CELEX: 32020M9759
Language: en
Date: 2020-06-26 00:00:00
Title: Commission Decision of 26/06/2020 declaring a concentration to be compatible with the common market (Case No COMP/M.9759 - NEXI / INTESA SANPAOLO (MERCHANT ACQUIRING BUSINESS)) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                 Brussels, 26.06.2020
                                                                 C(2020) 4432 final
                                                                                 PUBLIC VERSION
                                                                 To the notifying party
Subject:             Case M.9759 – Nexi/Intesa Sanpaolo (Merchant Acquiring business)
                     Commission decision pursuant to Article 6(1)(b) of Council Regulation
                     No 139/20041 and Article 57 of the Agreement on the European Economic
                     Area2
Dear Sir or Madam,
(1)       On 19.05.2020, the European Commission received notification of a proposed
          concentration pursuant to Article 4 of the Merger Regulation by which Nexi S.p.A.
          (“Nexi”, Italy) acquires within the meaning of Article 3(1)(b) of the Merger
          Regulation sole control of the whole of Intesa Sanpaolo S.p.A.’s (“ISP”, Italy)
          merchant acquiring business (“ISP Acquiring”) (the “Transaction”).3 Nexi is referred
          to as the “Notifying Party” and, together with ISP Acquiring, they are referred to as the
          “Parties”.
1.        THE PARTIES
(2)       Nexi is the holding company of a group primarily active in Italy in payment services.
          Nexi is active in the card payment systems sector in Italy and provides a full range of
          services for merchants, such as merchant acquiring services, processing services and
          supplies of point of sale (“POS”) terminals and related services via its subsidiary Nexi
          Payment S.p.A. (“Nexi Payments”). Other Nexi subsidiaries also provide services
          such as ATM management and digital corporate banking services. Nexi is controlled
          by Mercury UK Holdco Limited (“Mercury Holdco”), which holds 52.45% of its share
          capital. Mercury UK Holdco is in turn indirectly jointly controlled by funds managed
1     OJ L 24, 29.1.2004, p. 1 (the “Merger Regulation”). With effect from 1 December 2009, the Treaty on the
      Functioning of the European Union (“TFEU”) has introduced certain changes, such as the replacement of
      “Community” by “Union” and “common market” by “internal market”. The terminology of the TFEU will
      be used throughout this decision.
2     OJ L 1, 3.1.1994, p. 3 (the “EEA Agreement”).
3     Publication in the Official Journal of the European Union No C180, 29.05.2020, p. 17.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak---          by Advent International Corporation (“Advent International”) and funds managed by
         Bain Capital Investors, L.L.C. (“Bain Capital”), both private equity investment firms.
(3)      ISP is an Italian banking group that is listed on the Italian stock exchange and is not
         controlled by any person or persons within the meaning of the EU Merger Regulation.
         ISP Acquiring is the in-house merchant acquiring business of ISP. ISP Acquiring
         provides merchant acquiring services primarily in Italy and exclusively to ISP
         customers. More specifically, ISP Acquiring supplies merchant acquiring services
         internally to ISP‘s banking customers. Such services are often bundled with other
         banking and financial services provided to the bank’s customers, which are the
         merchants at the retail level of the value chain. ISP Acquiring provides merchants with
         POS and web-enabled merchant acquiring services, as well as various types of POS
         terminal solutions.
2.       THE OPERATION
(4)      On 19 December 2019, Nexi and ISP entered into a Contribution Agreement pursuant
         to which Nexi would acquire ISP Acquiring and designate either Nexi Payments or
         Mercury Holdco as the purchaser of the whole of ISP Acquiring. As a result of such
         designation, occurred on 17 February 2020, and following the completion of the
         Transaction, Nexi, through Nexi Payments, will acquire sole control over ISP
         Acquiring. The Transaction is therefore a concentration within the meaning of Article
         3(1)(b) of the EU Merger Regulation.
(5)      Following the closing of the Transaction, ISP separately agreed with Mercury Holdco
         to reinvest part of the proceeds that it will receive from the sale of ISP Acquiring in
         the purchasing a 9.9% non-controlling shareholding into Nexi in an ancillary
         transaction.4 The latter is merely a portfolio investment and will not confer any
         governance rights to ISP.
(6)      Pursuant to the Contribution Agreement and following the completion of the
         Transaction, the Parties will enter into a merchant digital acceptance business
4   This minority shareholding will not create risks of coordinated behaviour in any of the markets relevant to
    the present Decision since, following the cession of its merchant acquiring division (ISP Acquiring) to Nexi,
    ISP will no longer be active in any of these markets (wholesale or retail merchant acquiring, the provision
    of POS terminals or acquiring processing services). In particular, this minority shareholding has no impact
    on the assessment of potential coordinated effects carried out by the Commission in Section 4.5.3 of this
    Decision. In addition, the Notifying Party confirmed in its response to the Commission’s RFI 11, dated 24
    June 2020, that this shareholding will not provide ISP with information rights different from the ones
    guaranteed to any other Nexi’s minority shareholder. The Notifying Party explains that, being a listed
    company, under Italian law, Nexi is subject to disclosure obligations vis-à-vis its shareholders and the
    market on a non-discriminatory basis. As such, it appears that, through the acquisition of this minority
    shareholding, ISP will not gain access to any privileged information rights into Nexi’s activities. To this
    respect, the Commission also notes that in the course of a call with a competitor of the Parties on 17 March
    2020, the competitor of the Parties stated that: “With regard to the remuneration part of the Transaction,
    according to which ISP could acquire 10% of shares in Nexi, [Competitor] considers that the stake obtained
    by ISP does not allows direct intervention of ISP in the governance of Nexi and that therefore ISP will not
    be able to exercise significant influence on the Nexi’s activities.”
                                                             2
 ---pagebreak---          agreement (the “MDAB Agreement”) and into an ancillary service agreement
         (“ASA”).5
(7)      According to the MDAB Agreement, ISP will promote Nexi’s merchant acquiring
         products and services to ISP’s [BUSINESS SECRET – STRATEGIC DECISIONS]
         merchants. The overall duration of the relationship between ISP and Nexi is
         [BUSINESS SECRET REGARDING DURATION OF THE RELATIONSHIP] years,
         [BUSINESS SECRET – STRATEGIC DECISIONS]. The provisions of the MDAB
         Agreement reflect the fact that the ISP Acquiring business, being purchased by Nexi,
         obtains all its merchant customers from referrals by ISP’s banking business, which has
         a commercial direct relationship with these merchants and provides them with a range
         of banking and other financial services. While Nexi will take over merchant acquiring
         services, these merchants will preserve their current commercial relationship with ISP
         for the provision of all the other banking services.
(8)      Pursuant to the ASA, ISP will provide Nexi with certain services in order to allow the
         latter to manage the merchant acquiring business transferred to it.
3.       EU DIMENSION
(9)      The undertakings concerned have a combined aggregate world-wide turnover of more
         than EUR 5 000 million (2018: Nexi6: EUR [BUSINESS SECRET – FINANCIAL
         INFORMATION], ISP Acquiring EUR [BUSINESS SECRET – FINANCIAL
         INFORMATION]).7 Each of them has an EU-wide turnover in excess of EUR 250
         million (2018: Nexi: EUR [BUSINESS SECRET – FINANCIAL INFORMATION], ISP
         Acquiring: EUR [BUSINESS SECRET – FINANCIAL INFORMATION]), but they do
         not achieve more than two-thirds of their aggregate EU-wide turnover within one and
         the same Member State. The notified operation therefore has an EU dimension.
4.       COMPETITIVE ASSESSMENT
4.1.     Introduction and the Parties’ activities
(10)     The Transaction combines ISP’s in-house merchant acquiring services with Nexi, a
         payment services provider active in Italy. In 2016, Nexi previously acquired ISP’s
         acquiring processing services, and the present Transaction is additive to that deal.8 The
         Transaction results in a horizontal overlap in merchant acquiring services. In addition,
         the Transaction will result in the creation of vertical links with respect to some related
5   In relation to the MDAB and the ASA, the Commission notes that pursuant to Article 6(1)b, second
    subparagraph of the Merger Regulation, a decision declaring a concentration compatible with the internal
    market is deemed to cover restrictions directly and necessary to the implementation of the concentration, so
    called “ancillary restraints”. As a matter of principle, it is incumbent on the notifying parties to determine
    whether and to what extent agreements accompanying a concentration may qualify as ancillary restraints
    within the meaning of that provision. Restraints that are not covered by a decision pursuant to Article 6(1)b
    of the Merger Regulation may fall within the scope of application of antitrust rules. In this respect, the
    Commission Notice on restrictions directly related and necessary to concentrations, OJ C 56, 5.03.2005,
    p.24, provides further guidance.
6   Nexi’s turnover includes the turnover of its parent companies, Advent International and Bain Capital.
7   Turnover calculated in accordance with Article 5 of the Merger Regulation.
8   See Case M.9073 – Advent International / Bain Capital / Setefi Services / Intesa Sanpaolo Card.
                                                             3
 ---pagebreak---        activities within card payment systems. This section will therefore provide a brief
       description of card payment systems and the affected activities.
(11)   Card payment systems available to the public allow a cardholder to use a payment
       card, such as a debit or a credit card, to pay for products and services purchased at
       stores (physical or on-line) without using cash. Through these systems, the merchants
       are connected with financial institutions, namely the bank issuing the card (issuer
       bank) and the bank endorsing the cash-less payment to the benefit of the merchant
       (acquirer bank), to execute the entire transaction from the moment of payment at the
       point of sale (“POS”) until the merchant’s account is credited.9
(12)   Figure 1 provides an overview of the actors and main steps in a typical card payment
       transaction.
       Figure 1: Overview of electronic payment transaction
       Source: Notifying Party
(13)   A card payment transaction begins when the cardholder uses a payment card to pay
       for the purchase of goods or services from a merchant. The merchant will seek
       authorisation for the transaction from its merchant acquirer. The authorisation request
       is transmitted from the merchant’s POS terminal (card reader) in which the customer
       entered their card. Subsequently, the authorisation request is sent to the acquirer
       processor, which will identify the scheme network to which the payment card belongs
       and transmits the request to the issuer processor. The issuer processor will perform
       checks, such as whether the card is valid and whether the card holder’s account
       contains sufficient funds. The result of the authorization request is sent back to the
       POS terminal; if the transaction is authorised, the merchant can be sure of payment.
(14)   The setup described above can be subject to some variations across countries. A
       variety of players are active in the card payment process, such as banks, payment
9  See also Case M.7873 – Worldline/Equens/Paysquare for another presentation of card payment systems.
                                                    4
 ---pagebreak---       service providers (“PSPs”), and scheme networks. In most cases, an actor is involved
      in multiple stages of the process. In the case at hand, the Parties’ activities only overlap
      horizontally in merchant acquiring, as this is the only activity in the card payment
      process that ISP Merchant acquiring carries out. Merchant acquiring can be defined
      as follows:
       (a)    Merchant acquiring: a set of services that enable merchants to accept
              payment cards at POS terminals. Merchant acquirers sign contracts with
              merchants (who are thus the customers of merchant acquirers), maintain the
              merchant-customer relationship and ensure that merchants receive the funds
              following the card payment transactions. ISP Acquiring provides merchant
              acquiring services directly to merchants who are ISP customers.10 Nexi also
              provides merchant acquiring services directly to merchants. Internally, Nexi
              refers to this distribution channel as the Direct model. Moreover, under its so-
              called Referral model, Nexi provides merchant acquiring services directly to
              merchants that have been recruited by banks in exchange for a percentage of
              the merchant fee set by Nexi.11 Finally, under the so-called Licensing model,
              Nexi provides merchant acquiring services to banks, which will in turn provide
              these to merchants, possibly in conjunction with other financial services. In
              this model, Nexi negotiates and has a contractual relationship with banks. The
              banks in turn have a commercial relationship with merchants and set the
              commercial terms, including the price.12 In the rest of this decision, this last
              type of activities will be referred to as “wholesale merchant acquiring”, and
              the Direct and Referral models as “retail merchant acquiring”. The present
              decision will discuss whether wholesale merchant acquiring and retail
              merchant acquiring jointly constitute a single product market or should be
              considered as separate product markets.
(15)  In addition, other activities within the payment process are affected non-horizontally:
      (a)     Acquiring processing services: the merchant-oriented side of technically
              processing a transaction. This includes the network routing of payments
              towards the issuer processor and POS authorisation. Merchant acquirers can
              either provide acquiring processing in-house, or outsource it to third party
              processors. Today, ISP Acquiring sources acquiring processing services from
              Nexi on an exclusive basis. Conversely, Nexi’s acquiring processing services
              are provided almost exclusively to ISP Merchant Acquiring, for the majority
              of its other acquiring processing needs, Nexi outsources these activities to third
              parties.13
      (b)     POS terminal and related services: the provision of POS terminals (card
              readers) to merchants, either on a rental or purchase basis, as well as related
              services such as maintenance. Today, ISP Merchant Acquiring sources its POS
              terminals and related services exclusively from Nexi.14
10 Form CO, paragraph 6.
11 Form CO, paragraph 80.
12 Form CO, paragraph 96.
13 Form CO, paragraph 264.
14 Form CO, paragraph 249.
                                                   5
 ---pagebreak--- (16)   Finally, Nexi is also involved in other activities related to card payment systems which
       are not affected by the Transaction, such as issuing processing services, card issuing
       ATM management and digital corporate banking services.15
4.2.   Market definitions
(17)   While the Commission has previously defined a separate product market for merchant
       acquiring services (see Section 4.2.2.1), so far, it has not assessed the existence of
       separate markets for retail merchant acquiring (to merchants) and wholesale merchant
       acquiring (to banks). The Notifying Party submits that retail merchant acquiring and
       wholesale merchant acquiring constitute two distinct product markets.16 The Notifying
       Party’s reasoning and the Commission’s assessment in that respect will be further
       developed in Section 4.2.1, which will focus on wholesale merchant acquiring.
(18)   The main focus of the case is merchant acquiring, which comprises a set of services
       that allow merchants to accept card-based payments. A description of merchant
       acquiring and its role in the broader card payment system is provided in Section 4.1.
4.2.1. Wholesale merchant acquiring
(19)   Nexi considers itself to be active in the provision of merchant acquiring services at
       wholesale level to banks. It explains that prior to 2015, Italian banks were either
       vertically integrated in the provision of merchant acquiring services, or they sourced
       merchant acquiring services only from ICBPI, a body that included as shareholders
       several Italian cooperative banks (generally regional banks). ICBPI was at that time
       the only organisation providing such services in Italy. In 2015, ICBPI was acquired
       by Advent International and Bain Capital,17 and subsequently rebranded to Nexi in
       2017. Under the terms of the deal, Nexi obtained [BUSINESS SECRET – SALES
       STRATEGY] contracts lasting [BUSINESS SECRET – SALES STRATEGY] years with
       a number of banks for the provision of merchant acquiring services. Since this date,
       the market for wholesale merchant acquiring in Italy emerged and grew.
(20)   According to Nexi, wholesale merchant acquiring can be described as the activity by
       which a merchant acquirer enters into contractual relationships with partner banks to
       provide them with merchant acquiring services and POS terminals. The wholesale
       merchant acquirer negotiates and has a contractual relation with the partner banks,
       which in turn have a commercial relationship with merchants and set the commercial
       terms and economic conditions for acquiring services. In particular, the partner banks
       retain control over the pricing of merchant acquiring services they provide to their
       customers. As mentioned in paragraph (14), Nexi internally designates its wholesale
       activity as the Licensing model.
15 Form CO, paragraph 75.
16 Form CO, paragraph 79.
17 See Case M.7711, Advent International/Bain Capital/ICBPI, decision of 16 September 2015.
                                                      6
 ---pagebreak--- 4.2.1.1.Product market definition
Commission’s precedents
(21)    The Commission has not yet considered separate markets for retail merchant acquiring
        (to merchants) and wholesale merchant acquiring (to banks).
The Notifying Party’s view
(22)    The Notifying Party submits that there is a distinct wholesale market for the provision
        of merchant acquiring services to banks (by PSPs), separate from the retail provision
        of merchant acquiring services to merchants.18
(23)    To support this statement, the Notifying Party submits that retail merchant acquiring
        and wholesale merchant acquiring are separate levels of the value chain, where
        wholesale customers (banks) have full freedom to set the final price and conditions to
        their own retail customers (merchants) without any intervention of the provider of
        wholesale merchant acquiring services in the commercial relationship between the
        bank and the merchant.19 The Notifying Party also explains that ISP does not and could
        not compete at wholesale level,20 and that combining wholesale and retail volumes
        would lead to the double counting of the volumes that were sold at wholesale level to
        banks and then resold, at retail level, by those same banks, to their customers.21 The
        Notifying Party also claims that since banks are sophisticated players, the customer
        base and the competitive dynamics in place at wholesale level are different from the
        ones at retail level.22 Moreover, the Notifying Party submits that on a per-customer
        basis, wholesale transaction volumes are significantly larger than retail volumes. The
        average bank sources about EUR [BUSINESS SECRET – MARKET POSITION –
        KNOW-HOW] million per annum in merchant acquiring transaction value from Nexi,
        while the average merchant sources around EUR [BUSINESS SECRET – MARKET
        POSITION – KNOW-HOW] per annum.23 In terms of pricing, the Notifying Party
        explains that prices for wholesale services are significantly lower than retail prices for
        comparable merchant books, indicating a price difference of around [20-30]%.24
        Finally, the Notifying Party submits that the number of wholesale and retail customers
        differs substantially: Nexi has [BUSINESS SECRET – NUMBER OF CUSTOMERS]
        wholesale customers and about [BUSINESS SECRET – NUMBER OF
        CUSTOMERS] times as many retail customers.25
18  Form CO, paragraph 100.
19  Form CO, paragraph 101.
20  Form CO, paragraph 102.
21  Form CO, paragraph 103.
22  Form CO, paragraph 104.
23  Form CO, paragraph 231.
24  Form CO, paragraph 231.
25  Form CO, paragraph 231.
                                                   7
 ---pagebreak--- The Commission’s assessment
(24)    The Commission’s market investigation gave sufficient evidence to conclude that, in
        the Italian context, the definition of a separate product market for wholesale merchant
        acquiring is appropriate.
(25)    The majority of merchant acquirers indicated that wholesale merchant acquiring is
        either a genuine separate market or an alternative channel of distribution for the
        wholesaler where the customer bank retains freedom in terms of pricing. When asked
        directly whether the distinction between wholesale and retail merchant acquiring is
        relevant in Italy, a large majority indicated that the distinction is relevant.26 With
        regard to contract features between wholesale merchant acquirers and their customers,
        the large majority indicates that the contracts do not stipulate an exclusive relationship
        and provide for pricing freedom at retail level for the bank.27
(26)    Finally, it is noteworthy that there are merchant acquiring players in Italy that are
        active in merchant acquiring exclusively on a wholesale level, such as SIA.28
(27)    In light of the above and for the purposes of the assessment of the Transaction, the
        Commission considers that wholesale merchant acquiring constitutes a separate
        product market.
4.2.1.2.Geographic market definition
Commission’s precedents
(28)    The Commission has not yet considered separate markets for retail merchant acquiring
        (to merchants) and wholesale merchant acquiring (to banks). As mentioned below in
        paragraph (46), the Commission has considered in the past that the market for
        merchant acquiring is likely national in scope, except for merchant acquiring services
        for payments made through web-enabled interfaces (e-commerce) which were
        considered to be at least EEA-wide. The precise scope of the geographic market
        definition was ultimately left open.
The Notifying Party’s view
(29)    The Notifying Party submits that the relevant geographic market for wholesale
        merchant acquiring is EEA-wide, and considers that the same arguments that have
        been put forward in its claim that the relevant geographic market for retail merchant
        acquiring is EEA-wide also apply to wholesale merchant acquiring.29
The Commission’s assessment
(30)    As will be described in more detail for retail merchant acquiring in Section 4.2.2.2,
        wholesale merchant acquiring also shows a trend towards an EEA-wide market.
26  Responses to questions 7 and 9 of Q2 – Questionnaire to merchant acquirers.
27  Responses to question 8 of Q2 – Questionnaire to merchant acquirers.
28  Responses to question 3 of Q2 – Questionnaire to merchant acquirers.
29  Form CO, paragraph 121.
                                                        8
 ---pagebreak--- (31)    Much like the majority of retail merchant acquiring customers, the majority of
        wholesale merchant acquiring customers indicated in the Commission’s market
        investigation that there are no significant barriers to acquiring these services from
        outside Italy.30
(32)    For wholesale merchant acquiring in Italy, the barrier that domestic scheme networks
        can pose to international acquiring appear less relevant. Many banks that source
        merchant acquiring services on the retail market indicate that they retain merchant
        acquiring of the Italian domestic PagoBancomat scheme in-house31 and Nexi does not
        offer wholesale merchant acquiring for the PagoBancomat scheme.32
(33)    Ultimately, the question whether the appropriate geographic market definition is EEA-
        wide or national can be left open, as the Commission finds that the Transaction does
        not cause competitive concerns for either geographic market definition.
4.2.2. Merchant acquiring at retail level
4.2.2.1.Product market definition
Commission’s precedents
(34)    The Commission has previously defined a separate product market for merchant
        acquiring services.33 While in a number of previous cases, the Commission included
        the provision of POS terminals within the market for merchant acquiring,34 in more
        recent cases,35 the Commission has considered separate product markets for the
        provision of merchant acquiring services and the provision of POS terminals and
        related services.
(35)    In previous decisions,36 the Commission considered that the merchant acquiring
        market could be further subdivided on the basis of the following criteria: (i) types of
        payment card schemes (international/domestic), (ii) payment card brands (e.g. Visa,
        Mastercard), (iii) type of payment card (debit/credit), and (iv) based on whether the
        service relates to a physical payment via a POS terminal or a web-based payment (e-
        commerce). In all previous cases, the Commission left the precise scope of the product
        market definition open. The Commission has not yet considered separate markets for
        large merchants and small or medium merchants (“SMEs”).
30  Response to question 2 of Q2 – Questionnaire to merchant acquirers.
31  Responses to question 13 of Q2 – Questionnaire to merchant acquirers.
32  Form CO, paragraph 225.
33  See for example Cases M.7873 – Worldline/Equens/Paysquare, M.7241 - Advent International/Bain
    Capital Investors/Nets Holding, M.7711 - Advent International/Bain Capital/ICBPI, M.6956 -
    Telefonica/Caixabank/Banco Santander and M.5241 - American Express/Fortis/Alpha Card.
34 See Cases M.5241 – American Express/Fortis/Alpha Card, M.7241 – Advent International/Bain Capital
    Investors/Nets Holding and M.7711 – Advent International/Bain Capital/ICBPI.
35 See Cases M.7873 – Worldline/Equens/Paysquare, M.9357 – FIS/WorldPay and M.9387 – Allied Irish
    Banks/First Data Corporation/Semeral.
36 See for example Cases M.7873 – Worldline/Equens/Paysquare, M.7241 - Advent International/Bain
    Capital Investors/Nets Holding, M.7711 - Advent International/Bain Capital/ICBPI, M.6956 -
    Telefonica/Caixabank/Banco Santander and M.5241 - American Express/Fortis/Alpha Card.
                                                        9
 ---pagebreak--- The Notifying Party’s view
(36)  In relation to the retail level of merchant acquiring services, the Notifying Party
      submits that merchant acquiring and the provision of POS terminals and related
      services jointly constitute a single relevant market.37 The Notifying Party’s reasoning
      in that respect will be further developed in Section 4.2.3.
(37)  The Notifying Party further submits that the other possible subdivision previously
      considered by the Commission are not appropriate for the reasons set out below:
      (a)      A segmentation by type of payment card (credit / debit) or segmentation
               by card brand would no longer relevant in light of evolution in the market.
               The Notifying Party submits that, from a supply side perspective, merchant
               acquirers typically provide services for both credit and debit cards and most
               card brands and that the POS terminals provided by merchant acquirers accept
               most cards. In addition, the Notifying Party considers that the service offered
               is the same in both cases. From a demand side perspective, the Notifying Party
               indicates that merchants typically want to be able to accept as many different
               card types as possible.38
      (b)      A segmentation by card scheme (domestic / international) would be
               inappropriate in light of the substitutability between the two schemes. The
               Notifying Party submits that, from a supply-side perspective, most merchant
               acquirers can handle both types of card schemes, and POS terminals support
               both as well. From a demand-side perspective, the Notifying Party argues that
               most merchants request acquiring services for both card schemes. Finally, the
               Notifying Party indicates that, while historically domestic cards were debit-
               based and international cards credit-based, today that characterisation no
               longer applies because many debit cards in Italy run either solely on an
               international card scheme (such as Maestro or V-Pay) or are co-badged with
               an international debit card scheme.39
      (c)      A segmentation by payment type (physical POS transactions / e-commerce
               transactions) would not be relevant due to evolution of the market. The
               Notifying Party submits that the boundary between physical POS terminal
               transactions and web-based transactions is expected to blur in the short term
               due to the growth in e-commerce transactions. From a demand-side
               perspective, the Notifying Party submits that this blurring boundary is
               evidenced by the rising popularity of so-called “omni-channel” models, by
               which the merchant acquirer serves as a one-stop-shop for all the merchant’s
               sales channels, both physical sales and online.40
(38)  Similarly to the potential sub-segments proposed in the Commission’s past decision
      practice for POS terminals (see below in paragraphs (60) onwards), the Notifying
      Party, [BUSINESS SECRET – INTERNAL PROCESSES], has put forward potential
      separate sub-segments for retail merchant acquiring services based on the size of the
      customers. More precisely, the Notifying Party has provided separate market shares
37 Form CO, paragraph 100.
38 Form CO, paragraph 89.
39 Form CO, paragraph 90.
40 Form CO, paragraph 91.
                                                 10
 ---pagebreak---        for merchant acquiring services provided to SMEs and merchant acquiring services
       provided to large merchants. The Notifying Party classifies merchants with less than
       EUR [BUSINESS SECRET – INTERNAL PROCESSES] million per year in electronic
       transactions as SMEs, and the rest as large merchants. The Notifying Party submits
       that a sub-division of the merchant acquiring market by customer size is not
       appropriate as customers are heterogeneous and differ on multiple dimensions, of
       which size is only one.41
The Commission’s assessment
(39)   The Commission’s market investigation was inconclusive on whether the sub-
       segmentations considered in previous Commission decisions, namely (i) types of
       payment card schemes (international/domestic), (ii) payment card brands (e.g. Visa,
       Mastercard), (iii) type of payment card (debit/credit), and (iv) based on whether the
       service relates to a physical payment via a POS terminal or a web-based payment (e-
       commerce), are relevant.
(40)   For all sub-segmentations listed, a slight majority of customers indicated that
       merchant acquiring services are no different for any of the proposed sub-
       segmentations. However, a majority of competitors did indicate differences,
       specifically naming differences in pricing, as well as additional risks concerning e-
       commerce transactions (e.g. fraud).42
(41)   Concerning a differentiation between large customers and SMEs, the Commission’s
       market investigation gave some indications pointing in the direction of separate
       merchant acquiring product markets:
       (a)     Large merchants tend to source POS terminals separately from merchant
               acquiring services more often than SMEs;43
       (b)     A larger proportion of large merchants consider that they have special needs
               that only a limited number of merchant acquirers can meet, such as
               reconciliation, authorization, settlement, dispute management and support for
               large transaction volumes;44
       (c)     Large merchants tend to operate a significant number of POS terminals, and
               require reactive support in their retail outlets throughout the country;45
       (d)     A larger proportion of large merchants considered that merchant acquirers
               based outside of Italy credibly supply merchant acquiring services to
               businesses in Italy and larger merchant more often indicated to switch to a non-
               Italian merchant acquiring provider in case of a price increase.46
41 Form CO, paragraph 81.
42 Responses to question 8 of Q1 – Questionnaire to merchants and question 17 of Q2 – Questionnaire to
   merchant acquirers.
43 Responses to question 9 of Q1 – Questionnaire to merchants.
44 Responses to question 10 of Q1 – Questionnaire to merchants.
45 Responses to question 41 of Q1 – Questionnaire to merchants.
46 Responses to questions 15 and 17 of Q1 – Questionnaire to merchants.
                                                      11
 ---pagebreak--- (42)    Additionally, the Notifying Party submits that large customers, more so than SMEs,
        typically source their merchant acquiring services through tenders. While the
        Commission considers this plausible, it was not able to conclusively confirm this in
        the market investigation.
(43)    However, the distinction between large merchants and SMEs remains blurred and to
        a certain extent arbitrary. The above-mentioned differences and tendencies do not
        allow the Commission to draw a clear line between large merchants and SMEs. For
        example, the definition used by the Notifying Party (EUR [BUSINESS SECRET –
        INTERNAL PROCESSES] million annual card transaction value) leads to a situation
        where some multinational companies are defined as SMEs due to their limited card
        payment volumes with the Parties in Italy. Moreover, the majority of both large
        merchants and SMEs indicated not to have particular needs that distinguish them from
        other merchants.47 Additionally, some customers defined as SMEs may exhibit
        sourcing behaviours associated with large merchants, namely the use of tender
        processes and separation between merchant acquiring services separate from POS
        terminals, and vice versa.
(44)    For the purpose of the assessment of this Transaction, the Commission therefore
        considers that retail merchant acquiring for large merchants and SMEs form a
        combined product market that is heterogeneous in nature and is characterised by
        differentiated customer segments.
(45)    The questions of whether the appropriate product market definition is merchant
        acquiring as a whole or whether separate product markets exist for any of the
        remaining segmentations listed in paragraph (35), which were considered in previous
        decisions, can be left open, as the Commission finds that no competitive concerns arise
        for any of the possible product market definitions.
4.2.2.2.Geographic market definition
Commission’s precedents
(46)    In past decisions, the Commission has considered the market for merchant acquiring
        to be likely national in scope, except for merchant acquiring services for payments
        made through web-enabled interfaces (e-commerce) which were considered to be at
        least EEA-wide.48 The precise scope of the geographic market definition was
        ultimately left open.
The Notifying Party’s view
(47)    The Notifying Party claims that the relevant geographic market for merchant acquiring
        is EEA-wide, because of recent consolidation movements within the merchant
47 Responses to question 10 of Q1 – Questionnaire to merchants.
48 See Cases M.9387, Allied Irish Banks/First Data Corporation/Semeral, M.9357, FIS/Worldpay, and
    M.7873, Worldline/Equens/Paysquare. This follows from the Commission’s previous decisions in e.g.,
    M.6956, Telefonica/Caixabank/Banco Santander, and M.5241, American Express/Fortis/Alpha Card. See
    also M.7241, Advent International/Bain Capital Investors/Nets Holding, para. 30, where the Commission
    considered that the market for merchant acquiring services for all plausible market segmentations, except
    web-enabled transactions, is most likely national in scope, whereas the market for merchant acquiring
    services for payments made through web-enabled interfaces would be at least EEA-wide.
                                                        12
 ---pagebreak---        acquiring sector at EEA level,49 and increased competition from non-Italian, as well
       as multinational merchant acquirers at the level of merchant acquiring in Italy.50 In
       addition, the Notifying Party submits that merchants and banks tend more and more
       often to procure merchant acquiring services at EEA level.51 With respect to this last
       argument, the Notifying Party however acknowledges that, while it is particularly true
       of large merchants, with retail stores in several countries, the argument only applies
       to SMEs and smaller merchants to the extent that they migrate towards alternative
       payment solutions (such as ApplePay, Samsung Pay and Google Pay) and on-line
       payment solutions.
(48)   The Notifying Party also explains that regulatory developments within the SEPA zone,
       and in particular the so-called “passporting” rules provided under the second Payment
       Service Directive (“PSD2”)52 now allow banks from other European countries to enter
       the Italian market provided they comply with certain regulatory requirements and
       apply for the relevant licenses in Italy.53 In this regard however, the Notifying Party
       acknowledges the subsistence of domestic card schemes in several countries within
       the SEPA zone (including Italy, with the PagoBancomat scheme) that require
       compliance with slightly different procedures.
The Commission’s assessment
(49)   As previously acknowledged by the Commission54 and submitted by the Notifying
       Party, there is a trend towards harmonisation between Member States, opening up
       national merchant acquiring markets to competitors from elsewhere in the EEA.
(50)   The Commission’s market investigation supported the existence of this trend. Only a
       minority of merchants consider that it would be challenging to procure merchant
       acquiring services from merchant acquirers based outside of Italy, and approximately
       half the customers indicated that they consider offers from non-Italian merchant
       acquirers when sourcing merchant acquiring services.55 Furthermore, a majority of
       customers indicated they would switch to a non-Italian provider in case of a small but
       significant and non-transitory increase in price (“SSNIP”).56
(51)   Despite this trend, there are still several factors that point in the direction of a national
       market for merchant acquiring services.
(52)   In response to the market investigation, a large majority of merchants based in Italy
       indicated that they currently still source at national level.57 This is in line with the
49 Form CO, paragraphs 122 – 123.
50 Form CO, paragraphs 124 – 139.
51 Form CO, paragraphs 140 – 143.
52 Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment
   services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and
   Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC.
53 Form CO, paragraphs 144 – 152.
54 See, for example, case M.7873 - Worldline/Equens/Paysquare, paragraph 99.
55 Responses to questions 12 and 13 of Q1 – Questionnaire to merchants.
56 Responses to question 17 of Q1 – Questionnaire to merchants.
57 Responses to questions 12 of Q1 – Questionnaire to merchants.
                                                      13
 ---pagebreak---        Notifying Party’s estimates according to which only [10-20]% of the Italian merchant
       acquiring market is supplied by international players.58
(53)   Additionally, the geographic footprints of merchant acquirers active in the EEA differ
       significantly between the different countries. Only a limited share of players offer their
       services truly throughout the entire EEA, whereas other players focus only on one or
       several countries. The Parties clearly are among this latter group: Nexi is exclusively
       active in Italy, and ISP Acquiring performs less than [0-5]% of its acquiring activities
       outside of Italy.59
(54)    Also, the market investigation found national specificities which point in the direction
       of a national market. The domestic scheme networks are a key example of this. For
       the countries which have a domestic scheme network, including Italy, cards under the
       domestic scheme network, or under a domestic scheme network co-badged with an
       international scheme network, are still widely used. According to the Notifying Party’s
       estimates, PagoBancomat represents approximately [30-40]% of all card payments in
       Italy.60 In the market investigation, only very few non-Italian merchant acquirers
       indicated that they were able to provide merchant acquiring services for the Italian
       domestic PagoBancomat scheme.61
(55)   Despite the fact that PagoBancomat cards are often co-badged with an international
       network scheme,62 the domestic scheme remains relevant. Many merchants and
       merchant acquirers indicate that fees are lower for the domestic scheme.63 A large
       customer indicated that about half of its card payments are PagoBancomat payments,
       and that it considers it essential for its business to be able to accept PagoBancomat
       payments.64
(56)   Finally, merchant acquiring services are often procured in conjunction with POS
       terminals; in the Commission’s market investigation, the large majority of customers
       indicated they do so.65 For POS terminals, a majority of merchants and merchant
       acquirers indicated that it is important for the supplier to have a local presence, for
       example to provide local technical support.66
(57)   In light of the above considerations, the Commission considers that the relevant
       geographic scope of the provision of merchant acquiring services at retail level is
       likely to be limited to Italy. Ultimately, the question of whether the appropriate
       geographic market definition is EEA-wide or national can be left open, as the
       Commission finds that the Transaction does not cause competitive concerns for either
       geographic market definition.
58 Form CO, Table 14.
59 Form CO, footnote 4.
60 Form CO, Table 14 and 18. Shares by value of transactions in 2019.
61 Responses to question 13 of Q2 – Questionnaire to merchant acquirers.
62 Form CO, paragraph 90.
63 Responses to question 8 of Q1 – Questionnaire to merchants and question 17 of Q2 – Questionnaire to
   merchant acquirers.
64 Non-confidential minutes of call with a customer, dated 18 March 2020.
65 Responses to question 9 of Q1 – Questionnaire to merchants.
66 Responses to question 43 of Q1 – Questionnaire to merchants and question 58 of Q2 – Questionnaire to
   merchant acquirers.
                                                        14
 ---pagebreak--- 4.2.3. Provision of POS terminals and related services
(58)    A POS terminal (or “POS”) is the electronic device used to process card payments at
        the merchant's location. It is a necessary element for physical card based transactions.
        POS terminals are either sold or leased to merchants. POS terminals are supplied either
        together with the merchant acquiring services or on a standalone basis.
(59)    There are different types of POS terminals: traditional POS terminals and mobile POS
        (or “mPOS”) card readers. Traditional POS terminals connect to the merchant
        acquirer’s system through the merchant’s fixed telephone line, through broadband (via
        fixed cable or WiFi) or through the mobile telephone network. mPOS card readers
        connect to the merchant’s mobile device (smartphone or tablet) via Bluetooth and an
        app on that mobile device then connects to the merchant acquirer. POS terminals are
        used by merchants of different sizes.
4.2.3.1.Product market definition
Commission’s precedents
(60)    As mentioned above in paragraph (34), while in a number of previous cases, the
        Commission included the provision of POS terminals within the market for merchant
        acquiring, in more recent cases the Commission has considered separate product
        markets for the provision of merchant acquiring services and the provision of POS
        terminals and related services.
(61)    In FIS/Worldpay, the Notifying Party (Fidelity National Information Services, Inc.)
        also suggested a potential sub-segmentation by type of POS device or based on the
        size of the POS terminal customers; however, none of the respondents to the
        Commission’s market investigation took a clear position as to whether a possible
        relevant market for the supply of POS terminals should be sub-segmented further by
        type of POS device or based on the size of the POS terminal customers.67 This
        potential sub-segmentation was not looked into in the competitive assessment carried
        out by the Commission in subsequent cases relating to POS terminals.68
The Notifying Party’s view
(62)    As explained above in paragraph (36), the Notifying Party submits that merchant
        acquiring and the provision of POS terminals and related services jointly constitute a
        single relevant market. To this effect, the Notifying Party explains that [BUSINESS
        SECRET – SALES STRATEGY], and from a demand perspective the largest number of
        customers are SMEs who do not distinguish between these two services and
        systematically procure both as part of one and the same package, as they are mostly
        unaware of the different steps of the card payment value chain, and find it more
        convenient to source POS terminals and merchant acquiring services together.69
(63)    While acknowledging the fact that some large merchants source POS terminals
        separately from their merchant acquiring services, the Notifying Party considers that
        this is only a reflection of the economic arbitrage these customers are making between
        sourcing these products and services separately or procuring them through a bundled
67 See Case M.9357, FIS/Worldpay.
68 See Case M.9387, Allied Irish Banks/First Data Corporation/Semeral.
69 Form CO, paragraphs 111 and 112.
                                                      15
 ---pagebreak---        offer, and as such it should not be regarded as an indication of the existence of two
       separate markets. Moreover, the Notifying Party considers that only a minority of large
       merchants do so, and that at any rate, the distinction between large merchants and
       SMEs is not clear-cut to this respect, because while it is mostly large merchants who
       source POS terminals separately from their merchant acquiring services, some SMEs
       may also do so.70
(64)   Finally, the Notifying Party submits that a segmentation of the market for the provision
       of POS terminals and related services by type of POS terminals would not be
       appropriate, because traditional POS providers also exercise a meaningful constraint
       on alternative players, who provide mPOS card readers.71
The Commission’s assessment
(65)   The Commission’s market investigation was not fully conclusive on whether the
       provision of POS terminals and related services forms a separate product market from
       merchant acquiring. The majority of merchants indicated that they procure POS
       terminals and merchant acquiring services together. This holds true for large
       merchants as well, although a larger proportion of large merchants sources POS
       terminals separately than for SMEs. When asked whether or not the same person in
       the organisation is responsible for the procurement of merchant acquiring services and
       POS terminals, both models were similarly common.72
(66)   With regard to a further sub-segmentation of a potential market for the provision of
       POS terminals, the vast majority of merchants and merchant acquirers indicated that
       POS terminals are interoperable with any scheme network.73 The majority of
       merchants and merchant acquirers did indicate that differences in the provision of
       different types of POS terminals exist. For example, different purchase / rental prices
       were mentioned, as well as different capabilities and services of the devices. For
       smartPOS terminals for example, digital services such as applications need to be
       offered to unlock functionalities of the device.74
(67)   Ultimately, the questions of whether POS terminals form a separate product market
       from merchant acquiring services and whether further sub-segmentation, by the type
       of POS terminal75 is appropriate can be left open, as the Commission finds that the
       Transaction does not lead to competitive concerns under any product market definition
       set out above.
70 Form CO, paragraphs 113 and 114.
71 Form CO, paragraph 109.
72 Responses to questions 9 and 38 of Q1 – Questionnaire to merchants.
73 Responses to question 39 of Q1 – Questionnaire to merchants and question 53 of Q2 – Questionnaire to
   merchant acquirers.
74 Responses to question 40 of Q1 – Questionnaire to merchants and question 54 of Q2 – Questionnaire to
   merchant acquirers.
75 A sub-segmentation by customer size, as suggested in case M.9357 – FIS/Worldpay by the Notifying Party
   (Fidelity Information Services, Inc.) is not considered appropriate, in line with the findings for merchant
   acquiring (paragraph (40) to (44))
                                                         16
 ---pagebreak--- 4.2.3.2.Geographic market definition
Commission’s precedents
(68)    In its decisional practice, the Commission considered that the market for the supply of
        POS to merchants is likely national in scope but eventually left the question open.76
The Notifying Party’s view
(69)    The Notifying Party submits that the relevant geographic market for the provision of
        POS terminals and related services is EEA-wide, and considers that the same
        arguments that have been put forward in its claim that the relevant geographic market
        for retail merchant acquiring is EEA-wide also apply to the provision of POS terminals
        and related services.77 As an illustration of the increased presence of multinational and
        alternative foreign players in the Italian market, the Notifying Party focuses on the
        example of SumUp, who provided [BUSINESS SECRET – NEXI’S ESTIMATE] POS in
        Italy in 2017, [BUSINESS SECRET – NEXI’S ESTIMATE] in 2018 and [BUSINESS
        SECRET – NEXI’S ESTIMATE] in 2019, being in 2019 part of the top [5-10] providers
        of POS terminals in Italy.78 The Notifying Party suggests that this example evidences
        the fact that it is not essential to have a local presence or local service staff to provide
        POS terminals and related services to merchants in Italy.
(70)    Moreover, the Notifying Party submits that the existence of a domestic scheme
        (PagoBancomat) is not an obstacle to the provision of POS terminals and related
        services to customers in Italy by non-Italian players, since such players could either
        adopt the same payment protocol as the one used by PagoBancomat or request that
        PagoBancomat certifies their proprietary protocol. The Notifying Party however
        acknowledges that this latter option could take up to [BUSINESS SECRET – NEXI’S
        ESTIMATE] months.79
The Commission’s assessment
(71)    The Commission’s market investigation gave indications that the market for the
        provision of POS terminals could be national in scope. The majority of merchants and
        merchant acquirers indicated that a local presence in Italy is necessary to supply POS
        terminals in Italy. Reasons mentioned include local technical assistance and
        maintenance, as well as language and cultural aspects.80 Despite these results, the
        majority of respondents also indicated not to perceive any barriers to supplying POS
        terminals on EEA-wide level.81
76 See Cases M.9387, Allied Irish Banks/First Data Corporation/Semeral, M.9357, FIS/Worldpay, and
    M.7873, Worldline/Equens/Paysquare.
77 Form CO, paragraph 157.
78 Form CO, paragraph 157 and 158.
79 Form CO, paragraph 159.
80 Responses to question 43 of Q1 – Questionnaire to merchants and question 58 of Q2 – Questionnaire to
    merchant acquirers.
81 Responses to question 43 of Q1 – Questionnaire to merchants and question 60 of Q2 – Questionnaire to
    merchant acquirers.
                                                      17
 ---pagebreak--- (72)     Ultimately, the question whether the appropriate geographic market definition is EEA-
         wide or national can be left open, as the Commission considers that the Transaction
         does not cause competitive concerns for either geographic market definition.
4.2.4. Payment card processing – acquiring processing
4.2.4.1.Product market definition
Commission’s precedents
(73)     The Commission previously considered a distinct market for card processing and
         within that market, it has discussed the existence of separate relevant markets for
         acquiring processing services and issuing processing services. The exact market
         definition was ultimately left open.82 Within acquiring processing, the Commission
         has identified a possible further sub-segmentation based on (i) the payment card
         scheme (domestic v. international) and (ii) the platform, distinguishing between
         physical POS terminals and through web-enabled interfaces (e-commerce). The exact
         market definition was ultimately left open.83
The Notifying Party’s view
(74)     The Notifying Party considers that a distinction in processing between POS and web-
         enabled transactions does not appear appropriate neither at EEA level, nor in Italy,
         since the activity of processing POS and web-enabled transaction are the same, and
         the fees for the processing of POS terminals and web-enabled transactions are
         substantially similar.84 The Notifying Party nonetheless considers that the exact scope
         of the product market can be left open.85
The Commission’s assessment
(75)     The market investigation did not provide any indications suggesting that the
         Commission should depart from its past decisional practice.
(76)     In any event, the Commission considers that, for the purpose of the present case, the
         question of whether acquiring processing forms a single relevant product market or
         whether it would be appropriate to segment it further according to the payment card
         scheme or the platform can be left open, since the Commission considers that the
         Transaction does not raise serious doubts as to its compatibility with the internal
         market regardless of the product market definition.
82 See Cases M.9452, Global Payments/TSYS, M.7873, Worldline/Equens/Paysquare, and M.7241, Advent
    International/Bain Capital Investors/Nets Holding
83 See Cases M.9452, Global Payments/TSYS, M.8073, Advent International/Bain Capital/Setefi
    Services/Intesa Sanpaolo Card, and M.7241, Advent International/Bain Capital Investors/Nets Holding.
84 Form CO, paragraph 119.
85 Form CO, paragraph 120.
                                                       18
 ---pagebreak--- 4.2.4.2.Geographic market definition
Commission’s precedents
(77)     In its decisional practice, the Commission has previously left open whether the
         provision of payment card processing services, in general, and of acquiring processing
         services, in particular, is national or EEA-wide in scope.86
The Notifying Party’s view
(78)     The Notifying Party submits that the relevant geographic market for payment card
         processing, in general, and acquiring processing, in particular, is at least EEA-wide,
         and considers that the same arguments that have been put forward in its claim that the
         relevant geographic market for retail merchant acquiring is EEA-wide also apply to
         acquiring processing.87 The Notifying Party explains that additional reasons for the
         geographic market for acquiring processing to be considered EEA-wide are the
         increased presence of multinational and alternative players in Italy and the absence of
         requirement to be an Italian company, or to have a local presence or staff in Italy to
         perform acquiring processing activities on the Italian market. In support of this, the
         Notifying Party explains that Nexi [BUSINESS SECRET – SUPPLY SOURCES].88
(79)     In addition, the Notifying Party submits that the “passporting” rules provided under
         the PSD2 allow processors to provide processing services in Member States other than
         their home country.89
(80)     Finally, the Notifying Party claims that the existence of domestic schemes is not an
         obstacle to the performance of acquiring processing activities by non-Italian players
         in Italy, because even where domestic schemes require different procedures or
         certifications, processors may partner with local banks to provide the required
         services. As an illustration, the Notifying Party explains that [BUSINESS SECRETS –
         COMMERCIAL STRATEGY] has partnered with [BUSINESS SECRETS –
         COMMERCIAL STRATEGY] to provide processing services in Italy.90
The Commission’s assessment
(81)     The market investigation did not provide any indications suggesting that the
         Commission should depart from its past decisional practice.
(82)     In any event, the Commission considers that, for the purpose of the present case, the
         question of whether the relevant geographic market for acquiring processing is EEA-
         wide or national can be left open, since the Commission finds that the Transaction
         does not raise serious doubts as to its compatibility with the internal market regardless
         of the geographic market definition.
86 See Cases M.9452, Global Payments/TSYS, M.7873, Worldline/Equens/Paysquare, and M.7241, Advent
    International/Bain Capital Investors/Nets Holding.
87 Form CO, paragraph 162.
88 Form CO, paragraph 162.
89 Form CO, paragraph 162.
90 Form CO, paragraph 162.
                                                       19
 ---pagebreak---  4.3.    Framework of the competitive assessment
 (83)    Under Articles 2(2) and 2(3) of the Merger Regulation, the Commission must assess
         whether a proposed concentration would significantly impede effective competition
         in the internal market or in a substantial part of it, in particular through the creation or
         strengthening of a dominant position.
 (84)    A merger can entail horizontal effects. In this respect, the Commission Guidelines on
         the assessment of horizontal mergers under the Merger Regulation (“the Horizontal
         Merger Guidelines”)91 distinguish between two main ways in which mergers between
         actual or potential competitors on the same relevant market may significantly impede
         effective competition, namely (a) by eliminating important competitive constraints on
         one or more firms, which consequently would have increased market power, without
         resorting to coordinated behaviour (non-coordinated effects); and (b) by changing the
         nature of competition in such a way that firms that previously were not coordinating
         their behaviour are now significantly more likely to coordinate and raise prices or
         otherwise harm effective competition. A merger may also make coordination easier,
         more stable or more effective for firms which were coordinating prior to the merger
         (coordinated effects).92
 (85)    In addition, a merger can also entail vertical effects when it involves companies
         operating at different levels of the same supply chain. Pursuant to the Commission
         Guidelines on the assessment of non-horizontal mergers under the Council Regulation
         on the control of concentrations between undertakings (the “Non-Horizontal Merger
         Guidelines”),93 vertical mergers do not entail the loss of direct competition between
         merging firms in the same relevant market and provide scope for efficiencies.
         However, there are circumstances in which vertical mergers may significantly impede
         effective competition. This is in particular the case if they give rise to foreclosure.94
         The Non-Horizontal Merger Guidelines distinguish between two forms of foreclosure:
         input foreclosure, where the merger is likely to raise costs of downstream rivals by
         restricting their access to an important input, and customer foreclosure, where the
         merger is likely to foreclose upstream rivals by restricting their access to a sufficient
         customer base.95
4.4.     Overview of affected markets
 (86)    Nexi and ISP Acquiring are both active in the provision of merchant acquiring services
         at retail level to merchants, as well as in the provision of POS terminals and related
         services. In addition, Nexi is active in the provision of merchant acquiring services at
         wholesale level to banks, as well as in the provision of acquiring processing services.
 (87)    As a result, the Transaction gives rise to two horizontally affected markets with respect
         to :
 91 Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
     concentrations between undertakings, OJ C 31, 5.2.2004 p.5.
 92 Horizontal Merger Guidelines, paragraph 22.
 93 OJ C 265, 18.10.2008, p. 6.
 94 Non-Horizontal Merger Guidelines, para 18.
 95 Non-Horizontal Merger Guidelines, para 30.
                                                         20
 ---pagebreak---                  the provision of merchant acquiring services at retail level to merchants
                  (section 4.5.1),
                 the provision of POS terminals and related services (section 4.5.2).
(88)     In addition, the Transaction gives rise to three vertical relationships, namely:
                 Wholesale merchant acquiring (upstream) with retail merchant acquiring
                  (downstream) (Section 4.6.1)
                 Provision of POS terminals and related services (upstream) with retail
                  merchant acquiring (downstream) (Section 4.6.2)
                 Acquiring processing (upstream) with retail merchant acquiring (downstream)
                  (Section 4.6.3)
4.5.     Competitive assessment of the horizontal overlaps
(89)     As regards the Transaction, the Commission considers it appropriate to focus its
         assessment of horizontal effects on non-coordinated effects. In addition to it, a short
         coordinated effects assessment is however carried out in Section 4.5.3.
4.5.1. Merchant acquiring at retail level
(90)     Both Parties are active in the provision of merchant acquiring services at retail level
         to merchants. At EEA level, the Parties’ combined market shares for all the plausible
         sub-segments identified above in paragraphs (35) and (38) are relatively low, and in
         absolute terms remain below 5% for all sub-segments. The Notifying Party has
         provided the Commission with market shares estimates for all the plausible sub-
         segments identified above in paragraphs (35) and (38) in Italy.96 Table 1 below
         provides the detail of the Parties’ and their competitor’s market shares for a
         hypothetical market for retail merchant acquiring in Italy (without any further sub-
         segmentation). Table 2 below summarises the Parties’ market shares for each of the
         potential sub-segments identified above in paragraphs (35) and (38) in Italy. The
         complete data on the Parties’ and their competitors’ market shares for all plausible
         sub-segments discussed above in paragraphs (35) and (38) in Italy can be found in
         Table 3 to Table 12 below.97
96 At EEA level, the Parties’ combined market shares are small, ranging from [0-5]% to [0-5]%, depending on
    the potential sub-segment considered.
97 For the potential segments of transactions performed on debit cards, transactions performed on credit cards,
    transaction performed using Visa cards, transactions performed using MasterCard cards, transactions for
    large merchants and transactions for SMEs, the Notifying Party argues that it was not possible to find
    reliable data on their competitor’s sales.
                                                        21
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak--- (95)    In addition, the Notifying Party considers that a material share of ISP Acquiring’s
        volumes is represented by clients that Nexi would not be in a position to credibly
        supply. In particular, because [BUSINESS SECRET - SALES POLICIES, KNOW-HOW,
        MARKETING PLANS]. The Notifying Party indicates that customers under any of
        these four categories would account for about [10-20]% of ISP Acquiring volumes.100
(96)    The Notifying Party also submits that large merchants (who account for [50-60]% of
        volumes for Nexi and [50-60]% for ISP) are sophisticated buyers who have strong
        countervailing buying power and can switch easily.101 The Notifying Party explains
        that [90-100]% of the contracts of both Parties for large merchants are [BUSINESS
        SECRET – SALES STARTEGY] years in duration, [90-100]% of these contracts have
        [BUSINESS SECRET – SALES STARTEGY], and [80-90]% of Nexi contracts, on the
        one hand, and [60-70]% of ISP Acquiring’s contracts, on the other hand, have
        [BUSINESS SECRET – SALES STARTEGY]. The Notifying Party further submits that
        [BUSINESS SECRET – CUSTOMERS’ BEHAVIOUR].102 In addition, the Notifying
        Party claims that a number of their large merchant customers, representing [40-50]%
        of Nexi’s yearly transaction volumes in 2018-2019 and [20-30]% of ISP Acquiring
        yearly transaction volumes in 2018-2019 [BUSINESS SECRET – SALES
        STRATEGY].103
(97)    Finally, the Notifying Party claims that the barriers to entry and expansion in the
        market are low, so that the Parties are facing competition from new entrants and
        alternative players such as SumUp, iZettle, Hobex and myPOS in addition to
        established strong players such as Banco BPM, UniCredit and Poste Italiane.104 Above
        all, the Notifying Party considers the market for retail merchant acquiring to be an
        EEA-wide market (see above paragraph (47)), in which the combined market share
        would amount only to [0-5]%.
The Commission’s assessment
(98)    At EEA level, the Parties’ combined market shares for all the plausible sub-segments
        of merchant acquiring identified above in paragraphs (35) and (38) are unproblematic
        because these remain below 5% for all sub-segments.
(99)    At national level in Italy, it should first be mentioned that responses from competing
        merchant acquirers to the Commission’s market investigation provided indications
        that the market shares estimates provided by the Notifying Party might have been
        over-estimated. A number of major competing merchant acquirers active at retail level
        have provided figures for the volumes of transactions that they process which are
        higher than the Notifying Party’s estimates provided in the Form CO, while only a
        few other indicated lower volumes of transactions than provided by the Notifying
        Party in the Form CO.105 However, while this would seem to be indicative that the
        Parties’ market share might in fact be lower than indicated in the Form CO, the
100 Form CO, paragraphs 199 – 200.
101 Form CO, paragraphs 201 – 207.
102 Form CO, paragraphs 208 – 209 and 212 – 217.
103 Form CO, paragraphs 210 – 211.
104 Form CO, paragraphs 218 – 222.
105 Responses to question 11 of Q2 – Questionnaire to merchant acquirers.
                                                       30
 ---pagebreak---         Commission was not able to fully reconstruct the market for overall merchant
        acquiring at retail level.
(100) First, as regards a potential overall market for retail merchant acquiring in Italy,
        while evidencing that Nexi and ISP Acquiring are perceived by their merchant
        customers as being the leading two merchant acquirers in Italy,106 market participants
        also considered other suppliers to constitute credible alternatives. When asked to rank
        merchant acquirers according to their competitive strength in Italy, customers place
        Nexi first, followed by ISP acquiring second, UniCredit (whose market share on the
        Italian merchant acquiring market overall is [5-10]%, similar to Nexi’s) third, Banca
        Sella fourth and BNP Paribas fifth; with ISP Acquiring’s UniCredit’s and Banca
        Sella’s average rating being very close to each other.107 It may also be noted that, while
        large merchants rated the above-mentioned competitors of the Parties in the same
        order, SMEs considered ICCREA to be the number five merchant acquirer in Italy
        instead of BNP Paribas. In this context, the Commission notes that contrary to the
        Notifying Party’s views, neither customers nor competitors currently consider Fin-
        Tech players to be credible players in the Italian market. Overall, the vast majority of
        merchants nevertheless considered that, post-Transaction, a sufficient number of
        credible alternative suppliers for merchant acquiring services will remain active on the
        Italian market.108 Likewise, a majority of competitors took the view that, post-
        Transaction, a sufficient number of credible alternative suppliers for merchant
        acquiring services will remain active on the Italian market.109
(101) Second, however, the overall results of the market investigation did not sufficiently
        clearly indicate that Nexi and ISP Acquiring are close competitors. As mentioned
        above in paragraph (100), when asked to rank merchant acquirers according to their
        competitive strength in Italy, customers place Nexi first, followed by ISP acquiring
        second in terms of average grades. However, when asked to identify competitors that
        compete closely with each of Nexi and ISP Acquiring in the market for merchant
        acquiring at retail level, only a minority of merchants considered ISP Acquiring to be
        Nexi’s closest competitor. The same proportion of respondents considered Unicredit
        to be Nexi’s closest competitor.110 In a similar way, only a minority of merchants
        considered Nexi as ISP Acquiring’s closest competitor, and a very similar proportion
        responded that ISP Acquiring’s closest competitor is Unicredit.111 Market respondents
        also frequently mentioned, among the Parties’ closest competitions, players such as
        Wordline, Banca Sella and SIA.112 Against this background, the Commission
        considers that the market investigation does not support the conclusion that he Parties
        are each other’s closest competitor, they nevertheless compete closely with each other
        within a group that includes other players, like Unicredit and Banca Sella.
(102) In this context, the Commission notes that the tender data provided by the Parties in
        support of their claim that Nexi and ISP Acquiring are not close competitors (see
106 Responses to question 25 of Q1 – Questionnaire to merchants.
107 Responses to question 25 of Q1 – Questionnaire to merchants.
108 Responses to question 33 of Q1 – Questionnaire to merchants.
109 Responses to question 43 of Q2 – Questionnaire to merchants acquirers.
110 Responses to question 26 of Q1 – Questionnaire to merchants.
111 Responses to question 26 of Q1 – Questionnaire to merchants.
112 Responses to question 26 of Q1 – Questionnaire to merchants.
                                                       31
 ---pagebreak---         paragraph (94) above) appear to have only limited significance based on the results of
        the Commission’s market investigation, given that only a minority of customers (and
        mostly large customers) organize the renewing of their contracts for merchant
        acquiring services through tenders,.113 The market investigation however revealed that
        the majority of the customers go through the process of renewing their contracts for
        merchant acquiring services via bilateral discussions with two or more potential
        providers, while only a minority of them renewed their contracts through other means,
        such as tenders, bilateral negotiations carried out with their current merchant acquirer
        only, or the roll-over of their existing contracts.114 Therefore, as only a minority of
        customers use tenders to renew their contracts, tender data appear of a low evidential
        value.
(103) Third, even though switching merchant acquirers entails some burden for merchants,
        a vast majority of customers of the Parties made clear that they could and would switch
        to another supplier in case of a price increase,115 and a significant proportion of
        respondents had indeed switched supplier in the course of the last three years.116
(104) Fourth, as mentioned above in section 4.2.2.2, while currently the evidence is not
        sufficient to conclude on an EEA-wide market for retail merchant acquiring, the
        market is developing in that direction and there is a growing competitive pressure from
        non-Italian players. While competitors do not yet perceive non-Italian merchant
        acquirers to exercise significant competitive pressure in Italy,117 the vast majority of
        customers would consider switching to non-Italian merchant acquirers in case of a
        price increase in Italy,118 and considers non-Italian merchant acquirers as credible
        alternatives for the supply of their needs in terms of merchant acquiring services.119
        While this appears to be even more the case for large merchants, these elements are
        also shared by a majority of SME merchants.120
(105) Fifth, the vast majority of customers and even the majority of competitors who
        responded to the market investigation indicated that they do not expect any negative
        impact from the Transaction, especially with respect to the evolution of prices, the
        quality of the services they receive, the choice of service, as well as innovation.121
        Some even indicated that they expect price decreases, choice and quality increases and
        more innovation.122
(106) In this context, the Commission notes that a minority of respondents, expected a
        negative impact of the Transaction on the different parameters of competition,
        including price. One competitor further detailed its respective concerns in a follow-up
113 Responses to question 5 of Q1 – Questionnaire to merchants.
114 Responses to question 5 of Q1 – Questionnaire to merchants.
115 Responses to question 20 of Q1 – Questionnaire to merchants.
116 Responses to question 22 of Q1 – Questionnaire to merchants.
117 Responses to question 21 of Q2 – Questionnaire to merchants acquirers.
118 Responses to question 17 of Q1 – Questionnaire to merchants.
119 Responses to question 15 of Q1 – Questionnaire to merchants.
120 Responses to question 15 of Q1 – Questionnaire to merchants.
121 Responses to question 34 of Q1 – Questionnaire to merchants and responses to question 64 of Q2 –
    Questionnaire to merchant acquirers.
122 Responses to question 34 of Q1 – Questionnaire to merchants and responses to question 64 of Q2 –
    Questionnaire to merchant acquirers.
                                                       32
 ---pagebreak---        submission of 8 June 2020. While most of the concerns exposed by this competitor
       related to non-horizontal aspects of the Transaction, it also expressed the view that
       Nexi, through the Transaction, might strengthen its position in card issuing (a market
       that is not affected and as a result not discussed in details in the rest of the decision).
       Since transactions where the merchant’s merchant acquiring provider is also the issuer
       of the card (so-called “on-us” transactions) bear a smaller part of the scheme cost, this
       competitor explains that by increasing its presence both in issuing and in merchant
       acquiring, Nexi would benefit from a better cost structure compared to its competitors,
       allowing it to undercut its competitors’ prices and allow it to marginalize its
       competitors.123
(107) With respect to this submission, the Commission first notes Nexi’s arguments in
       relation to the merged entity’s cost-advantages following the Transaction. In
       particular, Nexi argues such a scenario would imply a pro-competitive efficiency, that
       on-us savings are very small, and that, in any event, they could only be made when
       the acquiring and issuing processing platforms are connected, [BUSINESS
       SECRET].124 Second, the Commission considers that, the scenario presented by the
       competitor would lead to a price decrease for customers of the Parties in the short term
       (which can be viewed as pro-competitive). Third, it appears questionable whether it
       would enable the Parties to raise the prices in the mid-to long term. In particular, all
       the arguments presented above regarding the competitive pressure posed by non-
       Italian merchant acquirers, and the Parties’ customers’ ability to switch to non-Italian
       merchant acquirers in case of a price increase or, more generally, should the conditions
       of supply offered by the Parties be worsened, (see in particular paragraph (104) above)
       suggest that barriers to entry into the Italian market are not significant. These
       arguments apply equally to the theory of harm presented by the competitor of the
       Parties, and would prevent the merged entity from engaging successfully into such a
       strategy consisting in raising its prices after having eliminated or weakened
       competition through price decreases. Therefore, the Commission considers the theory
       of harm put forward in the submission of 8 June not to be founded.
(108) The Commission moreover, considers that the arguments set out in paragraphs (99) to
       (107) above also apply to the potential sub-segmentation of merchant acquiring based
       on (i) the payment card scheme (merchant acquiring for domestic or international card
       schemes); (ii) the payment card brand (merchant acquiring for VISA or Mastercard
       card schemes); (iii) the payment card type (merchant acquiring for credit or debit
       cards); and (iv) the payment platform (merchant acquiring through physical POS
       terminals or online), which all address the same categories of merchants, and for which
       the Parties’ individual and combined market shares are similar to the ones at retail
       level overall.
(109) As regards a potential differentiation within the market for merchant acquiring
       according to the size of the merchant, the Notifying Parties’ estimates provide that
       the Parties’ combined supply share for SMEs would be moderate post-Transaction
       ([20-30]%), while their combined supply share for large merchants would be more
       significant ([60-70]%) that their combined market share at an overall retail level.
       These estimates would appear indicative of closeness of competition between Nexi
       and ISP Acquiring with respect to the supply of larger merchants.
123 Submission by [Competitor of the Parties] dated 8 June 2020 - ID 654.
124 Submission by the Notifying Party dated 11 June 2020.
                                                        33
 ---pagebreak--- (110) Albeit significant, the Commission considers that the Parties’ combined supply share
        for large merchants does not by itself raise serious doubts as to the compatibility of
        the Transaction with the internal market. The market investigation indeed provided
        evidence that most of the customer-specific factors that would likely render a potential
        price increase from the Parties unsuccessful are even stronger when large merchants
        only are considered.
(111) First, an even greater proportion of large merchants (than for merchants overall)
        mentioned that they engage in bilateral negotiations with multiple suppliers or tenders
        in order to renew their contracts for merchant acquiring,125 which seems indicative of
        an even greater ability to switch away from their current supplier, and even more
        important resources dedicated to screening the market to get the best deal possible.
(112) Second, even more than all customers considered together, large customers appear to
        have a particularly strong ability to switch away to non-Italian merchant acquirers.
        Most noticeably, a vast majority of large merchants explained that they would consider
        switching to a non-Italian merchant acquirer in case of a price increase in Italy.126
        Moreover, large customers tend to source POS terminals and merchant acquiring
        separately more often than SMEs do.127 As a result, they could rely on a local provider
        of POS terminals, where customer support and proximity to the retail outlets is more
        important, while selecting a different supplier, which could be a foreign player for the
        supply of merchant acquiring services. To this respect, switching to a non-Italian
        merchant acquirer for the provision of their merchant acquiring service would be
        comparatively easier for large merchants than for SMEs, who tend to bundle more
        frequently their purchases of POS terminals and related services with the procurement
        of merchant acquiring services.
(113) Third, even within Italy, large merchants appear to have an even greater ability (than
        for merchants overall) to switch away from their current supplier in case of a price
        increase,128 and a large majority of them considers that they have either equal or
        stronger bargaining power that the Parties when negotiating the supply of merchant
        acquiring services.129
(114) Finally, as for merchants overall, the vast majority of large merchants considered that,
        post-Transaction, a sufficient number of credible alternative suppliers for merchant
        acquiring services will remain active on the Italian market,130 and did not expect any
        impact from the Transaction, especially with respect to the evolution of prices, the
        quality of the services they receive, the choice of service as well as innovation.131
125 Responses to question 5 of Q1 – Questionnaire to merchants.
126 Responses to question 17 of Q1 – Questionnaire to merchants.
127 Responses to question 9 of Q1 – Questionnaire to merchants.
128 Responses to question 22 of Q1 – Questionnaire to merchants.
129 Responses to question 27 of Q1 – Questionnaire to merchants.
130 Responses to question 33 of Q1 – Questionnaire to merchants.
131 Responses to question 34 of Q1 – Questionnaire to merchants.
                                                       34
 ---pagebreak--- (115) In light of the above, the Commission considers that the Transaction does not raise
        serious doubts as to its compatibility with the internal market in relation to the market
        for the provision of merchant acquiring services, regardless of whether the relevant
        geographic market is considered national or EEA-wide or if the product market is
        retail merchant acquiring overall or sub-segmented based on (i) the payment card
        scheme (merchant acquiring for domestic or international card schemes); (ii) the
        payment card brand (merchant acquiring for VISA or Mastercard card schemes); (iii)
        the payment card type (merchant acquiring for credit or debit cards) and (iv) the
        payment platform (merchant acquiring through physical POS terminals or online).
4.5.2. Provision of POS terminals and related services
(116) The Transaction gives rise to another horizontally affected possible market with
        respect to the supply of POS terminals and related services. Both Nexi and ISP
        Acquiring provide some of their customers with POS terminals. At EEA level, the
        Parties’ combined market shares are modest, and remain below 5%. In 2017, the
        Parties’ combined market share in the Italian market was [20-30]%, [BUSINESS
        SECRET – EVOLUTION OF MARKET SHARES] [10-20]% in 2018 and [10-20]%
        in 2019. Moreover, while the potential sub-segment of traditional POS terminals was
        not affected in neither 2017, 2018 nor 2019, the Parties’ combined market shares in
        the potential sub-segment for mPOS was [20-30]% in 2019.
(117) The Notifying Party has provided the Commission with market shares estimates for
        the provision of POS terminals and related services in Italy.132 Table 13 to Table 15
        below summarises the Parties’ market shares for each of the potential sub-segment
        considered. It should be noted that since ISP Acquiring currently obtains POS
        terminals only from Nexi, to avoid double-counting, data for ISP Acquiring refer to
        the terminals it supplies to its merchants (all of which are sourced from Nexi), while
        for Nexi the data excludes POS terminals supplied to ISP Acquiring.
132 At EEA level, the Parties’ combined market shares are only [0-5]% for 2017, 2018 as well as 2019.
                                                        35
 ---pagebreak---  ---pagebreak---  ---pagebreak---          reliable, since the sum of the Parties’ total market size for these two years is not equal
         to the total market size for all POS terminals. In addition, the Parties have not
         computed market shares for traditional POS and mPOS separately for the year 2017.
(121) Second, a vast majority of customers, as well as a majority of competitors, indicated
         that a sufficient number of credible alternative providers of POS terminals and related
         services will remain active on the Italian market post-Transaction.134 Moreover, a
         majority of customers indicated that they expect no impact from the Transaction on
         either the price, the quality, the choice or the innovation for POS terminals.135
         Interestingly, a majority of competitors responded that they expect either no impact or
         a price decrease for POS terminals and related services in Italy. As one customer puts
         it, “We are convinced that standardization of terminals and services will allow a
         higher product quality, as well as determine a leveling of prices and the possibility of
         using more types of payment, even the most innovative ones that the market can make
         available.”136 Another customers mentions that “expectations are for an improvement
         of quality, choice of service and innovation”.137 Similarly, a majority of competitors
         mentioned that they expect either no impact or an increase in the quality of the service,
         the choice offered to customers and the innovation for POS terminals and related
         services in Italy.138
(122) If the market for POS terminals was sub-segmented at Italian level according to the
         type of POS terminals, the absence of concerns raised in the course of the market
         investigation, as well as the fact that customers did not expect any impact from the
         Transaction on either the price, the quality, the choice or the innovation for POS
         terminals still holds true. In addition, the Commission notes that the potential subs-
         segment for the provision of traditional POS terminals, representing [90-100]% of the
         total market for POS terminals in 2019, is not affected, while only the potential sub-
         segment for the provision of mPOS is. However, in this segment, [BUSINESS SECRET
         – MARKET SHARES’ TREND – KNOW-HOW] the Parties’ combined share from [40-
         50]% to [20-30]% between 2018 and 2019 would appear to give credit to the Parties’
         arguments that new entrants and alternative players (such as SumUp, iZettle, Hobex
         and myPOS ), who are particularly active on this segment, pose a significant constraint
         by the Parties in Italy.
(123) In light of the above, the Commission considers that the Transaction does not raise
         serious doubts as to its compatibility with the internal market in relation to the market
         for the provision of POS terminals and related services, regardless of whether the
         relevant geographic market is considered national or EEA-wide.
134 Responses to question 44 of Q1 – Questionnaire to merchants and question 61 of Q2 – Questionnaire to
    merchant acquirers. With respect to the alternative possible geographic market definition, it should be noted
    that a vast majority of customers as well as a vast majority of competitors considered the existence of a
    sufficient number of credible alternative suppliers to be even more true at EEA level.
135 Responses to question 45 of Q1 – Questionnaire to merchants.
136 Responses to question 45 of Q1 – Questionnaire to merchants.
137 Responses to question 45 of Q1 – Questionnaire to merchants.
138 Responses to question 64 of Q2 – Questionnaire to merchant acquirers.
                                                           38
 ---pagebreak--- 4.5.3. Coordinated effects
(124) In addition to raising serious doubts as to its compatibility with the internal market
        through non-coordinated effects, a merger may also change the nature of competition
        in such a way that firms that previously were not coordinating their behaviour, post-
        merger may be more likely in a better position to coordinate and raise prices or
        otherwise harm effective competition, or make coordination easier, more stable or
        more effective for firms which were coordinating prior to the merger (coordinated
        effects).139 In assessing coordinated effects, the Commission considers whether (1)
        competitors are likely in a position to reach terms of coordination following the
        Transaction; (2) it would be possible for competitors to monitor potential deviations
        from the terms of coordination, (3) there are deterrent mechanisms to police adherence
        to the terms of coordination and (4) reactions of outsiders may jeopardise the outcome
        of coordination.
(125) In light of the market structures of the potential markets for retail markets for merchant
        acquiring in Italy, as well as the potential markets for the provision of POS terminals,
        the Commission considers it to be unlikely that the Transaction would lead to
        coordinated effects.
(126) First, in the overall Italian market for the provision of merchant acquiring services
        at retail level, the merged entity will have a combined market share of [30-40]% in a
        rather fragmented market, where the second biggest competition would have a [5-
        10]% market share in Italy. Hence, the market is characterised by significant
        asymmetry. Such asymmetry of market positions coupled with differences in business
        models pursued by merchant acquirers in Italy (integrated merchant acquirers, such as
        UniCredit or ISP Acquiring, banks who rely on wholesale merchant acquiring services
        in order to provide those at retail level, and players such as Nexi active at wholesale
        and retail level) make coordination generally more challenging, as the interest of the
        different types of players may not be aligned. Moreover, prices for merchant acquiring
        services are heterogeneous across different customers and at times subjected to
        tenders, which would make the monitoring of deviations difficult. While a particularly
        aggressive pricing strategy could be deployed as deterrent mechanism, reactions from
        non-Italian merchant acquirers would likely make coordination unstable, as they are
        already perceived as credible alternatives to Italian players today and customers
        indicated that they would be willing to switch to those in the event of price increases
        in Italy.
(127) These arguments in relation to a possible overall Italian market for retail merchant
        acquiring appear are equally valid if that market were to be further segmented
        according to the potential sub-segments identified in paragraphs (21) and (25) above.
        In light of these elements, as well as the evidence available to it, the Commission
        considers that the Transaction does not raise serious doubts as to its compatibility with
        the internal market in relation to potential coordinated effects in the Italian market of
        merchant acquiring services at retail level.
(128) Regarding potential coordinated effects in the Italian market for the provision of POS
        terminals and related services, the merged entity would have a moderate combined
        market share of [10-20]% in a rather fragmented market. In particular, the larger
        competitors would have market shares between [5-10]% and [0-5]% and other
139 Horizontal Merger Guidelines, paragraph 22.
                                                    39
 ---pagebreak---         providers, falling under the “Others” category, would account for more than half of
        the market with a [60-70]% market share. As such, it appears that the relatively low
        concentration of the market for the provision of POS terminals and related services on
        the supply-side would make reaching terms of coordination among POS terminals
        providers difficult.140 These considerations would apply even if considering the
        market for POS terminals sub-segmented in Italy by type of POS terminal.
(129) In light of these elements, as well as the evidence available to it, the Commission
        considers that the Transaction does not raise serious doubts as to its compatibility with
        the internal market in relation to potential coordinated effects in the Italian market for
        the provision of POS terminals and related services.
4.6.    Competitive assessment of the vertical links
4.6.1. Wholesale merchant acquiring (upstream) with retail merchant acquiring
        (downstream)
(130) The Parties do not overlap in the provision of merchant acquiring services at wholesale
        level, since only Nexi is active in this market, providing wholesale merchant acquiring
        services to banks. About half of all its merchant acquiring volumes are at wholesale
        level to banks under the so-called Licensing model, while the other half are direct sales
        to merchants at retail level under the so-called Direct model and the Referral model.
        The vertical relationship between wholesale merchant acquiring (upstream) and retail
        merchant acquiring (downstream) is affected both upstream, because Nexi’s market
        shares are above 30% for the potential Italian wholesale merchant acquiring market
        and some of its sub-divisions, and downstream, because the Parties’ combined market
        share is above 30% for the potential Italian retail merchant acquiring market and some
        of its sub-divisions.
(131) The Notifying Party has provided the Commission with market shares estimates for
        wholesale merchant acquiring for all the plausible sub-segments identified above in
        paragraphs (35) and (38) in Italy,141 except for the potential sub-segmentation between
        large merchants and SMEs (since wholesale merchant acquiring services are provided
        at a wholesale level to banks only, which would always qualify as large customers).
        However, the Notifying Party has failed to provide precise market share estimates, as
        well as market share estimates for their competitors, for lack of visibility into this
        segment. Table 16 below summarises the Parties’ market shares for each of the
        potential sub-segment considered. The Parties’ market shares for merchant acquiring
        in Italy142 as well as all potential sub-segments discussed above in paragraphs (35) and
        (38) are provided above in Table 1 to Table 12.
140 Horizontal Merger Guidelines, paragraph 45.
141 At EEA level, the Notifying Party was not able to provide an estimate of Nexi’s market shares for wholesale
    merchant acquiring.
142 At EEA level, the Parties’ combined market shares in retail merchant acquiring are small, ranging from [0-
    5]% to [0-5]%, depending on the potential sub-segment considered.
                                                          40
 ---pagebreak---  ---pagebreak---         relationship (of which merchant acquiring is only a minor component). It is unlikely
        that customers of another bank (which is currently bundling merchant acquiring
        supplied by Nexi with other in-house banking services) would switch to ISP for the
        full bundle of their services; and (ii) should they switch for the sourcing of merchant
        acquiring services only, the Commission notes that ISP is a retail bank which would
        require a much larger retail distribution network to reach and capture merchants from
        other banks across Italy.147 As regards impact on competition, the Notifying Party
        considers that any input foreclosure strategy would unlikely have a significant impact
        on competing banks at retail level, because merchant acquiring services ultimately
        represent a small proportion of their overall costs (<5%) compared to the value of the
        bundle banks create and sell to merchants. Moreover, there would be no impact on
        barriers to entry, since there are sufficient alternative merchant acquirers from which
        potential entrants can source wholesale merchant acquiring services.148
(135) In addition, the Commission reviewed a complaint from a competitor149 supporting
        the theory of harm that Nexi would enjoy an information advantage in light of its
        position as wholesale merchant acquirer vis-à-vis other retail banks when tendering
        for large clients. The Commission, however, does not consider this theory of harm
        grounded nor merger specific. This theory would be based on the consideration that
        Nexi, as a wholesale merchant acquirer, has knowledge of costs for the sourcing of
        merchant acquiring services borne by banks and that it might leverage this knowledge
        to have a competitive advantage against its rivals at downstream level. The
        Commission observes that (i) the market investigation results revealed that banks
        served by Nexi define the price of the bundle of services they offer to large customers
        independently,150 and (ii) even if this theory was grounded, it would not be merger
        specific, considering that Nexi’s knowledge of banks’ costs for merchant acquiring
        services would not improve or change post-Transaction.
(136) With respect to potential customer foreclosure, the Notifying Party claims that the
        Transaction would have no impact on the current situation, since ISP did merchant
        acquiring in-house, therefore, it did not source from wholesalers in the past and is not
        a current nor a potential customer of other wholesalers.151
The Commission’s assessment
(137) First, as regards ability to engage in a potential input foreclosure strategy, the
        Commission considers that, following the Transaction, the merged entity despite its
        sizeable market share at wholesale level would likely not have the ability to engage in
        full or partial input foreclosure, such as raising the price it charges when supplying
        wholesale merchant acquiring services to banks which are active at the retail level for
        merchant acquiring services, or making the conditions of supply less favourable.
        Respondents to the market investigation, in fact, indicated that they would switch
        wholesale merchant acquirer following a price increase or the worsening of supply
147 Form CO, paragraphs 243 – 244.
148 Form CO, paragraph 245.
149 Submission by [Competitor of the Parties] dated 8 June 2020 - ID 654.
150 Responses to question 37 of Q2 – Questionnaire to merchant acquirers.
151 Form CO, paragraphs 246 – 247.
                                                        42
 ---pagebreak---         conditions and that there would be sufficient alternative wholesale merchant acquirers
        to switch to, such as SIA, Banca Sella, or ICCREA.152
(138) Second, as regards incentive to engage in a potential input foreclosure strategy, the
        Commission considers that, assuming that Nexi would have the ability to put in place
        an input foreclosure strategy (which, as explained above, is not plausible), this strategy
        would not be profitable. The profit Nexi would lose in the upstream market for the
        supply of wholesale merchant acquiring services, following an increase in prices or
        the degradation of the service, would not be offset by profit gains at the downstream
        level. The market investigation results indicated that Nexi would have no incentive to
        put in place an input foreclosure strategy, as it would lose economies of scale at
        upstream level, which are considered essential to remain competitive, and considering
        that wholesale merchant acquiring services represent Nexi’s core business.153
(139) Third, as regards the effects of a potential input foreclosure strategy, as explained
        above, Nexi would have no ability to increase the costs of its customers at wholesale
        level, which are its rivals at downstream level, by increasing the price for wholesale
        merchant acquiring services. The customers, in fact, would switch to alternative
        players. Therefore, the Commission considers that the Transaction will not result in a
        significant price increase in the downstream market and will not impede effective
        competition.
(140) Finally, as regards a potential customer foreclosure strategy, although, as shown in
        Table 1 above, in a potential overall market for retail merchant acquiring in Italy, ISP
        Acquiring would hold a [20-30]% market share and the Parties’ combined market
        share would amount to [30-40]%, Unicredit being the closest competitor with a [5-
        10]% market share, ISP Acquiring sources its wholesale merchant acquiring services
        only from Nexi. Following the Transaction, ISP Acquiring will continue sourcing
        wholesale merchant acquiring in-house and, therefore, the Transaction will bring no
        change in the market. Nexi will not have the ability to foreclose access to ISP
        Acquiring as a customer for wholesale merchant acquiring to its rivals in the upstream
        market because ISP Acquiring is currently not a customer to other wholesale merchant
        acquirers. In addition, the market investigation results did not bring to the
        Commission’s attention any concerns regarding a potential customer foreclosure
        strategy.
(141) In light of the above, the Commission considers that the Transaction does not give rise
        to serious doubts as to its compatibility with the internal market as possibly deriving
        from its vertical effects between the provision of wholesale merchant acquiring
        services (upstream) and of retail merchant acquiring services (downstream).
4.6.2. Provision of POS terminals and related services (upstream) with retail merchant
        acquiring (downstream)
(142) Both Nexi and ISP Acquiring provide their customers with POS terminals. The
        vertical relationship between the provision of POS terminals (upstream) and retail
        merchant acquiring (downstream) gives rise to an affected market because the market
152 Responses to question 45 of Q2 – Questionnaire to merchant acquirers.
153 Responses to question 46 of Q2 – Questionnaire to merchant acquirers.
                                                       43
 ---pagebreak---         share levels are above 30% for retail merchant acquiring and certain of its potential
        sub-segments.
(143) The Parties’ market shares for the provision of POS terminals and related services in
        Italy are provided above in Table 13. The Parties’ market shares for merchant
        acquiring in Italy at retail level154 as well as all potential sub-segments discussed above
        in paragraphs (35) and (38) are provided above in Table 1 to Table 12.
(144) Given the Parties’ small market shares in the upstream market for the provision of
        POS terminals and related services, and consequently the combined entity’s inability
        to foreclose access to the provision of POS terminals and related services post-
        Transaction, input foreclosure will not be assessed in this decision.
The Notifying Party’s view
(145) The Notifying Party considers that there is no risk of customer foreclosure since, as
        stated above in paragraph (116), ISP Acquiring is already procuring its POS terminals
        exclusively from Nexi pursuant to a long-term agreement, and is therefore not a
        current or potential customer of third-party providers of POS terminals.155
The Commission’s assessment
(146) First, as regards ability, the Commission considers that, post-Transaction, nothing
        would change in terms of access to ISP Acquiring’s customer base. Already today, in
        fact, ISP Acquiring sources its POS terminals exclusively from Nexi and, therefore, it
        is not a customer for alternative providers of POS terminals. The Notifying Party
        would have no ability to foreclose access to ISP Acquiring’s customer base as ISP
        Acquiring is not a customer to other players.
(147) Second, as regards incentive and effects, it is not necessary for the Commission to
        conclude on whether the Parties would have an incentive to engage in a potential
        foreclosure strategy, or whether such a potential input foreclosure strategy would have
        meaningful effects on the market, as the lack of ability would already prevent the
        Parties to engage in such a potential foreclosure strategy in the first place.
(148) Finally, the market investigation results did not bring any evidence to the
        Commission’s attention with respect to a potential customer foreclosure strategy that
        the Notifying Party might put in place following the Transaction.
(149) In light of the above, the Commission considers that the Transaction does not give rise
        to serious doubts as to its compatibility with the internal market in relation to the
        vertical link arising between the provision of POS terminals and related services
        (upstream) and retail merchant acquiring (downstream). Acquiring processing
        (upstream) with retail merchant acquiring (downstream)
4.6.3. Acquiring processing (upstream) with retail merchant acquiring (downstream)
(150) Both Parties are active in the market for retail merchant acquiring services but only
        Nexi is active in the provision of acquiring processing services to other merchant
154 At EEA level, the Parties’ combined market shares in retail merchant acquiring are small, ranging from [0-
    5]% to [0-5]%, depending on the potential sub-segment considered.
155 Form CO, paragraph 256.
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 ---pagebreak---  ---pagebreak--- (153) The previously mentioned complaint by a competitor159 also covers the vertical
       relationship between acquiring processing and merchant acquiring at retail level. It
       puts forward that Nexi would have the ability and incentive to foreclose competitors
       downstream in the market for retail merchant acquiring to which Nexi supplies
       acquiring processing. According to this complaint, Nexi would have the ability to
       increase its rivals’ costs in acquiring processing in order to gain a competitive
       advantage over them at downstream level.
(154) With regard to this input foreclosure strategy, the Commission firstly notes that
       already today, Nexi supplies its acquiring processing services almost exclusively to
       ISP Acquiring and, therefore, [BUSINESS SECRET – CUSTOMERS AND QUANTITIES
       SOLD]. The Notifying Party would therefore have no ability to foreclose access to
       Nexi’s acquiring processing services as Nexi is not an active supplier to acquiring
       processing customers other than ISP Acquiring. The very few alternative third-party
       customers that Nexi supplies with acquiring processing services represent only [0-5]%
       of the transactions it processes and [BUSINESS SECRET – CUSTOMERS AND
       QUANTITIES SOLD].
(155) As regards incentive to engage in a potential input foreclosure strategy and effects of
       such a potential input foreclosure strategy, it is not necessary for the Commission to
       conclude on whether the Parties would have an incentive to engage in a potential input
       foreclosure strategy, or whether such a potential input foreclosure strategy would have
       meaningful effects on the market, as the lack of ability would already prevent the
       Parties to engage in such a potential input foreclosure strategy in the first place.
(156) Second, as regards the possibility to engage in a potential customer foreclosure
       strategy, the Commission considers that, post-Transaction, nothing would change in
       terms of access to ISP Acquiring as a customer for acquiring processing. Already
       today, in fact, ISP Acquiring sources its acquiring processing services exclusively
       from Nexi and, therefore, it is not a customer, for alternative providers of acquiring
       processing services. The Notifying Party would have no ability to foreclose access to
       ISP Acquiring as a customer for acquiring processing as ISP Acquiring is not a
       customer, nor actual nor potential, to other players. As regards incentive to engage in
       a potential customer foreclosure strategy and effects of such a potential customer
       foreclosure strategy, it is not necessary for the Commission to conclude on whether
       the Parties would have an incentive to engage in a potential customer foreclosure
       strategy, or whether such a potential customer foreclosure strategy would have
       meaningful effects on the market, as the lack of ability would already prevent the
       Parties to engage in such a potential customer foreclosure strategy in the first place.
(157) Finally, with the exception of the above-mentioned complaint, which appears to be
       based on a wrong understanding of Nexi’s market position in acquiring processing,
       the market investigation results did not bring any evidence to the Commission’s
       attention with respect to a potential input or customer foreclosure strategy that the
       Notifying Party might put in place following the Transaction.
(158) In light of the above, the Commission considers that the Transaction does not give rise
       serious doubts as to its compatibility with the internal market in relation to the vertical
159 Submission by [Competitor of the Parties] dated 8 June 2020 - ID 654.
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 ---pagebreak---       link arising between the provision of acquiring processing services (upstream) and of
      retail merchant acquiring services (downstream).
5.    CONCLUSION
6. For the above reasons, the European Commission has decided not to oppose the notified
   operation and to declare it compatible with the internal market and with the EEA
   Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger
   Regulation and Article 57 of the EEA Agreement.
                                                    For the Commission
                                                    (Signed)
                                                    Margrethe VESTAGER
                                                    Executive Vice-President
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