EU Telegraphs It Is Probing Whether Western Union Colluded To Drive Rivals Out Of Money-Transfer Market

A View from Constantine Cannon’s London Office

By Richard Pike and Yulia Tosheva

The European Commission has reportedly launched a preliminary antitrust investigation into possible collusion by Western Union in the money remittance market.

According to sources, the European Commission is investigating whether exclusivity contracts signed between money-transfer provider Western Union and retail outlets violate European Union competition rules.

The European Commission is reportedly also looking into allegations that banks agreed to close accounts of some smaller money-transfer companies on the basis that they may be linked to drug-trafficking or terrorism.  This so-called de-risking strategy has been the subject of much discussion in the industry over the last few years, and gave rise to a claim in the English courts by one money transfer provider, Dahabshiil, which succeeded in using the Competition Act to get an interim injunction requiring Barclays to continue providing it with banking services.

The money remittance industry has dramatically expanded in the last few decades, driven by the millions of people working abroad.  In 2014, remittances to developing countries totalled a staggering $436 billion, out of a total of $583 billion worldwide.  In 2008 the World Bank launched a database of remittance prices, called the Remittance Prices Worldwide Database, which allows for comparison/benchmarking and puts pressure on remittance providers to enhance quality and offer competitive prices.

While the majority of money remittances are traditionally handled by banks, three main operators dominate the non-bank market: Western Union, MoneyGram and Ria. Between them they operate 1.1 million retail locations, across 200 countries.  Western Union holds a global market share of about 15 percent, followed by MoneyGram’s four to five percent.  Although innovative digital providers such as TransferWise and PayPal’s Xoom are putting pressure on Western Union’s market position, the company continues to dominate the money remittance industry and has been actively looking to enhance its capabilities through partnerships.  Most recently, Western Union announced a partnership with Viber, a leading mobile messaging application with more than 664 million users.  Last year, there was speculation that Western Union might acquire its main rival MoneyGram, which was eventually denied by the company.

Western Union has been already been subject to antitrust proceedings in Serbia, Russia and the U.S.  In 2010, the Serbian competition authority found that two Serbian Western Union agents, Eki Transfers and Tenfore, had abused their dominant position by imposing exclusivity clauses in their contracts with 24 banks.  The exclusivity clauses stipulated that the banks could not offer the services of Western Union’s competitors to their customers during the contract term (three to five years) and for up to 18 months after their expiration.  In 2003, the Russian Federal Antimonopoly Services found that exclusivity clauses in partnership agreements between Western Union and Russian banks were anti-competitive.  While the U.S. Department of Justice (“DOJ”) closed an investigation into Western Union’s exclusive contracts with its retail agents back in 2005, the DOJ stated that “it continues to have serious concerns regarding the lack of vigorous price competition in certain U.S.-foreign country ‘corridors’ and will monitor the international money transfer services market.”

Western Union said in a statement that competition is strong and consumers have various options available from money transfer operators, digital operators, mobile operators, mail and courier services, prepaid cards, travel cards, ATM transfers, and other money transfer services.  The European Commission is reportedly in the process of reviewing evidence and has not decided yet whether to open a formal investigation.

– Edited by Gary J. Malone