The CMA in the U.K. has levied a fine against PayPal for breaking rules regarding marketing in the country when it acquired iZettle for $2.2 billion. The CMA said that, while iZettle and PayPal are 2 of the largest suppliers of “mPOS devices,” their customers are also willing to switch to traditional POS devices. PayPal completed its tie-up with iZettle in September 2018, ... the CMA said PayPal had “no reasonable excuse for its failure to comply” with the watchdog’s enforcement notice.
PayPal/iZettle is the first time the CMA have seriously considered the possibility of a killer acquisition theory of harm, but it is very unlikely to be the last. All Rights Reserved.Both PayPal and iZettle provide point of sale services for payments. Sign up for the PYMNTS.com Newsletter to get updates on top stories and viral hits.“The CMA has confirmed that the alleged infractions that led to this fine were not intentional and did not have any impact in practice and they were remediated as soon as the CMA raised concerns,” PayPal said. The watchdog have warned that PayPal “could face insufficient competition in the UK after acquiring its market-leading rival”. Of interest in this case was the degree of analysis of internal documents to really drill down to understand the deal rationale. According to the Competition and Markets Authority (CMA), PayPal’s takeover of iZettle is a competition concern. The CMA announced on 26 November that its Phase 1 probe into PayPal’s completed takeover of iZettle had raised concerns that the deal could leave PayPal facing insufficient competition in the UK market for mobile point-of-sale devices. The 2 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.Additionally, it was determined that 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.© 2020 Crowded Media Group. “While we respectfully disagree with the CMA’s conclusions, we understand the importance of initial enforcement orders in the U.K.’s merger control regime and treated compliance with the IEO with the utmost importance throughout the merger review.”The deal, which brought together the U.K.’s two biggest mobile POS device suppliers, was completed in September of last year, but triggered an inquiry by the regulator because of the size of both companies and the implications of the merger.PayPal had permission to market to customers in mainland Europe, but was not permitted to do so in the U.K. The PayPal/iZettle case is the first significant merger decision in the digital space since the Furman Review published its recommendations for reforming UK competition policy to address the specific challenges and opportunities raise by digital markets. Dan Schulman, PayPal chief executive, said: “We are pleased the CMA has provisionally cleared our transaction.