UK competition regulator finds PayPal / iZettle merger problematic

Maria Nikolova

The CMA believes that PayPal’s takeover of iZettle could result in higher prices or reduce the range of services for customers.

PayPal’s $2.2 billion takeover of Swedish mobile payments company iZettle has raised the concerns of the UK Competition and Markets Authority (CMA). The regulator has found that the deal could lead to higher prices or reduce the range of services for customers.

Let’s recall that the deal, which completed in September this year, brings together the two largest suppliers of mobile point of sale devices in the UK.

A brief notice by the CMA on the page dedicated to the PayPal Holdings, Inc / iZettle AB merger inquiry says:

“The CMA has decided, on the information currently available to it, that it is or may be the case that this merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom. This merger will be referred for a phase 2 investigation unless the parties offer acceptable undertakings to address these competition concerns.”

In a press release providing more details on the decision, the CMA explains that, after completing its Phase 1 investigation, the regulator has found that PayPal could face insufficient competition in the UK after acquiring its market-leading rival. This raises concerns that the merger could lead to customers, which include small and medium-sized businesses, paying higher prices or receiving a lower quality service.

Furthermore, the watchdog has considered the potential effects of the merger on the emerging market for ‘omni-channel’ payment services, where PayPal has already gained a strong position. The investigation concluded that had iZettle not been taken over, it could have provided significant competition for PayPal and would have potentially benefitted customers by supporting future innovation and lower prices.

Andrea Gomes da Silva, CMA Executive Director, said:

“While iZettle is a relatively recent entrant to payment services, it has already established a market-leading position in mobile point of sale devices and was well-placed to compete against PayPal in other emerging markets. That’s why we are concerned that PayPal’s takeover could lead to higher prices or reduce the quality of the services available to customers”.

If the merging businesses are unable to address the CMA’s concerns, the merger will be referred for an in-depth Phase 2 investigation, which will be conducted by a group of independent CMA panel members.

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