In a business review letter to counsel for The Clearing House Payments Company LLC (TCH), Andrew Finch, Acting Assistant Attorney General in charge of the Justice Department's Antitrust Division, states that the Justice Department has no present intention to take enforcement action against TCH for its proposal to create and operate a new payment system that will enable real-time transfers of funds between depository institutions. At the same time, while the Sept. 21, 2017, letter acknowledges the commendable objectives and procompetitive benefits of TCH’s proposed “Real Time Payment” (RTP) system, the Justice Department “reserves the right to challenge RTP in the future if RTP’s operations are determined to be anticompetitive in purpose or effect.” This business review letter is the first from the new administration.
TCH, a joint venture owned by 24 of the largest banks in the United States, has proposed a new “payment rail” that is faster than current payment rails, which include wire, automated clearing house (ACH), and check clearing house systems. According to a Justice Department release, TCH has represented that “RTP will not interfere with the continued use and operation of existing payment rails.” As observed by the Justice Department’s letter, TCH and the Federal Reserve System “are the only operators of the U.S. wire and ACH rails, with TCH processing roughly half of the volume of each rail.”
RTP proposal. The RTP proposal by TCH would allow banks to complete “near-instantaneous fund transfers between each other, from authorization to clearing to settlement,” at any time of the day, on any day of the week—including weekends and banking holidays. Not only will RTP facilitate real-time fund transfers between end users, RTP also will provide banks and end users with the ability to send “remittance-advice messages,” facilitating end users’ linkage of payments to remittance information.
TCH will not be involved in the development or pricing of real-time fund-transfer services that banks offer to their end-user customers who use RTP, and payment service providers will be able to connect to RTP by “partnering with banks and complying with certain rules, such as a requirement to post a surety bond.” While RTP will charge two kinds of usage fees—a network fee and a request-for-payment incentive fee—TCH has represented that it “will not impose anti-steering rules.”
Justice Department’s analysis. Based on available information and TCH’s representations about the proposed RTP system, the government determined that:
- the development of the RTP system may yield procompetitive benefits;
- many other countries already have a system like RTP;
- the Federal Reserve System has encouraged TCH’s development of the RTP system in the United States;
- RTP may increase the variety of payment rails available to banks, payment service providers, and ultimately their end user customers;
- while there is a concern that many “collaborations of significant competitors,” such as TCH, have some potential to harm competition, TCH's current proposal does not appear to “limit rivals’ ability to access RTP in a way that appears to be anticompetitive;”
- while there is some concern that TCH retains the right to “change its rules at any time” and has “complete discretion over enforcement and implementation decisions,” the Justice Department has no reason to believe that TCH will use RTP to harm the rivals of the TCH owner banks; and
- to the extent that any anticompetitive effects arise in the future, they would be balanced against RTP’s procompetitive benefits “under the rule of reason.”
Recognizing that the proposed RTP system has the potential to offer improved services to banks, businesses, and consumers, the Justice Department concluded that it “has no present intention to take antitrust enforcement action against TCH’s proposed conduct.”
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