay’s return is excessive, the NMa compared this return to a benchmark return on Interpay’s equity and borrowed capital. The NMa calculated the benchmark return on the basis of the Weighted Average Cost of Capital (WACC) method, which is commonly used to determine a capital costs rate. Next, the NMa calculated the return realised by Interpay over the period 1998-2001 using a Return on Invested Capital (ROIC) model.[4] Only if the ratio between these two after comparison is disproportionate, would the NMa consider Interpay’s tariffs to be abusive in the context of Article 24 Mw.

The NMa dismissed the argument by the parties that the test applied by the NMa is stricter than the Commission’s practice under Article 82 EC. The NMa stressed that it will only regard excessive prices to be abusive and that it does not require that a dominant company charges only cost-oriented prices. The NMa also dismissed the argument that Article 82 EC requires an international comparison of tariffs for network services for debit card transactions. According to the NMa, international comparison may be an indication that certain tariffs are excessive, but there is no requirement under Article 82 EC to apply an international comparison, especially not if there are other methods available.

Having used a conservative (advantageous for Interpay) calculation scheme, the NMa concluded that the return made by Interpay over the period 1998-2001 was five to seven times higher than the calculated benchmark return. According to the NMa, this result is disproportionate. The NMa therefore concluded that the tariffs used constitute abuse of a dominant position by Interpay. The retailers, and ultimately consumers, had suffered a loss as a result.

Imposition of a fine for the infringement of Article 24 Mw

The NMa referred to its Fining Policy Guidelines, in which it has indicated that any abuse by an undertaking with a monopoly position, is automatically regarded as a very serious infringement. In this case, the NMa decided that the basis for the fine calculation is multiplied by 2.[5]

Application of the principles set out in the NMa’s Fining Policy Guidelines would result in a fine, which would exceed the statutory maximum of 10% of the company’s annual turnover. Therefore, the NMa limited the fine to 10% of Interpay’s turnover in the preceding calendar year (2003), which is EUR 30,183,000.


In view of the fact that Interpay had transferred the contract management including the sale of network services for debit card transactions to the individual shareholding banks of Interpay, the NMa acknowledged that the infringement of Article 6 Mw has been terminated. For that reason, the NMa saw no reason to impose an order for periodic penalty payments on Interpay. However, the NMa announced that it will closely follow the development of the tariffs for network services for PIN transactions in the future and that it will not hesitate to commence new investigations if there is any indication that the Competition Act is not observed.

Written by Pauline Kuipers and Liselotte van Wijngaarden.

[1] Article 6 MW is based on Article 81 EC and Article 24 Mw on Article 82 EC.

[2] Interpay and BeaNet are jointly referred to as ‘Interpay’, since the NMa considers them to act as one economic entity.

[3] It is interesting to note that the NMa remarks that it will generally not act on the basis on Article 24 Mw against pricing strategies by companies, which have no lasting or structural dominance. Also, the NMa takes into account whether the company has recovered start-up losses

[4] To underline the fact that the ROIC model is generally accepted, the NMa refers to a document on OFT’s website: Assessing profitability in competition policy analysis, Economic Discussion Paper 6 of July 2003.

[5] For very serious infringements, a multiplication factor of between 1.5 and 3 must be applied according to the NMa’s fining policy.




Pauline Kuipers


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