UK competition regulator provisionally clears PayPal’s takeover of iZettle

Maria Nikolova

As a result of its detailed investigation, the CMA has provisionally found that the merger does not raise competition concerns.

The Competition and Markets Authority (CMA) announces today that it has provisionally cleared PayPal’s completed takeover of mobile payments company iZettle following an in-depth, Phase 2, probe.

The watchdog notes that both companies provide mobile point of sale (mPOS) devices that enable businesses to take ‘offline’ payments through a card reader connected to a smartphone or tablet. The two companies are also active in the emerging market for ‘omni-channel’ payment services, through which businesses can take ‘offline’ and ‘online’ payments through a single provider.

An initial Phase 1 investigation by the Competition and Markets Authority (CMA) had raised concerns that PayPal’s purchase of its rival might reduce competition in the supply of mPOS devices in the UK, with iZettle’s customers, typically small and medium-sized businesses, paying higher prices or receiving a lower quality service.

The CMA was also concerned about the potential impact of the merger in ‘omni-channel’ payment services, where PayPal has already established a strong position and iZettle had been expanding its presence.

The CMA’s Phase 2 investigation, led by an independent group of panel members, has examined how competition between the merging businesses would have been likely to develop in future. The CMA has reviewed extensive evidence, including large volumes of the merging businesses’ internal documents, relating to PayPal’s rationale for the merger and what the commercial strategies of PayPal and iZettle would have been if the merger had not taken place. The regulator has also reviewed extensive evidence, including a survey of over 6,000 customers, relating to how they choose in practice between the more novel mPOS devices, such as those supplied by PayPal and iZettle, and ‘traditional’ point of sale devices, such those supplied by Worldpay and Barclaycard.

Following this detailed investigation, the CMA has provisionally found that the merger does not raise competition concerns.

The investigation revealed that, whereas iZettle and PayPal are two of the largest suppliers of mPOS devices, their customers are also willing to switch to ‘traditional’ POS devices. The two largest suppliers of payment services to smaller merchants, Worldpay and Barclaycard, account for almost 60% of the market at present and will continue to constrain the merged company.

The merged company will also face significant competition from other mPOS-only players, such as Square and SumUp, which have both grown significantly in recent years.

In omni-channel services, the CMA found that iZettle would only have been able to develop its offering slowly and would have remained a marginal player for the foreseeable future. The CMA also found that other significant competitors would be more important constraints on PayPal.

As a result of this thorough investigation, the CMA has provisionally found that the merger does not raise competition concerns.

PayPal’s $2.2 billion takeover of Swedish mobile payments company iZettle was completed in September 2018.

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