In addition to launching a marketing campaign in Germany in France, PayPal also reached out to U.K. customers.© 2020 What’s Next Media and AnalyticsPayPal said it was disappointed with the decision, and claimed it did not intentionally break the rules.Get our hottest stories delivered to your inbox.The CMA ordered the two businesses to stop doing business during the inquiry, and said that if the deal was completed, there could be a “substantial lessening of competition in any market or markets in the United Kingdom.” A month later, the CMA kicked off a more formal investigation.—————————— 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’s takeover of iZettle has been referred for a Phase 2 investigation by the Competition and Markets Authority (CMA). The watchdog have warned that PayPal “could face insufficient competition in the UK after acquiring its market-leading rival”. 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. According to the Competition and Markets Authority (CMA), PayPal’s takeover of iZettle is a competition concern. 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 the payments services sector is “dynamic and evolving.” The panel that reviewed the merger reviewed the rationale for the merger as well as alternatives to the combined service.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. Following a 'phase two' investigation, where the CMA concludes that it has serious competition concerns, the UK part of the merger could ultimately be blocked which means that PayPal could be required to sever and divest itself of iZettle’s UK business." The takeover of the Swedish payment firm, which was completed in September, is worth an estimated $2.2 billion. Of interest in this case was the degree of analysis of internal documents to really drill down to understand the deal rationale. 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. “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 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. The two companies have also moved into providing access to credit for their small business customers – a natural step for the Fintechs. Dan Schulman, PayPal chief executive, said: “We are pleased the CMA has provisionally cleared our transaction. 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.
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