ATM Service

Term 'prohibited agreement', was applied to a wide range of practices, whereby competitions co-ordinate among themselves to prevent, restrict or reduce competition in the market

Most glaring example of prohibited agreement was co-ordination among the competitors to fix the price

Such anti-competitive agreement aimed to reduce price competition, raise price or effect price in a favourable way for the undertaking (Association of Banks in the present case) involved and certainly had the object and effect of reducing competition in the market under S.4 of Competition Act, 2010, prohibited agreement could also be exempted under S.5 of the Act

To seek such exemption, an agreement had to fulfil the criteria/ conditions laid down in S.9 of the Act

Section 9 of the Competition Act, 2010, essentially raised the question that whether there were efficiency gains of a competition restrictive agreement; and benefits were passed on to the consumers; or whether its pro-competitive benefits outweigh its anti-competitive harms

In absence of a collective agreement to standardize interchange fee, some of the members (Banks) could find incentives to increase their fee, while also expecting others to keep their fee low; in such situation of free riding, while their customers continued to enjoy ATM cash withdrawal service at cheap rates, the customers of other banks would generate greater revenue for them in lieu of a higher fee

If that trend would continue, every bank which owed large ATM networks, would find it in its interest to raise its fee at par with others in order to avoid the situation, wherefrom riding was taking place at its expenses

Free riding would threaten the very existence of the network by reducing, demand for such services and could result in fees much higher than that which was collectively set by the members (Banks)

Individually negotiated inter-change fee could have the effect of hampering production and distribution while also apparently threating the failure of a system that would contribute to economy.