UK competition regulator refers PayPal / iZettle merger for in-depth investigation

Maria Nikolova

The CMA notes that PayPal has chosen not to offer proposals to address the regulatory concerns.

Further to the Competition and Markets Authority (CMA) announcement from last month that its Phase 1 probe into PayPal’s completed takeover of iZettle had found the deal problematic, the UK regulator said today that it will refer the deal for an in-depth investigation.

The CMA had said it would refer the deal for an in-depth Phase 2 investigation unless PayPal offered acceptable ways to address its concerns.

Today, the regulator explained that PayPal chose not to offer proposals to address the CMA’s concerns. Hence, the merger will now be referred for a Phase 2 investigation by an independent group of CMA panel members. The deadline for the final decision is May 21, 2019.

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

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