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PayPal-iZettle deal raises competition concerns, says CMA

The UK watchdog has raised concerns about the $2.2 billion merger between PayPal and iZettle, with the deal potentially driving up prices and reducing the amount of services to customers in the payment space.

PayPal headquarters
Source: Bloomberg

The UK Competition and Markets Authority (CMA) has raised concerns regarding PayPal’s planned takeover Swedish mobile payments rival iZettle.

The deal, which is valued at $2.2 billion, will combine two of the largest suppliers of mobile point of sale (POS) devices in the UK, leading to the CMA raising concerns that the takeover will increase payment fees and receiving a lower quality of service.

PayPal may face ‘insufficient competition’ in the UK

After completing its Phase 1 investigation into the deal, which was completed in September, the CMA felt that PayPal may face insufficient competition in the UK market once its takeover of iZettle is completed.

iZettle had initially planned to go public, only for PayPal to swoop in at the last minute with a takeover offer.

The CMA said that had iZettle not agreed to the merger, it had the potential to provide ‘strong competition for PayPal and potentially benefitted customers by driving future innovation and lower prices’ in the emerging market for omni-channel payment services.

‘Payment services markets are evolving so it’s particularly important to look to the future when we assess competition and the effects of mergers on customers,’ CMA Executive Director Andrea Gomes da Silva said.

‘While iZettle is a relatively recent entrant to payment services, it has already established a market-leading position in mobile point of sale devices and was well-placed to compete against PayPal in other emerging markets.

‘That’s why we are concerned that PayPal’s takeover could lead to higher prices or reduce the quality of the services available to customers,’ she added.

If the merging businesses are unable to address the CMA’s concerns, the merger will be referred for an in-depth Phase 2 investigation, to be carried out by a group of independent CMA panel members.

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