UK competition regulator slaps £250,000 fine on PayPal
PayPal conducted cross-selling pilot campaigns (intended to target customers in France and Germany) that led to it contacting UK potential customers in the face of assurances it would not do so.
The UK Competition & Markets Authority (CMA) has earlier today published a notice of penalty concerning PayPal Holdings, Inc., PayPal (Europe) Sarl et Cie SCA and PayPal SE. The regulator has decided to impose a fine of £250,000 on PayPal after finding the company has breached an Initial Enforcement Order (IEO) issued by the CMA under section 72 of the Enterprise Act 2002 on September 19, 2018.
The regulator has investigated the completed acquisition by PayPal of iZettle AB. On April 2, 2019, the CMA informed PayPal that it was investigating a potential breach of the IEO, in particular paragraphs 4 and 5 of the IEO, and that it was considering taking enforcement action. In June 2019, the CMA informed PayPal that it was of the preliminary view that PayPal had failed to comply with the IEO. The CMA has now decided to issue the decision of a penalty.
The regulator explains that, in some circumstances, it may be willing to grant a derogation to allow the integration of the parts of the merging parties’ businesses that have no relevance to their relevant activities in the UK. In the case at hand, PayPal sought a derogation from the IEO to permit it to engage in international integration activities that included conducting cross-selling pilot campaigns involving its non-UK businesses. In support of its derogation request, PayPal submitted that any integration activities would be confined to non-UK potential customers and would not impact on the UK. Subsequently, the CMA granted the derogation on the basis that any international activities did not affect the UK and were confined to non-UK jurisdictions.
In the face of its assurances and contrary to the derogation, PayPal conducted cross-selling pilot campaigns (intended to target customers in France and Germany) that led to it contacting UK potential customers. Having assessed the approach taken by PayPal to these cross-selling pilot campaigns for a sample of the customers contacted, the CMA has identified that 76 UK potential customers, 16 of which had an online and offline presence in the UK, were contacted as part of the campaigns.
Furthermore, because PayPal failed to implement sufficient safeguards to ensure that only non-UK potential customers were included in its cross-selling pilot campaigns, there remains a risk that significantly more UK potential customers were contacted given the total number of customers contacted, the CMA notes.
According to the CMA, by contacting UK potential customers PayPal risked impairing the ability of iZettle and PayPal to compete independently, contrary to paragraph 4(c) of the IEO; it risked undermining the separate sales or brand identities of PayPal, PayPal Here and iZettle, contrary to paragraph 5(a) of the IEO; and, by directing potential UK customers to the iZettle offering, PayPal was not operating the customer lists of the two businesses in the UK separately contrary to paragraph 5(g) of the IEO.
Because of the breach, UK potential customers could have perceived that the two businesses were integrated and were not being maintained separately.
The CMA finds that PayPal has no reasonable excuse for its failure to comply with the IEO.
