CELEX: 32019M9452
Language: en
Date: 2019-09-16 00:00:00
Title: Commission Decision of 16/09/2019 declaring a concentration to be compatible with the common market (Case No COMP/M.9452 - GLOBAL PAYMENTS / TSYS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 16.9.2019
                                                                C(2019) 6790 final
                                                                                          PUBLIC VERSION
                                                                   In the published version of this decision, some
                                                                   information has been omitted pursuant to Article
                                                                   17(2) of Council Regulation (EC) No 139/2004
                                                                   concerning non-disclosure of business secrets and
                                                                   other confidential information. The omissions are
                                                                   shown thus […]. Where possible the information
                                                                   omitted has been replaced by ranges of figures or
                                                                   a general description.
                                                                To the notifying parties
Subject:            Case M.9452 – Global Payments / TSYS
                    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 9 August 2019, the European Commission received notification of a proposed
          concentration pursuant to Article 4 of the Merger Regulation by which Global
          Payments Inc. (“Global Payments”, US) enters into a full merger within the meaning
          of Article 3(1)(a) of the Merger Regulation with Total System Services, Inc.
          (“TSYS”, US).3 Global Payments and TSYS are designated hereinafter as the
          “Parties” or the “Notifying Parties”.
1.        THE PARTIES
(2)       Global Payments is a global provider of payment solutions, which offers services
          including enterprise and payment management solutions, payment card processing,
          online payment portal solutions, and merchant acquiring.
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 C 281, 20.08.2019, p. 24.
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--- (3)  TSYS is a global provider of payment solutions, which offers services including
     payment card processing, merchant acquiring services, and products, such as
     software for payment card processing.
2.   THE OPERATION
(4)  On 27 May 2019, Global Payments entered into an agreement and plan of merger
     with TSYS pursuant to which TSYS will merge with and into Global Payments, with
     Global Payments being the surviving entity (the “Transaction”). After the proposed
     Transaction is completed, the separate corporate existence of TSYS will terminate
     and holders of TSYS common stock will receive 0.8101 shares of Global Payments
     common stock for each TSYS share. As a result, former holders of TSYS stocks will
     own approximately 48% and former holders of Global Payments shares will hold
     approximately 52% of the shares of the combined entity.
(5)  The Transaction would therefore give rise to a concentration within the meaning of
     Article 3(1)(a) of the Merger Regulation.
3.   EU DIMENSION
(6)  The undertakings concerned have a combined aggregate world-wide turnover of
     more than EUR 5 000 million (Global Payments: EUR 3 050 million; TSYS: EUR 3
     414 million).4 Each of them has an EU-wide turnover in excess of EUR 250 million
     (Global Payments: EUR […] million; TSYS: EUR […] million), 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
     pursuant to Article 1(2) of the Merger Regulation.
4.   RELEVANT MARKETS
(7)  The Transaction combines two providers of payments technology services. The
     Parties’ activities overlap in relation to card payment systems. Figure 1 below
     illustrates the key relationships and the main players involved in card-based payment
     transactions.
4   Turnover calculated in accordance with Article 5 of the Merger Regulation.
                                                       2
 ---pagebreak---                            Figure 1 – Overview of a card payment transaction
(8)   Card payment systems allow a cardholder to use a card (e.g., a credit or debit card)
      to pay for a product or a service without using cash. Card payment systems connect
      merchants to financial institutions and they cover the whole transaction from the
      moment the client pays at the point of sale ("POS") until the moment the merchant’s
      account is credited.
(9)   A card payment transaction starts with a purchaser using a payment card to buy
      goods or services from a merchant, either in a physical shop or online. The merchant
      seeks authorisation for the transaction. This authorisation request is initiated from
      the merchant’s physical card reader (a POS terminal for card-present transactions) or
      at a virtual POS (e.g., a web-based portal which enables similar functionality for
      card-not-present transactions).
(10)  The authorisation request is transmitted to the merchant acquirer (a bank or another
      financial services provider). The merchant acquirer has a contractual relationship
      with the merchant (who is thus the customer of merchant acquirers) and ensures that
      merchants are paid for their sales through cards. These services are referred to as
      merchant acquiring.5
(11)  The merchant acquirer receives the authorisation request together with the
      transaction details. The request and the details are then routed to the relevant card
      scheme to ensure POS authorisation. These services are referred to as acquiring
      processing. Merchant acquirers either provide acquiring processing in-house or
      outsource it to third-party processors.6
5    Case M.7873 - Worldline/Equens/Paysquare, Commission decision of 20 April 2016, paragraph 14.
6    Case M.7873 - Worldline/Equens/Paysquare, Commission decision of 20 April 2016, Commission
     decision of 20 April 2016, paragraph 14; M.7241 - Advent International/Bain Capital Investors/Nets
     Holding, Commission decision of 8 July 2014, paragraph 32.
                                                      3
 ---pagebreak--- (12)  The card scheme receives the authorisation request and the details of the transaction
      from the acquiring processor, identifies the card issuer (usually a bank) and sends the
      transaction to the issuing processor. The issuing processor requests payment
      authorisation from the issuer. It also maintains and manages local and international
      blocking lists, verifies card limits, manages card accounts, and generates cardholder
      statements and invoices. These services are referred to as issuing processing.7
(13)  The issuer then determines whether to approve the transaction based on the
      characteristics of the cardholder account (e.g., whether the cardholder has sufficient
      balance). The issuer can carry out issuing processing itself or outsource it to an
      issuer processor.
(14)  Finally, the transaction response (approved, declined, or other) of the issuer returns
      to the merchant via the issuing and acquiring processors. In case of approval, the
      merchant releases the goods or services.
(15)  To offer acquiring processing services, a merchant acquirer or an acquiring
      processor may use their own proprietary software or in-license processing software
      from a card processing software provider. To offer issuing processing services, an
      issuer or an issuing processor may use their own proprietary software or in-license
      processing software from a card processing software provider.
(16)  The remainder of this Section discusses market definition in card payment systems
      markets which are relevant for the horizontal and non-horizontal analysis of the
      overlaps between the activities of the Parties.
4.1   Card Processing
4.1.1 Product Market Definition
(17)  Card processing includes all technical services concerning payment card
      transactions.8 Card processing services include acquiring processing services and
      issuing processing services. In more detail:
7    Case M.7873 - Worldline/Equens/Paysquare, Commission decision of 20 April 2016, paragraph 14.
8    See Case M.5968, Advent/Bain Capital/RBS Worldpay, Commission decision of 14 October 2010,
     paragraph 11.
                                                  4
 ---pagebreak---         (a)      Acquiring processing relates to the merchant-oriented side of technically
                 processing a card payment transaction. It includes the network routing of
                 payments towards the corresponding issuer and the POS authorisation.
                 Merchant acquirers can purchase processing services from third-party
                 processors or source these services in-house;9 and
        (b)      Issuing processing relates to the issuer-oriented side of technically processing
                 a transaction. It includes payment authorisation requests from the issuer,
                 management of card accounts and credit card limits, and the preparation of
                 cardholder statements and invoices. Issuers can purchase processing services
                 from third-party processors or source these services in-house.10
4.1.1.2 Previous Commission decisions
(18)    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.11 The exact market
        definition was ultimately left open.12
(19)    Within acquiring processing, the Commission has identified a possible further sub-
        segmentation based on (i) the payment card scheme (national v. international) and
        (ii) the platform, distinguishing between physical POS terminals and through web-
        enabled interfaces (e-commerce).13 The exact market definition was ultimately left
        open.14
(20)    With regard to issuing processing, the Commission has not considered any further
        market sub-segmentation.15
4.1.1.3 Notifying Parties’ view
(21)    According to the Parties, there are indications that card processing should be split in
        two separate relevant markets: acquiring processing and issuing processing. The
        Parties submit that among other things, acquiring processing and issuing processing
        services have fundamentally different content and they target different customers;
9     See Case M.7873, Worldline/Equens/Paysquare, Commission decision of 20 April 2016, paragraph 14.
10    See Case M.7873, Worldline/Equens/Paysquare, Commission decision of 20 April 2016, paragraph 14.
11    Case M.7873 - Worldline/Equens/Paysquare, Commission decision of 20 April 2016, paragraph 33;
      M.7241 - Advent International/Bain Capital Investors/Nets Holding, Commission decision of 8 July
      2014, paragraph 32.
12    Cases M.7873 - Worldline/Equens/Paysquare, Commission decision of 20 April 2016, M.7241 - Advent
      International/Bain Capital Investors/Nets Holding, Commission decision of 8 July 2014, M.7078 -
      Santander Consumer Finance/El Corte Ingles/Financiera El Corte Ingles, Commission decision of 29
      January 2015, M.5241 - American Express/Fortis/Alpha Card, Commission decision of 3 October
      2008.
13    Cases M.8073 – Advent International/Bain Capital/Setefi Services/Intesa Sanpaolo Card, Commission
      decision of 10 August 2016, paragraph 25; and M.7241 - Advent International/Bain Capital
      Investors/Nets Holding, Commission decision of 8 July 2014, paragraphs 35-36.
14    Cases M.8073 – Advent International/Bain Capital/Setefi Services/Intesa Sanpaolo Card, Commission
      decision of 10 August 2016, paragraph 27; and M.7241 - Advent International/Bain Capital
      Investors/Nets Holding, Commission decision of 8 July 2014, paragraph 36.
15    Case M.7873 - Worldline/Equens/Paysquare, Commission decision of 20 April 2016, paragraph 34.
                                                       5
 ---pagebreak---         they have a different price structure; and the applicable regulatory framework is not
        the same.16
(22)    The Parties do not consider that it is appropriate to sub-segment further each of the
        markets for acquiring processing and for issuing processing. Within acquiring
        processing, the Parties submit that is not necessary to sub-segment the market based
        on the payment card scheme or based on the platform.17
(23)    The Parties also consider that it is not appropriate to distinguish separate markets
        between in-house card processing services and card processing services to third
        parties or more narrowly, between in-house acquiring processing services18 and
        acquiring processing services to third parties nor between in-house issuing
        processing services19 and issuing processing services to third parties.
(24)    In any event, the Parties submit that the precise product market definition can be left
        open in this case, as the proposed Transaction does not give rise to competition
        concerns under any plausible (product) market delineation.
4.1.1.4 Commission’s assessment
(25)    In this case, the exact product market definition can be left open since the
        Transaction does not give rise to serious doubts as to its compatibility with the
        internal market under any plausible product market definition (including all card
        processing services; all issuing processing services; card processing services to third
        parties; issuing processing services to third parties).20
4.1.2 Geographic Market Definition
4.1.2.1 Previous Commission decisions
(26)    The Commission has previously left open the question whether the provision of card
        processing services is national or EEA-wide in scope.21 When looking more
        narrowly into acquiring processing and issuing processing, the Commission also left
        the geographic market definition open, indicating that the relevant markets could be
        national or EEA-wide in scope.22
16    Form CO, paragraphs 6.53 and 6.60.
17    Form CO, paragraphs 6.54ff.
18    This is the case when a merchant acquirer processes in-house the transactions of its merchants.
19    This is the case when an issuer processes in-house the transactions based on the cards it has issued.
20    These markets are discussed in detail in Section 5 below. The following plausible markets are not
      affected by the proposed Transaction: all acquiring processing services; acquiring processing services
      for national card schemes; acquiring processing services for international card schemes; acquiring
      processing services for POS transactions; acquiring processing services for transactions through web-
      enabled interfaces; acquiring processing services to third parties and in-house acquiring processing
      services; in-house card processing services; and in-house issuing processing services.
21    Cases M.8073 – Advent International/Bain Capital/Setefi Services/Intesa Sanpaolo Card, Commission
      decision of 10 August 2016, paragraph 36; M.5968 – Advent/Bain Capital/RBS Worldpay, paragraph
      12; M.4814 – AIB/FDC/JV, paragraphs 19-20; M.4316 – Atos Origin/Banksys/BCC, paragraphs 26-27.
22    Regarding acquiring processing, see Case M.7950 – EGB/GP, Commission decision of 19 April 2016,
      paragraphs 39-43. In Case M.7241 - Advent International/Bain Capital Investors/Nets Holding,
      Commission decision of 8 July 2014, the Commission recognized that acquiring processing for web-
                                                          6
 ---pagebreak--- 4.1.2.2 Notifying Parties’ view
(27)    The Parties submit that each of the markets for acquiring processing and issuing
        processing is EEA-wide. In any event, the Parties add that the Transaction would not
        give rise to any competition concerns even if it was assessed on the narrowest
        plausible market definition, i.e., at national basis.23
4.1.2.3 Commission’s assessment
(28)    The Commission’s market investigation did not provide any indications that would
        require the Commission to depart from its precedents on the geographic scope of the
        market for card processing.24
(29)    In any event, for the purposes of this Decision, the exact geographic scope of the
        market for card processing can be left open, since the Transaction does not give rise
        to serious doubts as to its compatibility with the internal market under any plausible
        product market definition (i.e., at EEA-wide level or at national level).
4.2     Provision of card processing software
4.2.1 Product Market Definition
(30)    Card processing software is an application and office software designed for and
        licensed to merchant acquirers and issuers (respectively enabling them to offer
        acquiring and issuing processing services in-house). Card processing software can
        also be licensed to acquiring and issuing processors who use the software to offer
        issuing and acquiring processing services to third parties.
4.2.1.1 Previous Commission decisions
(31)    The Commission has defined software markets based on criteria such as
        functionality, sector, and end-use of the software in question, further sub-segmented
        in some cases by application or level of sophistication.25 The Commission has not
        previously considered a market for the provision of card processing software.26
      enabled transactions could be EEA-wide but ultimately left the issue open (see paragraph 40).
      Regarding issuing processing, see Case M.7873 - Worldline/Equens/Paysquare, Commission decision
      of 20 April 2016, paragraph 112-114.
23    Form CO, paragraph 1.25.
24    Including for narrower plausible markets for acquiring processing and issuing processing services.
25    Case Case M.7873 - Worldline/Equens/Paysquare, Commission decision of 20 April 2016, paragraph
      78.
26    In Case M.7873 - Worldline/Equens/Paysquare, Commission decision of 20 April 2016, the
      Commission defined a separate relevant market for the software used by network service providers
      (“NSPs”) in Germany. This software was described as a "toolbox" for German NSP functionalities
      including routing, clearing, authorisation, communication protocol ZVT, routing of credit card
      transactions and some terminal management functions. This software was “tailored to the German
      card payment systems, specifically for the needs of German NSPs” (Case M.7873 -
      Worldline/Equens/Paysquare, Commission decision of 20 April 2016, paragraph 138). Therefore, this
      software is different from card processing software (such as TSYS’ Prime), which is purchased around
      the world by merchant acquirers, acquiring processors, issuers, and issuing processors.
                                                         7
 ---pagebreak--- 4.2.1.2 Notifying Parties’ view
(32)    The Parties submit that there is one single product market including the provision of
        all types of card processing software. The Parties take the view that within this
        market, there are no separate markets for the provision of acquiring processing
        software and issuing processing software, because of supply-side substitutability.
        Most players designing and licensing card processing software offer both acquiring
        and issuing processing software.27
(33)    That said, the Parties also acknowledged that there are “differences in the
        functionality depending on the intended use [of the software] such that a licensee
        who is using [software] only for acquiring processing could not use the product
        licensed for... issuing processing. Reflecting the difference in functionality, license
        fees differ depending on whether the software is used for acquiring processing,
        issuing processing, or both”.28
(34)    In any event, the Parties add that the Transaction would not give rise to any
        competition concerns even if assessed on the basis of the all plausible market
        segments (i.e., provision of card processing software; provision of acquiring
        processing software; provision of issuing processing software).
4.2.1.3 Commission’s assessment
(35)    In this case, the exact product market definition can be left open since the
        Transaction does not give rise to serious doubts as to its compatibility with the
        internal market under any plausible product market definition (i.e., a single market
        including the provision of all card processing software or two separate markets, one
        for the provision of acquiring processing software and one for the provision of
        issuing processing software).
4.2.2 Geographic Market Definition
4.2.2.1 Previous Commission decisions
(36)    In its decisional practice, the Commission took the view that the relevant geographic
        markets for application and office software, including software used in the banking
        and financial sector, are generally at least EEA-wide or worldwide in scope, because
        the solutions were offered on an EEA, or even on a global basis.29 The exact
        geographic market definition was left open.30
(37)    The only exception in payment systems software is Worldline/Equens/Paysquare,
        where the Commission examined the relevant market for the software used by NSPs
        in Germany. As the software in that case was specifically meant to serve German
        card payment systems, the Commission found that the market was likely national in
27    Form CO, Table 6.5.
28    Form CO, paragraph 6.67.
29    Case M.7873 - Worldline/Equens/Paysquare, Commission decision of 20 April 2016, paragraph 136.
30    Case M.7873 - Worldline/Equens/Paysquare, Commission decision of 20 April 2016, paragraph 136
      with references to earlier decisions.
                                                    8
 ---pagebreak---         scope but in any event, the precise geographic scope of the market was left open
        because serious doubts arose under any plausible geographic market definition.31
4.2.2.2 Notifying Parties’ view
(38)    The Parties submit that the relevant geographic market for card processing software
        is EEA-wide or global in scope.
(39)    According to the Parties, card processing software can be sourced globally;32 the
        product offered does not differ between EEA countries and between the EEA and
        other regions;33 license fees do not differ materially between regions; and after-sales
        support can be provided remotely.34
(40)    The Parties distinguish the geographic market definition for card processing software
        and the geographic market definition for software used by NSPs (considered in
        Worldline/Equens/Paysquare). Unlike card processing software which is sourced by
        merchant acquirers, acquiring processors, issuers, and issuing processors around the
        world, the software used by NSPs was tailored to German card payment systems.35
(41)    The Parties add that the Transaction would not give rise to any competition concerns
        even if it was assessed on the basis of the narrower plausible geographic market
        definition, i.e., at EEA-wide level.
4.2.2.3 Commission’s assessment
(42)    The Commission’s market investigation did not provide any indications that would
        require the Commission to depart from its precedents on the geographic scope of the
        markets for application and office software (including software used in the banking
        and financial sector).
(43)    Card processing software is typically offered to different types of customers around
        the world (merchant acquirers, acquiring processors, issuers, and issuing processors)
        and it is not developed specifically for payment card transactions in one country. In
        this sense, the market for provision of card processing software differs from the
        market for provision of software for the activities of German NSPs, which the
        Commission considered as likely national in scope in Worldline/Equens/
        Paysquare.36
(44)    For the purposes of this Decision, the exact geographic scope of the market for card
        processing software can be left open, since the Transaction does not give rise to
        serious doubts as to its compatibility with the internal market under the narrower
        plausible geographic market definition (i.e., at EEA-wide level).
31    Case M.7873 - Worldline/Equens/Paysquare, Commission decision of 20 April 2016, paragraphs 138-
      140.
32    For example, TSYS’ card processing software is licensed for use in 80 countries.
33    For example, TSYS’ card processing software is licensed with EEA Member State languages preloaded
      and does not need to be specifically adapted to the language of each country.
34    Form CO, paragraph 6.71.
35    See Form CO, paragraph 6.72.
36    See Case M.7873 - Worldline/Equens/Paysquare, Commission decision of 20 April 2016, paragraphs
      70ff and 135ff. The Commission ultimately left open the relevant geographic market definition for
      provision of software for the activities of German NSPs.
                                                           9
 ---pagebreak--- 5.    COMPETITIVE ASSESSMENT
5.1   Introduction
(45)  Article 2 of the Merger Regulation requires the Commission to examine whether
      notified concentrations are compatible with the internal market, by assessing whether
      they would significantly impede effective competition in the internal market or in a
      substantial part of it, in particular as a result of the creation or strengthening of a
      dominant position.
(46)  A merger giving rise to a significant impediment of effective competition may do so
      as a result of the creation or strengthening of a dominant position in the relevant
      market(s). Moreover, mergers in oligopolistic markets involving the elimination of
      important constraints that the parties previously exerted on each other, together with
      a reduction of competitive pressure on the remaining competitors, may also result in
      a significant impediment to effective competition, even in the absence of
      dominance.37
(47)  The Commission Guidelines on the assessment of horizontal mergers under the
      Merger Regulation (the “Horizontal Merger Guidelines”)38 describe horizontal non-
      coordinated effects as follows: “A merger may significantly impede effective
      competition in a market by removing important competitive constraints on one or
      more sellers who consequently have increased market power. The most direct effect
      of the merger will be the loss of competition between the merging firms. For
      example, if prior to the merger one of the merging firms had raised its price, it
      would have lost some sales to the other merging firm. The merger removes this
      particular constraint. Non-merging firms in the same market can also benefit from
      the reduction of competitive pressure that results from the merger, since the merging
      firms’ price increase may switch some demand to the rival firms, which, in turn, may
      find it profitable to increase their prices. The reduction in these competitive
      constraints could lead to significant price increases in the relevant market.”39
(48)  The Horizontal Merger Guidelines list a number of factors which may influence
      whether or not significant non-coordinated effects are likely to result from a merger,
      such as the large market shares of the merging firms, the fact that the merging firms
      are close competitors, the limited possibilities for customers to switch suppliers, or
      the fact that the merger would eliminate an important competitive force. 40 That list
      of factors applies equally regardless of whether a merger would create or strengthen
      a dominant position, or would otherwise significantly impede effective competition
      due to non-coordinated effects. Furthermore, not all of these factors need to be
      present for significant non-coordinated effects to be likely. The list of factors, each
      of which is not necessarily decisive in its own right, is also not an exhaustive list.41
37   Horizontal Merger Guidelines, paragraph 25.
38   OJ C 31, 5.2.2004, p. 5.
39   Horizontal Merger Guidelines, paragraph 24.
40   Horizontal Merger Guidelines, paragraphs 27 and following.
41   Horizontal Merger Guidelines, paragraphs 24-38.
                                                      10
 ---pagebreak--- (49)  Finally, the Horizontal Merger Guidelines describe a number of factors, which could
      counteract the harmful effects of the merger on competition, including the likelihood
      of buyer power, the entry of new competitors on the market, and efficiencies.
(50)  In addition, the Commission Guidelines on the assessment of non-horizontal mergers
      under the Merger Regulation (the "Non-horizontal Merger Guidelines") distinguish
      between two main ways in which vertical mergers may significantly impede
      effective competition, namely input foreclosure and customer foreclosure.42
(51)  For a transaction to raise input foreclosure competition concerns, the merged entity
      must have a significant degree of market power upstream. 43 In assessing the
      likelihood of an anticompetitive input foreclosure strategy, the Commission has to
      examine whether (i) the merged entity would have the ability to substantially
      foreclose access to inputs; (ii) whether it would have the incentive to do so; and (iii)
      whether a foreclosure strategy would have a significant detrimental effect on
      competition downstream.44
(52)  For a transaction to raise customer foreclosure competition concerns, the merged
      entity must be an important customer with a significant degree of market power in
      the downstream market.45 In assessing the likelihood of an anticompetitive customer
      foreclosure strategy, the Commission has to examine whether (i) the merged entity
      would have the ability to foreclose access to downstream markets by reducing its
      purchases from upstream rivals; (ii) whether it would have the incentive to do so;
      and (iii) whether a foreclosure strategy would have a significant detrimental effect
      on consumers in the downstream market.46
5.2   Overview of Affected Markets
(53)  On the basis of the above market definitions, and the Parties' activities, the
      Transaction results in the following affected markets:
      (a)      Both Parties are active in issuing processing services in Czechia. Global
               Payments is also active in acquiring processing services in Czechia. The
               proposed Transaction gives rise to a horizontally affected market in card
               processing in Czechia;47 and
      (b)      TSYS develops and licenses its card processing software for acquiring and
               issuing processing in several EEA countries. The card processing software
               market is upstream to the Parties’ activities in card processing (downstream).
               The proposed Transaction gives rise to affected markets regarding the
42   OJ L 24, 29.1.2004, p. 1.
43   Non-horizontal Merger Guidelines, paragraph 35.
44   Non-horizontal Merger Guidelines, paragraph 32.
45   Non-horizontal Merger Guidelines, paragraph 61.
46   Non-horizontal Merger Guidelines, paragraph 59.
47   The Parties’ activities do not overlap horizontally in any other EEA country. Outside Czechia, Global
     Payments offers acquiring and issuing processing services also in Latvia, Romania, and Slovakia and
     TSYS offers issuing processing services in Finland, Germany, Hungary, Ireland, Italy, the Netherlands,
     Norway, Poland, Sweden, and the UK.
                                                        11
 ---pagebreak---  ---pagebreak--- (56)   Taking into account services provided in-house and to third parties, in Czechia, the
       combined market share of the Parties in card processing (including both acquiring
       and issuing processing) would be [50-60]%. The Parties’ combined market share
       would be [30-40]% in issuing processing. In both cases, TSYS would contribute an
       increment of less than [0-5]% to the share of the combined entity. Taking into
       account services provided only to third parties, in Czechia, the combined market
       share of the Parties in card processing (including both acquiring and issuing
       processing) would be [50-60]%. The Parties’ combined market share would be [50-
       60]% in issuing processing. In both cases, TSYS would contribute an increment of
       less than [0-5]% to the share of the combined entity.
(57)   The Transaction does not give rise to serious doubts as to its compatibility with the
       internal market regarding the plausible markets for card processing (in-house and
       third-party or third-party only) or issuing processing (in-house and third-party or
       third-party only) in Czechia for the following reasons.
(58)   First, under all plausible market definitions, the market position of TSYS remains
       minor. The share increment from TSYS remains always less than [0-5]%. Thus, the
       proposed Transaction is unlikely to cause significant change in the competitive
       landscape of card processing or issuing processing in Czechia.53
(59)   Second, the combined entity will continue to face competitive constraints from
       several competitors active in card processing in Czechia, including SIA, Česká
       spořitelna, EVO, Worldline, and Danube Pay. Each of these players has a much
       higher share than TSYS in card processing and issuing processing in Czechia.
(60)   Third, the Parties do not compete closely in card processing in Czechia:
       (a)      Global Payments offers card processing services both in-house and to third
                parties while TSYS offers card processing services only to third parties;
       (b)      Global Payments offers both issuing and acquiring processing, while TSYS
                only offers issuing processing; and
       (c)      Global Payments holds a significant market position in card processing in
                Czechia as a result of its 2004 acquisition of the previously state-owned
                central payment processor in the country. Global Payments serves many
                different third parties and proactively bids for new customer opportunities in
                the country. In contrast, TSYS offers issuing processing services only to one
                customer in Czechia, namely, [Company]. This is in the context of TSYS’
                multi-national client relationship with [Company], covering several EEA
                countries.54 The Parties are not aware of any company other than TSYS that
                offers issuing processing services to [Company] in Czechia today.55 TSYS
                currently does not compete closely with Global Payments in the market for
53   In particular regarding issuing processing in Czechia, the HHI delta is […] (i.e., below 150); the post-
     merger HHI is […]; and the combined share of the Parties does not exceed 50%. The proposed
     Transaction is thus unlikely to give rise to horizontal competition concerns as per the Horizontal
     Merger Guidelines, paragraph 20.
54   In addition to Czechia, TSYS offers issuing processing services to American Express in the following
     EEA countries: the UK, Hungary, Poland, Finland, Norway, and Sweden.
55   See RFI 4, Parties’ Reply of 11 September 2019.
                                                       13
 ---pagebreak---                  card processing or issuing processing in Czechia, as it does not proactively
                 solicit customers in the country.
(61)   In light of the above considerations, the Commission concludes that the Transaction
       does not raise serious doubts as to its compatibility with the internal market in terms
       of its competition impact in the plausible markets for card processing or issuing
       processing in Czechia.
5.4    Card Processing Software in the EEA (Upstream) – Card Processing in Czechia
       (Downstream)
(62)   TSYS licenses its card payment software (called Prime) for issuing processing in
       Bulgaria, Cyprus, Denmark, Estonia, Finland, Greece, Lithuania, Norway, Poland,
       Romania, Sweden, and the UK and for acquiring processing in Bulgaria, Germany,
       Greece, Lithuania, Poland, and Romania. The Parties submitted that TSYS’ market
       share is less than 10% in the upstream market for provision of card processing
       software in the EEA.56
(63)   Card payment software is an important input for the services offered in the card
       processing market.57 Global Payments and TSYS are active in card processing in
       several EEA countries. The Parties submitted that their combined share exceeds 30%
       in card processing (or in any of its sub-segments) only in Czechia.58
(64)   Thus, the Transaction results in one set of vertically affected markets: (i) card
       payment software in the EEA (upstream) and (ii) card processing in Czechia
       (downstream).59
5.4.1 Input Foreclosure
(65)   The Transaction is unlikely to give rise to input foreclosure concerns. The combined
       entity would not have the ability to foreclose its downstream competitors in card
       processing in Czechia (under all plausible market delineations) by restricting access
       to card payments software in the EEA for the following reasons:
       (a)       Input foreclosure may raise competition problems when the upstream input is
                 essential for the downstream product, e.g., when that product could not be
                 manufactured or effectively sold on the market without the input.60 Based on
                 the market investigation, in-licensing card payment software is not an
                 essential input for entering and succeeding in the card processing market.
56   Form CO, Table 6.4. The Parties confirmed that their share does not exceed 10% in the plausible
     upstream markets for provision of acquiring processing software in the EEA and the provision of
     issuing processing software in the EEA.
57   Card payment software is also an important input for merchant acquiring services and issuing services.
     Global Payment offers merchant acquiring services in the EEA but its share does not exceed 30% in
     any EEA country. TSYS does not offer merchant acquiring services in the EEA. Global Payments does
     not offer issuing services in the EEA.
58   See Table 1 above.
59   The analysis in paragraphs 60ff. applies also to potential vertical links between upstream card payment
     software in the EEA and downstream: card processing in Czechia (in-house and third-party); card
     processing in Czechia (third-party only); issuing processing in Czechia (in-house and third-party); and
     issuing processing in Czechia (third-party only).
60   Non-horizontal Merger Guidelines, paragraph 34.
                                                        14
 ---pagebreak---                 Several issuers, issuing processors, merchant acquirers, and acquiring
                processors are active in this space having developed their own proprietary
                software in-house. This is the case with Global Payments in Czechia which
                uses its own proprietary software for the acquiring and issuing processing
                services it offers to third parties;61
       (b)      For input foreclosure to be a concern, the combined entity must have a
                significant degree of power in the upstream market.62 However, TSYS has a
                very limited position in card processing software in the EEA. In 2018, TSYS’
                share in this market was [5-10]% (in terms of revenues63 from provision of
                card processing software).64 Moreover, TSYS competes with five other key
                rivals in this market (namely ACI Worldwide, RS2, Openway, Fiserv/First
                Data and HPS) and at least two competitors have a much higher share than
                TSYS in the EEA, namely, ACI Worldwide (which holds 17-50% in terms of
                revenues from provision of card processing software) and RS2 (which holds
                [10-20]% in terms of revenues from provision of card processing software);65
                and
       (c)      The combined entity would not have the ability to foreclose downstream
                competitors, as it cannot negatively affect the overall availability of inputs for
                the downstream market.66 TSYS does not license its card processing software
                to any customer in Czechia as of 2019 (be it to a card processor; a merchant
                acquirer; or an issuer). In 2018, TSYS’ software was used for the issuing
                processing of [0-5]% of card transactions and the acquiring processing of [0-
                5]% of card transactions in Czechia.67 TSYS would thus have no ability to
                foreclose downstream competitors in this country, by restricting access to its
                card processing software.
(66)   As the Commission found that the combined entity would have no ability to
       foreclose card processing players in Czechia (under any plausible market
       delineation), it is not necessary to assess in detail the incentives of the combined
       entity or the overall impact of the Transaction on competition.
61   Form CO, paragraph 6.102. The Parties submitted that the following players in the downstream market
     for card processing in Czechia may use a combination of in-house and third-party software solutions:
     Worldline and EVO for acquiring processing; and Česká spořitelna, Raiffeisen Bank and Sberbank for
     issuing processing. See RFI 4, Parties’ Reply of 11 September 2019.
62   Non-horizontal Merger Guidelines, paragraph 35.
63   In 2018, TSYS held less than [0-5]% in the EEA-wide market for provision of card processing software
     based on the value and volume of transactions processed.
64   This conclusion would not change if the market were to be sub-segmented by type of card processing
     software. The Parties confirmed that their share does not exceed 10% in the plausible upstream markets
     for provision of acquiring processing software in the EEA and the provision of issuing processing
     software in the EEA.
65   Other key competitors include Openway, Fiserv/First Data, and HPS. See Form CO, Table 6.4.
66   Non-horizontal Merger Guidelines, paragraph 36.
67   In 2018, TSYS licensed its software to only one customer in Czechia, namely [Company], […]. See
     Form CO, paragraph 6.102. [Company] used TSYS’ software for in-house issuing and acquiring
     processing. TSYS’ software was not used at all in Czechia for issuing processing or acquiring
     processing services to third parties in 2018.
                                                        15
 ---pagebreak--- 5.4.2 Customer Foreclosure
(67)   The Transaction is unlikely to give rise to customer foreclosure concerns. The
       combined entity would not have the ability to foreclose its upstream competitors in
       provision of card processing software in the EEA by foreclosing access to a
       significant customer base for the following reasons:
       (a)     When assessing customer foreclosure, the Commission takes into account the
               existence of different uses for the upstream product. These can ensure that a
               sufficiently large customer base remains for that product post-merger.68 Card
               processors in Czechia are not the only purchasers of card processing
               software. According to the ECB, the volume of transactions processed in
               Czechia represents approximately 1.44% of the transactions processed in the
               EEA.69 Post-Transaction, there will remain several downstream players to
               whom upstream rivals can sell card processing software. These include (i)
               card processors outside Czechia,70 given that the card processing software
               market is at least EEA-wide and (ii) customers in Czechia and in other EEA
               countries who are not card processors, e.g., merchant acquirers and issuers
               who also license card processing software to conduct processing in-house.
               Customers who are not card processors represent a significant percentage of
               the demand for card processing software today, as reflected in the customer
               base of TSYS for card processing software. Across the EEA, today, TSYS
               only provides its card processing software to two processors ([…], […]). The
               revenues from these licences represent less than [5-10]% of the total revenues
               that TSYS obtained in 2019H1 from licensing its card processing software in
               the EEA; and
       (b)     Customer foreclosure is less likely when the combined entity is not an
               important customer for the upstream product.71 This is the case here, as
               Global Payments is currently not purchasing third-party card processing
               software but uses its own in-house software to process card payments (both
               for acquiring and for issuing processing).
(68)   As the Commission found that the combined entity would have no ability to
       foreclose card processing software suppliers in the EEA, it is not necessary to assess
       in detail the incentives of the combined entity or the overall impact of the
       Transaction on competition.
5.4.3 Conclusion
(69)   In light of the above considerations, the Commission concludes that the Transaction
       does not raise serious doubts as to its compatibility with the internal market as a
       result of either input or customer foreclosure on the markets for card processing
       software in the EEA (upstream) and card processing in Czechia (downstream).
68   Non-Horizontal Merger Guidelines, paragraphs 61 and 66.
69   See Form CO, Table 6.1, based on ECB Payments data 2018, available at
     https://www.ecb.europa.eu/stats/payment statistics/payment services/html/index.en html.
70   Cf. Case M.8073, Advent International/Bain Capital/Setefi Services/Intesa Sanpaolo Card,
     Commission decision of 10 August 2016, paragraph 51.
71   Non-horizontal Merger Guidelines, paragraph 61.
                                                       16
 ---pagebreak--- 6.   CONCLUSION
(70) 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
                                                   Member of the Commission
                                              17