CELEX: 32019M9387
Language: en
Date: 2019-10-23 00:00:00
Title: Commission Decision of 23/10/2019 declaring a concentration to be compatible with the common market (Case No COMP/M.9387 - ALLIED IRISH BANKS / FIRST DATA CORPORATION / SEMERAL) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 23.10.2019
                                                                C(2019) 7713 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                                                                 information omitted has been replaced by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.9387 – Allied Irish Banks/First Data Corporation/Semeral
                    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 18 September 2019, the European Commission received notification of a
          proposed concentration pursuant to Article 4 of the Merger Regulation by which
          Allied Irish Banks plc (“AIB”, Ireland) and First Data Corporation (“FDC”, USA)
          (together, the “Notifying Parties”) will acquire joint control over Semeral Limited
          (“Semeral”, Ireland). Semeral is the holding company of Payzone Ireland Limited
          (“Payzone”, Ireland).3 AIB, FDC, Semeral, and Payzone are designated hereinafter
          as the “Parties”.
1.        THE PARTIES
(2)       AIB is a financial services group operating predominantly in Ireland and providing a
          range of banking, financial and related services to retail, business, and corporate
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 322, 26.9.2019, p. 6.
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---         customers. FDC is active in electronic commerce and payment services for
        businesses worldwide. In Ireland, AIB and FDC jointly control AIBMS, a JV active
        in merchant acquiring and payment card processing services.4
(3)     Semeral is a holding company controlled by The Carlyle Group (USA). Semeral
        controls Payzone, which operates a multi-channel consumer payments acceptance
        network in Ireland, predominantly focused on services that facilitate the payment of
        utility bills, transport-related charges, and pre-paid mobile top-ups.
2.      THE CONCENTRATION
(4)     The Notifying Parties signed a Share Purchase Agreement on 18 April 2019, by
        virtue of which the operation (“Transaction”) will be structured as follows. First,
        [DETAILS OF JV STRUCTURE]. Augmentum would then acquire directly 100%
        of the shares of Semeral.
(5)     Although Semeral has no activities other than being the holding company for
        Payzone, Payzone is a business with a market presence to which market turnover can
        be clearly attributed and hence, as clarified in paragraph 24 of the Consolidated
        Jurisdictional Notice (“CJN”),5 it constitutes an undertaking within the meaning of
        the Merger Regulation.
(6)     Following completion of the Transaction, the Notifying Parties would acquire joint
        control of Augmentum, Semeral, and Payzone. Post-Transaction, the Notifying
        Parties would jointly make decisions related to the strategic commercial conduct of
        each of Augmentum, Semeral, and Payzone. [DETAILS OF JV STRUCTURE].6
(7)     As neither of the Notifying Parties exerted previously any form of control over
        Semeral (or Payzone), the transaction qualifies as an acquisition of control by third
        parties pursuant to paragraph 91 of the CJN.
(8)     In light of the above, the transaction constitutes a concentration within the meaning
        of Article 3(1)(b) of the Merger Regulation.
3.      EU DIMENSION
(9)     The undertakings concerned have a combined aggregate world-wide turnover of
        more than EUR 5 000 million7 (AIB: EUR 2 874 million; FDC: EUR 7 349 million;
        Payzone: EUR […] million). Two of them have an EU-wide turnover in excess of
        EUR 250 million (AIB: EUR 2 874 million; FDC: EUR […] million). AIB and
        Payzone achieve more than two thirds of their aggregate EU-wide turnover in
        Ireland, but FDC does not.
(10)    The notified operation therefore has an EU dimension pursuant to Article 1(2) of the
        Merger Regulation.
4   See Case M.4814, AIB/FDC/JV.
5   Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the
    control of concentrations between undertakings (OJ C 95, 16.2.2008, p.9)
6   Stakeholders Agreement (17 April 2019), clauses 2.8(a)(i) and 2.8(a)(ii), and Schedule 1.
7   Turnover calculated in accordance with Article 5 of the Merger Regulation.
                                                          2
 ---pagebreak--- 4.      RELEVANT MARKETS
4.1.    Supply of POS terminals to merchants
4.1.1. Product market definition
(11)    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.
(12)    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.8 POS
        terminals are used by merchants of different sizes.9
(13)    In FIS/Worldpay, the Commission considered a separate product market for the
        supply of POS terminals to merchants.10 The Commission left open the question
        whether a possible relevant market for the supply of POS terminals should be sub-
        segmented by type of POS device or based on the size of the POS terminal
        customers.11
(14)    In this case, the Notifying Parties submit that the market for supply of POS terminals
        should not be further sub-segmented, by device type or by merchant size.
(15)    For the purposes of the present decision, 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 definition (i.e., supply of
        POS to all merchants; supply of traditional POS to merchants; supply of POS to
        large merchants; supply of POS to medium-sized merchants; supply of POS to
        smaller merchants).
4.1.2. Geographic market definition
(16)    In its decisional practice, the Commission considered that the market for supply of
        POS to merchants is likely national in scope but eventually left the question open.12
(17)    In this case, the Notifying Parties submit that the market for POS terminals could be
        broader than national and cover a territory including Ireland and the UK, because
8   Case M.9357, FIS/Worldpay, para. 28.
9   See Case M.9357, FIS/Worldpay, para. 34, where, by reference to the UK, the Parties defined smaller
    merchants as all merchants with an annual total payments volume (“TPV”) below GBP 380 000; medium-
    sized merchants as all merchants with an annual TPV between GBP 380 000 and GBP 1 million; and large
    merchants as all merchants with an annual TPV exceeding GBP 1 million.
10 Case M.9357, FIS/Worldpay, paras. 36-38. See also Case M.7873, Worldline/Equens/Paysquare, paras.
    62-69.
11 Case M.9357, FIS/Worldpay, para. 38.
12 Case M.9357, FIS/Worldpay, para. 41 and M.7873, Worldline/Equens/Paysquare, paras. 128ff.
                                                        3
 ---pagebreak---          sales/leases are completed remotely and providers can offer support services in both
         countries in the same language.
(18)     For the purposes of the present decision, the exact geographic market definition for
         the supply of POS to merchants can be left open, since the Transaction does not give
         rise to serious doubts as to its compatibility with the internal market even under the
         narrowest plausible geographic market definition, i.e. at national level in Ireland.13
4.2.     Top-ups for pre-paid mobile telecommunication services
4.2.1. Product market definition
(19)     Retail mobile telecommunication services include the delivery of voice and data
         services to end customers via a mobile network.14 Mobile Network Operators
         (“MNOs”) and to Virtual Mobile Network Operators (“MVNOs”) can offer such
         services either on a post-paid basis (where customers enter a long-term contract and
         receive a monthly bill) or on a pre-paid basis (where customers advance purchase
         credit to use their mobile phone).
(20)     Customers of pre-paid mobile telecommunication services need to purchase credit
         (or “top up” their phone) regularly. MNOs/MVNOs offer in-house top-up
         capabilities but they also rely on third party services which provide additional top-up
         options. MNOs/MVNOs remunerate the third parties to use their top-up services.
(21)     Customers who want to top up their mobile phones can do so through two channels:
         (i) the customer-present channel and (ii) the customer-not-present channel. In more
         detail:
         (a)     Customer-present channel. This channel allows customers to top up their
                 mobile phone by visiting a retail store of the MNO/MVNO or by purchasing
                 vouchers in a retail outlet; and
         (b)     Customer-not-present channel. This channel allows customers to top up their
                 mobile phone by calling or texting a dedicated number provided by the
                 MNO/MVNO; by using the app or the website of the MNO/MVNO (using a
                 payment card); or via their bank account using online banking or the bank
                 app or at an ATM.
(22)     In past decisions, the Commission defined a market for retail mobile
         telecommunication services.15 The Commission has not assessed top-ups for pre-
         paid mobile telecommunication services in its previous decisional practice.16
13  According to the Parties, the market for supply of POS terminals to merchants (under all possible sub-
    segmentations) would not be affected by the Transaction under any plausible geographic market definition
    wider than Ireland. See reply to RFI 6, 22 October 2019.
14 Case M.6992, Hutchinson 3G UK/Telefonica Ireland, para. 141, with references to previous decisions.
15 Case M.6992, Hutchinson 3G UK/Telefonica Ireland, para. 141, with references to previous decisions.
    The Commission argued that this market should not be further sub-divided into a post-paid and a pre-paid
    segment (see Case M.6992, Hutchinson 3G UK/Telefonica Ireland, paras. 142-143). Top-ups are not
    required for post-paid mobile telecommunication services and as such, these services are not relevant for
    the assessment of the plausible product markets in this case.
16 In Case ME/659/18, Post Office Limited/Payzone Bill Payments Limited, the CMA considered that mobile
    top-ups constitute a separate market which is different from other business payment systems but
                                                           4
 ---pagebreak--- (23)    In this case, the Notifying Parties submit that there is a relevant market for top-ups
        for pre-paid mobile telecommunication services, which is separate from the market
        for retail mobile telecommunication services. The Notifying Parties also stress the
        differences between top-ups through the customer-present channel and through the
        customer-not-present channel. In any event, the Notifying Parties take the view that
        it can be left open whether the relevant market includes all top-up services for pre-
        paid mobile telecommunication services or there are separate markets for customer-
        present top-ups and customer-not-present top-ups.
(24)    The Commission’s market investigation suggests that top-ups through the customer-
        present and the customer-not-present channels are not substitutable for the following
        reasons:
        (a)     The vast majority of MNOs/MVNOs need (and have) access to both channels
                to distribute pre-paid mobile telecommunication services to end customers
                and compete effectively. As an MNO/MVNO explained: “ceasing to offer
                top-ups through any of the existing channels would be a risk for [the
                MNO/MVNO] as it would trigger customer frustration/risk churn/NPS
                ramifications”17.
        (b)     According to most MNOs/MVNOs, customers are unlikely to switch between
                channels. As one MNO/MVNO put it, “customers who choose one method
                usually stick with it”.18 Another MNO/MVNO added: “... the majority of
                customers tend to use the same method for topping up as the method they
                began the usage journey with, to a large extent using the same retail outlet
                continuously for example”.19 An internal document of AIB confirmed that
                “[…]”;20 and
        (c)     There are important technical differences between the customer-present and
                the customer-not-present channels, which means that suppliers could not
                readily switch or expand from one to the other. With the exception of the
                MNO/MVNOs’ own capabilities, there are no suppliers who are active in
                both channels in Ireland today.21
(25)    In any event, even if all top-up solutions for pre-paid mobile telecommunication
        services in Ireland were considered to belong to one single market, this would be a
        highly differentiated market, as it would include two distinct and very dissimilar
        channels, i.e., the customer-not-present and the customer-present channel, which do
        not compete closely.
   eventually left the issue open (see paras. 49-52). This market would correspond to customer-present top-
   ups for pre-paid mobile telecommunication services.
17 MNO/MVNO’s email of 23 August 2019, in response to questionnaire of 16 August 2019, Doc ID 65
   (“NPS” refers to the Net Promoter Score, a customer satisfaction index). In the same vein,
   MNO/MVNO’s email of 23 August 2019, in response to questionnaire of 16 August 2019, Doc ID 66 and
   MNO/MVNO’s email of 20 August 2019, in response to questionnaire of 16 August 2019, Doc ID 40.
18 MNO/MVNO’s email of 23 August 2019, in response to questionnaire of 16 August 2019, Doc ID 57 and
   in the same vein, MNO/MVNO’s email of 23 August 2019, in response to questionnaire of 16 August
   2019, Doc ID 62.
19 MNO/MVNO’s email of 23 August 2019, in response to questionnaire of 16 August 2019, Doc ID 62.
20 [INTERNAL DOCUMENT], provided as Form CO, Attachment H-1.
21 See Tables 2 and 3 below.
                                                         5
 ---pagebreak--- (26)    For the purposes of this decision, 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 definition (all top-ups for pre-paid
        mobile telecommunication services; customer-present top-ups for pre-paid mobile
        telecommunication services; customer-not-present top-ups for pre-paid mobile
        telecommunication services).
4.2.2. Geographic market definition
(27)    In Hutchinson 3G UK/Telefonica Ireland, the Commission concluded that the
        relevant geographic market for retail mobile telecommunication services is national
        in scope because of the national licences required for MNOs to operate and grant
        access to their networks.22
(28)    Consistent with this precedent, the Notifying Parties submit that the geographic
        scope of the market for top-ups for retail mobile telecommunication services is also
        national.
(29)    In this case, the market investigation did not provide any indications that would
        require the Commission to depart from its precedents. In any event, the exact
        geographic market definition for this market can be left open, since the Transaction
        does not give rise to serious doubts as to its compatibility with the internal market
        even under the narrowest plausible geographic market definition, i.e. at national
        level in Ireland.23
4.3.    Merchant acquiring (downstream market)
4.3.1. Product market definition
(30)    Merchant acquirers offer services that enable merchants to accept card payment
        transactions by connecting them to a range of card schemes and by providing
        solutions to process card payment transactions.24
(31)    The Commission has previously defined a relevant product market for merchant
        acquiring services. The Commission has also considered separate plausible markets
        for merchant acquiring services 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).25
(32)    In this case, the Notifying Parties submit that it is not appropriate to define separate
        markets for merchant acquiring services based on the payment card brand; the
        payment card type; or the payment platform. The Notifying Parties add that there is
        no domestic payment scheme in Ireland and a market delineation based on the
        payment card scheme would not be appropriate in this country.
22  Case M.6992, Hutchinson 3G UK/Telefonica Ireland, para. 164.
23  According to the Parties, a plausible market including all top-ups for pre-paid mobile telecommunication
    services would not be affected by the Transaction under any plausible geographic market definition wider
    than Ireland. See reply to RFI 6, 22 October 2019.
24 Case M.9357, FIS/Worldpay, para. 14.
25 Case M.9357, FIS/Worldpay, paras. 16-21 with references to earlier Commission decisions.
                                                         6
 ---pagebreak--- (33)     For the purposes of this decision, the exact product market definition for merchant
         acquiring 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 definition (i.e.
         merchant acquiring; merchant acquiring for Visa card transactions; merchant
         acquiring for MasterCard transactions; merchant acquiring for credit card
         transactions; merchant acquiring for debit card transactions; merchant acquiring for
         payments made through physical POS terminals; and merchant acquiring for
         payments made through web-enabled interfaces).
4.3.2. Geographic market definition
(34)     In past decisions, the Commission has considered the market for merchant acquiring
         to be likely national in scope, irrespective of the type of card, the card scheme or the
         card brand that merchant acquiring services concern.26 The precise scope of the
         geographic market definition was ultimately left open.27
(35)     In this case, the Notifying Parties did not depart from the Commission’s precedents
         as regards geographic market definition for merchant acquiring.
(36)     For the purposes of the present decision, the exact geographic scope of the market
         for merchant acquiring can be left open since the Transaction does not give rise to
         serious doubts as to its compatibility with the internal market even under the
         narrowest plausible geographic market definition, i.e. at national level in Ireland.28
4.4.     Provision of ISO services (upstream market)
4.4.1. Product market definition
(37)     Merchant acquirers often use their in-house sales teams to identify and sign up new
         customers (merchants). Merchant acquirers can also outsource new customer
         recruitment to third parties, namely, independent service organisations or ISOs.29 A
         merchant acquirer may use one or more ISOs concurrently. Sometimes, merchant
         acquirers may recruit merchants both directly and via ISOs. Even when a merchant
         is recruited through the ISO, the contractual relationship for the provision of
         merchant acquiring services remains between the merchant and the merchant
         acquirer. ISOs are focused solely on recruiting, onboarding and supporting new
         merchants.
26  See e.g., M.6956, Telefonica/Caixabank/Banco Santander, para. 49 and M.5241, American
    Express/Fortis/Alpha Card, para. 30. 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.
27 Cases M.9357, FIS/Worldpay, paras. 25-26, M.7950, EGB/GP, paras. 32 and 38, M.7873,
    Worldline/Equens/Paysquare, para. 108, and M.7241, Advent International/Bain Capital Investors/Nets
    Holding, paras. 23ff.
28 According to the Parties, the market for merchant acquiring services (under all possible sub-
    segmentations) would not be affected by the Transaction under any plausible geographic market definition
    wider than Ireland. See reply to RFI 6, 22 October 2019.
29 Case M.9357, FIS/Worldpay, para. 42.
                                                         7
 ---pagebreak--- (38)    The Commission has previously considered a separate relevant product market for
        the provision of ISO services in FIS/Worldpay.30 The Commission eventually left
        open the question whether ISO services should be sub-segmented by type of
        associated merchant acquiring services.
(39)    The Notifying Parties consider that ISO services and merchant acquiring services
        belong to the same relevant product market. According to the Notifying Parties,
        “ISOs and merchant acquirers offer the same fundamental service, i.e., the ability to
        accept card payments... [W]hile ISOs... effectively operate as a reseller of a
        merchant acquirer’s services, ISOs and merchant acquirers do compete directly for
        merchants...”.31 Having said this, the Notifying Parties also consider a separate
        plausible relevant market including only the provision of ISO services (and
        excluding merchant acquiring services).32 In any event, the Notifying Parties submit
        that the precise product market definition can be left open, as the Transaction does
        not give rise to competition concerns under any plausible market delineation.
(40)    Consistent with its decision in FIS/Worldpay, the Commission considers that ISO
        services and merchant acquiring services do not belong to the same market. This is
        in line with the Notifying Parties’ claim that “the ISO acts as the representative of
        their merchant acquirer partner... regardless of whether the merchant is recruited
        directly by the merchant acquirer or indirectly on behalf of the merchant acquirer by
        an ISO, merchants enter into merchant acquiring contracts only with merchant
        acquirers.”33 This means that merchant acquiring services (the basis of an ISO’s
        offering to merchants) are controlled by merchant acquirers, not by ISOs themselves.
        What is more, ISOs have a contractual relationship with and are remunerated by the
        merchant acquirer – not the merchant directly.34
(41)    For the purposes of this decision, it can be left open whether this separate market for
        ISO services should be sub-segmented further, since the Transaction does not give
        rise to serious doubts as to its compatibility with the internal market under any
        plausible definition (all ISO services; ISO services market split by type of associated
        merchant acquiring services).
4.4.2. Geographic market definition
(42)    In FIS/Worldpay, the Commission left the geographic market definition for ISO
        services open given that the transaction did not raise any issues even at the
        narrowest plausible geographic market definition (i.e., at national level).35
(43)    The Notifying Parties submit that the geographic market scope for the provision of
        ISO services is national, but that given that the transaction does not present any
        competition concerns, the exact definition can be left open.
(44)    For the purposes of the present decision, the exact geographic scope of the market
        for ISO services can be left open since the Transaction does not give rise to serious
30  Case M.9357, FIS/Worldpay, para. 46.
31  Form CO, para. 6.139.
32  The Notifying Parties take the view that a plausible market for the provision of ISO services should not be
    sub-segmented by type of associated merchant acquiring services.
33  Form CO, paras. 6.24 and 6.139.
34  Case M.9357, FIS/Worldpay, para. 42.
35  Case M.9357, FIS/Worldpay, para. 49.
                                                          8
 ---pagebreak---         doubts as to its compatibility with the internal market even under the narrowest
        plausible geographic market definition, i.e. at national level in Ireland.36
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
36  According to the Parties, the market for ISO services (under all possible sub-segmentations) would not be
    affected by the Transaction under any plausible geographic market definition wider than Ireland. See
    reply to RFI 6, 22 October 2019.
37  Horizontal Merger Guidelines, para. 25.
38  OJ C 31, 5.2.2004, p. 5.
39  Horizontal Merger Guidelines, para. 24.
40  Horizontal Merger Guidelines, paras. 27 and following.
                                                          9
 ---pagebreak---          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
(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 (i) whether 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 (i) whether 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)     The Transaction gives rise to limited horizontal and vertical overlaps. The
         Transaction results in two horizontally affected markets, namely (i) the supply of
         POS terminals to merchants, where Payzone, FDC, and AIBMS are active and (ii)
         top-ups for pre-paid mobile telecommunication services that AIB and Payzone offer
         to MNOs/MVNOs. The Transaction also gives rise to a vertical link which results in
         two affected markets: (i) ISO services provided by Payzone (upstream) and (ii)
         merchant acquiring services provided by AIBMS and FDC (downstream).47
41  Horizontal Merger Guidelines, paras. 24-38.
42  OJ L 24, 29.1.2004, p. 1.
43  Non-horizontal Merger Guidelines, para. 35.
44  Non-horizontal Merger Guidelines, para. 32.
45  Non-horizontal Merger Guidelines, para. 61.
46  Non-horizontal Merger Guidelines, para. 59.
47  The Transaction also gives rise to a vertical link between (i) manufacture of POS terminals and supply to
    intermediaries where FDC is active (upstream) and (ii) supply of POS terminals to merchants where
    Payzone, AIBMS, and FDC are active (downstream). Both FDC’s share in the upstream market and the
    combined share of Payzone, AIBMS, and FDC in the downstream market are below 30%. Thus, these
    markets are not vertically affected by the Transaction.
                                                          10
 ---pagebreak---  ---pagebreak---  ---pagebreak---          would not give rise to competition concerns in this market for the reasons discussed
         below.
5.4.1. The Parties are distant competitors
(63)     The Parties offer different top-up solutions that cater for the needs of different end
         customers. For instance, while any customer can purchase the top-up vouchers
         offered by Payzone, only customers with an AIB bank account can use its top-up
         capabilities.    An internal document of AIB confirmed that “[…]”.53 An
         MNO/MVNO explained: “if a sim card was purchased in a retail environment [end-
         customers] are likely to top up in a retail environment. Customers who purchased
         through a website would likely continue to do so, and the bank account option...
         would refer to a younger demographic who are more inclined to use their apps to do
         general business”.54 The market investigation also suggested that customers of each
         segment rarely switch between pre-paid distribution channels.55 Therefore, the
         solutions of AIB and Payzone do not compete closely for the same type of end-
         customers.
(64)     During the market investigation, MNO/MVNOs confirmed that when negotiating
         with Payzone fees for top-up services, they do not use as benchmark the fees offered
         to AIB and other players in the customer-not-present channel. A reason for this is
         that Payzone (like other customer-present actors) follows a different cost structure
         than customer-not-present competitors, because [DETAILS OF PAYZONE’S COST
         STRUCTURE].56 MNO/MVNOs added that when negotiating with AIB the fee for
         top-up services, they also do not use as benchmark the fees offered to Payzone and
         other players in the customer-present channel.57
53  [INTERNAL DOCUMENT], provided as Form CO, Attachment H-1 (emphasis added).
54  MNO/MVNO’s email of 23 August 2019, in response to questionnaire of 16 August 2019, Doc ID 62.
55 MNO/MVNO’s email of 23 August 2019, in response to questionnaire of 16 August 2019, Doc ID 57 and
    in the same vein, MNO/MVNO’s email of 23 August 2019, in response to questionnaire of 16 August
    2019, Doc ID 62.
56 Minutes of call with MNO/MVNO, 12 September 2019, para. 7.b.
57 Minutes of call with MNO/MVNO, 12 September 2019, para. 7.a.
                                                   13
 ---pagebreak--- (65)     Rather, each of AIB and Payzone compete more closely with other rivals than with
         each other:
         (a)     Payzone’s top-up solution competes closely with the other services in the
                 customer-present channel. Vodafone, Three, and eir (which together account
                 for approximately 90% of all mobile telecommunication services in Ireland)
                 use top-up vouchers not just from Payzone, but also from PostPoint and
                 Euronet (epay). Payzone also competes with the (customer-present and
                 customer-not-present) top-up options that the MNOs/MVNOs themselves
                 offer.58 As one MNO/MVNO put it during the market investigation: “the
                 customers abandoning the voucher channel started using [the
                 MNO/MVNO’s] own top-up capabilities (online and in-store)”.59
         (b)     AIB’s top-up solutions compete closely with the (customer-not-present) top-
                 up options that the MNOs/MVNOs themselves offer.60 Both the banking top-
                 ups and the MNO/MVNO own tools are predominantly online solutions,
                 based on apps and websites. According to one MNO/MVNO, there is “more
                 interchangeability between top-ups through digital channels offered by
                 MNOs/MVNOs and banks (including websites and apps), and less
                 interchangeability between voucher top-ups and top-ups through digital
                 channels”61.
(66)     Finally, in the past 5 years, the percentage of mobile subscribers in Ireland using pre-
         paid services has declined by 11%,62 while the percentage of post-paid retail mobile
         subscribers in Ireland has increased. The Notifying Parties recognize that for the
         […].”63 The market investigation suggested that this is particularly true for
         customers using the voucher channel.64 […].65 This further confirms the lack of
         competitive closeness between the top-up solutions of AIB and Payzone.
5.4.2. Customers of pre-paid top-up solutions (MNOs/MVNOs) multi-home and have
         countervailing buyer power
(67)     As shown in Table 3 below, most MNOs/MVNOs active in Ireland use several
         solutions to offer top-ups for pre-paid mobile telecommunication services to their
58  Indeed, the MNOs/MVNOs have every incentive to encourage subscribers who switch away from
    Payzone’s solutions to use the MNO/MVNO top-up capabilities. First, this would allow the
    MNOs/MVNOs to retain the commission that would otherwise have to be paid to a third party. Second,
    supplying customers directly may provide MNOs/MVNOs with additional insights into their customer
    base, including customer profiles and usage patterns. Third, their own top-up methods provide
    MNOs/MVNOs with an additional opportunity to distribute promotional material and advertisements to
    their customers (see Reply of the Notifying Parties to RFI 5, 9 October 2019, para. 7.3).
59  Minutes of call with MNO/MVNO, 12 September 2019, para. 5.
60  Minutes of call with MNO/MVNO, 12 September 2019, para. 6. See also fn. 58 above regarding the
    MNOs/MVNOs’ incentives.
61  MNO/MVNO’s email of 23 August 2019, in response to questionnaire of 16 August 2019, Doc ID 65.
62  See Form CO, fn. 80.
63  [INTERNAL DOCUMENT], provided as Form CO, Attachment I-2.
64  Minutes of call with MNO/MVNO, 10 September 2019, 5.
65  [INTERNAL DOCUMENT], provided as Form CO, Attachment H-1, p. 114, which identifies as the main
    risk for Payzone the […].
                                                          14
 ---pagebreak---  ---pagebreak--- 5.4.4. Conclusion
(71)     In light of the above considerations, the Commission concludes that the Transaction
         does not give rise to serious doubts as to its compatibility with the internal market in
         the plausible market for top-ups for mobile telecommunication services in Ireland.
5.5.     ISO Services in Ireland (Upstream) – Merchant Acquiring Services in Ireland
         (Downstream)
(72)     AIBMS and FDC offer merchant acquiring services in Ireland, holding a combined
         share of [30-40]% (by value of transactions) and [30-40]% (by volume of
         transactions) in 2018 in the relevant market for merchant acquiring services.72
         Payzone offers ISO services only to AIBMS in Ireland, and it holds a share of [30-
         40]% (by value of transactions) and [50-60]% (by volume of transactions) in the
         market for ISO services in Ireland.73
(73)     The Transaction does not give rise to competition concerns regarding the vertical
         link between the upstream market for ISO services in Ireland and the downstream
         market for merchant acquiring services in Ireland for the reasons explained below.74
5.5.1. Input foreclosure
(74)     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
         merchant acquiring in Ireland (under all plausible market delineations) by restricting
         access to ISO services for the following reasons:
         (a)     Input foreclosure may raise competition problems when it is essential for the
                 downstream product, e.g., when that product could not be manufactured or
                 effectively sold on the market without the input.75 ISO services do not seem
                 to be an important input for merchant acquiring. Merchant acquirers can and
                 do provide on their own the services offered by ISOs (i.e., signing up
72  The Notifying Parties confirm that their market shares in merchant acquiring would remain comparable
    under all plausible market delineations (i.e., if the merchant acquiring services were to be sub-segmented
    on the basis of the payment card brand, the payment card type, or the payment platform). The Notifying
    Parties added that all merchant acquirers are typically active in each of the plausible sub-segments in
    Ireland. For these reasons, the analysis and conclusion in this Section applies regardless of the precise
    relevant market delineation in merchant acquiring services.
73 The Notifying Parties submit that ISOs in Ireland facilitate the acceptance of all types of cards, of all
    brands, for payments made through physical or web-enabled interfaces. For these reasons, the analysis
    and conclusion in this Section applies regardless of a possible sub-segmentation in the market for ISO
    services.
74 Even assuming that ISO services and merchant acquiring services belong to the same market, as the
    Parties argued (see para. (39) above), the horizontal overlap between AIBMS’, FDC’s, and Payzone’s
    activities would not give rise to serious doubts as to the compatibility of the Transaction with the internal
    market. The combined share of the Parties would be [30-40]% (in terms of value of transactions) and [30-
    40]% (in terms of volume of transactions) in a hypothetical market including both ISO services and
    merchant acquiring services in Ireland. The increment contributed by Payzone would remain low ([0-5]%
    in terms of value of transactions and [5-10]% in terms of volume of transactions). Post-Transaction, the
    combined entity would continue facing competition by several strong rivals, including Worldpay, Elavon,
    Barclays, BOIPA, Valitor, Paymentsense, Swedbank, JP Morgan Chase, and others, such as Adyen and
    Stripe. The Parties would not be close competitors as AIBMS and FDC are merchant acquirers while
    Payzone is an ISO, only reselling merchant acquiring services of AIBMS.
75 Non-horizontal Merger Guidelines, para. 34
                                                           16
 ---pagebreak---                 merchants and managing customer relationships).76 For example, in 2018,
                [70-80]% of the merchants that AIBMS recruited were identified and signed
                up through AIBMS’s own sales team. […].
        (b)     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.77 […]. Post-Transaction, the combined entity would
                not be able to foreclose any of its downstream rivals by restricting access to
                Payzone’s ISO services, because none of these rivals relies on these services
                today to compete effectively. In any event, a number of ISOs will remain in
                the market post-Transaction and will be able to satisfy merchant acquirer
                demand. This includes BOIPA, Payment Plus, and eCOMM. In the
                upstream market, there has also been new entry recently, e.g., by
                Paymentsense and RMS, which are headquartered in the UK, but started
                offering ISO services in Ireland in recent years.
(75)    As the Commission found that the combined entity would have no ability to
        foreclose merchant acquirers in Ireland, it is not necessary to assess in detail the
        incentives of the combined entity or the overall impact of the Transaction on
        competition.
5.5.2. Customer foreclosure
(76)    The Transaction is unlikely to lead to customer foreclosure concerns. The combined
        entity would not have the ability to foreclose its upstream competitors in ISO
        services in Ireland (under all plausible market delineations) by restricting access to a
        significant customer base for the following reasons:
        (a)     When considering whether the merged entity has the ability to foreclose
                access to downstream markets, the Commission examines whether there are
                sufficient economic alternatives in the downstream markets for the upstream
                rivals to sell their output.78 In this case, post-Transaction, a significant
                customer base of merchant acquirers will remain in Ireland for ISOs to sell
                their services to (representing approximately 63% of the market (in terms of
                volume of transactions) or 67% (in terms of value of transactions)). Such
                potential customers include Worldpay, Elavon, Barclays, Valitor, Swedbank,
                JP Morgan Chase, Adyen, and Stripe.
        (b)     The combined entity has the ability to engage in customer foreclosure, only
                when it involves a company which is an important customer in the
                downstream market.79 AIBMS and FDC are not significant customers for
                ISO services in Ireland today. As explained above, AIBMS mainly recruits
                merchant customers directly (through its own sales team) while FDC does
                not use ISOs to recruit merchants in Ireland. In any event, AIBMS already
                sources approximately […]% of its (limited) demand for ISO services from
                Payzone. The remaining AIBMS’ demand for ISO services from providers
76  Case M.9357, FIS/Worldpay, para. 80(a).
77 Non-horizontal Merger Guidelines, para. 36.
78 Non-horizontal Merger Guidelines, para. 61.
79 Non-horizontal Merger Guidelines, para. 61.
                                                  17
 ---pagebreak---                other than Payzone only represents […]% of the overall demand for ISO
               services in Ireland.
(77)   As the Commission found that the combined entity would have no ability to
       foreclose ISOs in Ireland, it is not necessary to assess in detail the incentives of the
       combined entity or the overall impact of the Transaction on competition.
5.5.3. Conclusion
(78)   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 ISO services
       (upstream) and merchant acquiring (downstream).
6.      CONCLUSION
(79)   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
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