CELEX: 32021M9971
Language: en
Date: 2021-07-08 00:00:00
Title: Commission Decision of 08/07/2021 declaring a concentration to be compatible with the common market (Case No COMP/M.9971 - P27 NPP / BANKGIROT) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                  Brussels, 8.7.2021
                                                                  C(2021) 5207 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
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                                                                  Danske Bank A/S
                                                                  Holmens Kanal 2-12
                                                                  DK-1092 Copenhagen K – Denmark
                                                                  Nordea Bank Abp
                                                                  Smålandsgatan 15, H50
                                                                  105 71 Stockholm – Sweden
                                                                  OP Corporate Bank plc
                                                                  Gebhardinaukio 1,
                                                                  FI-00510 OP, Helsinki – Finland
                                                                  Skandinaviska Enskilda Banken AB
                                                                  Kungsträdgårdsgatan 8,
                                                                  SEW-106 40 Stockholm – Sweden
                                                                  Svenska Handelsbanken AB
                                                                  Kungsträdgårdsgatan 2,
                                                                  SE-106 70 Stockholm – Sweden
                                                                  Swedbank AB
                                                                  Landsvägen 40, L26, 172 63 Sundbyberg
                                                                  SE-105 34 Stockholm – Sweden
Subject:              Case M.9971 – P27 NPP / BANKGIROT
                      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
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”).
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--- Dear Sir or Madam,
(1)    On 3 June 2021, the Commission received notification of a proposed concentration pursuant
       to Article 4 of Council Regulation (EC) No 139/2004, by which Danske Bank A/S
       (“Danske Bank”, Denmark), Svenska Handelsbanken AB (“Handelsbanken”, Sweden),
       Nordea Bank Abp (“Nordea”, Finland), OP Corporate Bank plc (“OP”, Finland),
       Skandinaviska Enskilda Banken AB (“SEB”, Sweden) and Swedbank AB (“Swedbank”,
       Sweden) (collectively referred to as the “Parent Companies”) acquire, within the meaning
       of Articles 3(1)(b) and 3(4) of the Merger Regulation, joint control of Bankgirocentralen
       BGC AB (“Bankgirot”, Sweden) through a newly-created joint-venture, P27 Nordic
       Payments Platform AB (“P27”, Sweden) (the “Transaction”). The Parent Companies, P27
       and Bankgirot are referred together as the “Parties”.3
1.     THE PARTIES
(2)    The Parent Companies are six banking groups active primarily in the Nordics, offering a
       wide-range of financial services. Post-Transaction, the Parent Companies will retain their
       activities in the banking markets, including in particular the market for payment services to
       corporate and retail customers, which are downstream of the markets where P27 (including
       Bankgirot) will be active.
(3)    P27 is a newly created joint venture between the Parent Companies for the creation of a new
       payment platform at pan-Nordic level. More specifically, P27 will offer the following
       services:
       −    Layer 1 services: a pan-Nordic clearing system for batch and real-time payments
            covering domestic, cross-border and multi-currency transactions in Denmark, Finland,
            Sweden and potentially Norway (the “P27 Clearing System”);
       −    Layer 2 services: a pan-Nordic invoice payment solution in Denmark, Finland, Sweden
            and potentially Norway (the “P27 Bill Payment Solution”). 4
(4)    Bankgirot is the incumbent provider of the clearing infrastructure processing real time
       payments in Sweden. Bankgirot currently offers Layer 1 and Layer 2 services (in Sweden
       only). Bankgirot is owned by SEB, Swedbank, Handelsbanken, Nordea and Danske Bank
       (together, the “BG Banks”).5 None of them currently exerts joint or sole control over
       Bankgirot. The BG Banks and the Parent Companies largely overlap but the former do not
       include OP.
2.     THE OPERATION AND ITS RATIONALE
2.1    Rationale of the Transaction
(5)    The purpose of the establishment of P27 is to create a new pan-Nordic and cross-border
       payment platform. Once operational, P27 shall operate a new payment infrastructure,
       providing better services (more functionalities) at a lower price (economies of scale).
       Therefore, customers are expected to progressively migrate from the existing domestic
       payment infrastructures to P27 (see Section 6.1).
3    Publication in the Official Journal of the European Union No C 221, 10.6.2021, p. 26.
4    In the future, Layer 2 services provided by P27 may also include additional value-added payment services that could
     benefit from a Nordic scale and scope (e.g. [types of value-added payment services that P27 potentially will offer], etc.).
     These potential future Layer 2 services are not defined yet.
5    The BG Banks account together for over [90-100]% of the shareholding in Bankgirot. Two other banks, namely
     Länsförsäkringar Bank Aktiebolag and Skandiabanken Aktiebolag each hold [0-5]% of Bankgirot, [future plans
     with shareholding].
                                                              2
 ---pagebreak--- (6)    In Sweden, […]6 […]. The acquisition of Bankgirot by P27 (before the start of P27’s
       operations and of the migration from existing domestic payment infrastructures to P27) aims
       at mitigating the above risk and, thus, preserving financial stability in Sweden.
2.2    Assessment of the joint control
(7)    The Parent Companies hold equal shares and ownership in P27. [the Parent Companies veto
       rights related to Bankgirot].
(8)    Moreover, pursuant to the Contract Note and the Bankgirot Shareholders’ Agreement, both
       entered into by the Parties on 6 October 2020, P27 will acquire [90-100]% of the voting
       rights and share capital of Bankgirot.7 Post-Transaction, the main guidelines of Bankgirot’s
       budget and the business plan will be defined at P27 level. In particular, P27’s budget and
       business plan will include specific provisions defining notably Bankgirot’s (i) pricing
       policies (including pricing model and methods); (ii) scope of products and solutions
       (including product development policy); and (iii) detailed balance sheets and P&L
       statement. In view of the foregoing, the Commission concludes that the provisions in P27’s
       budget and business plan related to Bankgirot – [the Parent Companies veto rights related to
       Bankgirot] – are sufficiently detailed to constitute strategic decisions within the meaning of
       the Consolidated Jurisdictional Notice8 and, thus, to confer joint control over Bankgirot to
       each Parent Company.
2.3    Assessment of the full functionality
(9)    Post-Transaction, P27 (including Bankgirot) will have its own market presence and
       sufficient resources to operate independently, including its own staff and management
       dedicated to its day-to-day operations, as well as sufficient financial resources.9 In fact,
       Bankgirot is already pre-Transaction an existing company with its own market presence
       operating autonomously from its shareholders. Post-Transaction, P27 (including Bankgirot)
       will also provide its clearing and payment services to the Parent Companies and third parties
       on a fair, objective and non-discriminatory basis, applying to all customers a transparent
       “cost-plus” distribution model. Thus, the relationship between P27 operations and the Parent
       Companies will be commercial in character. Moreover, according to the Parties’ forecasts,
       P27 will achieve a substantial share of its turnover through third parties, i.e. between […]%
       and […]% depending on the scenario.10 Finally, P27 (including Bankgirot) will operate on a
       lasting basis. Therefore, P27 (including Bankgirot) will be full-function.
2.4    Conclusion
(10)   In view of the above considerations, the Transaction constitutes a concentration within the
       meaning of Articles 3(1)(b) and 3(4) of the Merger Regulation.
3.     UNION DIMENSION
(11)   The undertakings concerned have a combined aggregate worldwide turnover of more than
       EUR 5 000 million (Danske Bank: […]; Handelsbanken: […]; Nordea: […]; OP: […];
       SEB: […]; Swedbank: […]; and […]).11 In addition, each of at least two of them has a
6    Form CO, para. 108.
7    However, P27 will have no financial responsibility in relation to Bankgirot. […].
8    Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of
     concentrations between undertakings (the “Consolidated Jurisdictional Notice”) (OJ C 95, 16.4.2008, p.1),
     paras. 65 and ff.
9    In order to be active on the clearing market, P27 is required by law to obtain a license from the Swedish FSA (the
     “P27 Clearing License”). The latter has not been awarded yet. However, P27 will acquire the clearing license
     owned by Bankgirot.
10   See para. 98 of the Consolidated Jurisdictional Notice.
11   Turnover calculated in accordance with Article 5 of the Merger Regulation.
                                                           3
 ---pagebreak---           Union-wide turnover in excess of EUR 250 million (Danske Bank: […]; Handelsbanken:
          […]; Nordea: […]; OP: […]; SEB: […]; Swedbank: […]; and Bankgirot: […]) but they do
          not achieve more than two-thirds of their aggregate Union-wide turnover within one and the
          same Member State. The Transaction therefore has a Union dimension pursuant to
          Article 1(2) of the Merger Regulation.
4.        OVERVIEW OF THE PARTIES’ OVERLAPPING ACTIVITIES
(12)      As detailed in Table 1, the Transaction gives rise to horizontal overlaps in Sweden between
          the future activities of P27 and Bankgirot’s existing activities with respect to the provision
          of both clearing services (Layer 1) and account-to-account (“A2A”) invoice payment
          services (Layer 2).
(13)      The Transaction also gives rise to three vertical links between the provision of the following
          services (i) clearing services (upstream) and payment services to end-customers
          (downstream), (ii) A2A invoice payment services (upstream) and payment services to end-
          customers (downstream), and (iii) clearing services (Layer 1) (upstream) and A2A invoice
          payment services (Layer 2) (downstream).
              TABLE 1 –     HORIZONTAL OVERLAPS AND VERTICAL LINKS ARISING FROM THE TRANSACTION
                Markets                       P27 (not yet active)             Bankgirot            Parent Companies
Clearing services (Layer 1)                    x (Nordic region)            x (Sweden only)
A2A invoice payment services (Layer 2)         x (Nordic region)            x (Sweden only)
Payment services                                                                                     x (Nordic region)
5.        RELEVANT MARKETS
5.1       Product market definition
5.1.1     Payment clearing services (Layer 1 services)
          (a)       The Commission’s precedents
(14)      Payment clearing services refer to the processing of interbank payments prior to the
          completion of the transaction and the transfer of funds (i.e. the settlement). P27 and
          Bankgirot are active in the clearing process but do not conduct the settlement process, which
          is carried out by distinct providers (typically central banks). In other words, clearing
          services entail all the processes that precede the transfer of funds, such as transmitting and
          reconciling interbank payments, confirming verifying that there are funds or credit available
          on individual accounts, authorising the transactions, etc.
(15)      In its past decisional practice,12 the Commission considered a market for the provision of
          payment clearing systems for domestic and low-value payments but ultimately left open the
          exact scope of the product market.13
          (b)       The Parties’ views
(16)      The Parties consider that the market for interbank payment clearing services is distinct from
          other payment services such as those provided in-house by banks or by central bank
12     M.3894 – Unicredito/HVB (2005), paras. 38-39; M.2567- Nordbanken/Postgirot (2001), paras. 25-34.
13     In M.9744 – Mastercard/Nets (2020), the Commission considered the markets for the provision of account-to-
       account core infrastructure services (“A2A CIS”), i.e. the provision of the underlying technical infrastructure to
       suppliers of clearing services. None of the Parties is active on this market, which is upstream of the market for
       clearing services.
                                                            4
 ---pagebreak---        settlement systems.14 They also assessed the following possible segmentations of the market
       for clearing services:
       −    Segmentation between low-value and large-value payments: the Parties agree with this
            segmentation envisaged in the past decisional practice. They submit that large-value
            payments (i.e. payment transactions between mainly financial institutions, which tend to
            have high-values and are usually time critical) and low-value (or retail) payments (i.e.
            payment transactions where at least one party to the transaction is not a financial
            institution, which typically have a much lower value) are typically processed through
            different payment systems. This is due to different safety requirements and the fact that
            some payment systems have an upper value limitation. The Parties’ activities only
            overlap with respect low-value payments;15
       −    Segmentation between domestic and cross-border payments: the Parties submit that this
            segmentation envisaged in the past decisional practice is no longer relevant due to the
            increasing harmonisation of the regulation at EEA level, including in particular the
            introduction of Single Euro Payment Area (“SEPA”). They also argue that the
            establishment of P27 will remove many of the differences in treatment between
            domestic and cross-border payments in the Nordics. In their view, in the future, any
            payment system will be able to clear both domestic and cross-border payments. That
            said, the Parties also acknowledge that the domestic clearing systems currently available
            in the Nordics do not have the technical capabilities to clear cross-border payments; 16
       −    Segmentation between batch and instant payments: clearing systems may provide (i)
            batch payment processing (i.e. processing together payment orders at discrete intervals
            of time) and/or (ii) instant (or real-time) payment processing (i.e. processing of
            payments on a transaction-by-transaction basis in real time). Historically, clearing
            systems only processed batch payments. However, with the emergence of instant
            payments in the last decade, the market is progressively migrating from batch payments
            to instant payments. The Parties consider that clearing systems for instant and batch
            payments are usually not substitutable, but rather complementary. However, they also
            note that most market players provide clearing services for both types of payments;17
       −    Segmentation between A2A and card payments: A2A payments allow the transfer of
            funds directly from the payer's account to the payee's account, without requiring the use
            of a payment card. According to the Parties, this distinction is irrelevant on the ground
            that, even if a payment order is initiated by a card, once it reaches the clearing system, it
            is technically cleared as an A2A transfer.18
(17)   In any event, the Parties submit that the exact scope of the market for clearing services can be
       left open as no competition concern arises under any plausible market definitions.
       (c)       The Commission’s assessment
(18)   The market investigation was not fully conclusive regarding whether the market for clearing
       services should be further segmented or not:
       −    Segmentation between low-value and large-value payments: the results of the market
            investigation were mixed. A large majority of customers of payment clearing services
14   Form CO, paras. 352 to 364.
15   Form CO, paras. 365 to 367.
16   Form CO, paras. 368 to 371.
17   Form CO, paras. 389 and 390.
18   Form CO, paras. 382 to 385. According to the Parties, only the first steps of the clearing of card payments is done by
     the payment card scheme (e.g. Visa). The last step of the card payment clearing (i.e. the final calculation of the net
     payment between card issuers and acquirers) can be done through a clearing system. In such a case, this final step is
     processed by the clearing system as an A2A transfer between the bank accounts of the card issuer and acquirer.
                                                          5
 ---pagebreak---              consider that the two segments present similar competitive dynamics. However,
             virtually all providers of payment clearing services generally take the opposite view,
             stressing the existence of different providers and requirements, while acknowledging
             some convergence;19
        −    Segmentation between domestic and cross-border payments: the results of the market
             investigation suggest that the clearing of domestic payments and cross-border payments
             may constitute distinct markets. Around half of the respondents consider that the two
             segments present different competitive dynamics and landscape (due to the existence of
             different regulations, prices, currencies, etc.). However, a third of the respondents takes
             the opposite view and several of them stressed that the above distinction may become
             less relevant with P27;20
        −    Segmentation between batch and instant payments: the results of the market
             investigation suggest that the clearing of instant payments and batch payments could be
             part of the same market. For most participants, both types of payments are characterized
             by similar competitive dynamics and landscape;21
        −    Segmentation between A2A and card payments: most respondents consider that the
             clearing of card payments and A2A payments could be part of the same market.
             However, a significant minority takes the opposite view. A few market participants also
             stress a trend towards convergence. 22
(19)    In any event, for the purpose of this decision, the Commission concludes that the exact
        scope of the market for clearing services can be left open since the Transaction does not give
        rise to serious doubts as to its compatibility with the internal market and with the EEA
        Agreement under any of the above-mentioned plausible market definitions.
5.1.2   A2A invoice payment services (Layer 2 services)
        (a)       The Commission’s precedents
(20)    In Mastercard/Nets,23 the Commission assessed the market for A2A invoice payment
        services, i.e. services/applications allowing end-users to transfer money from one bank
        account to another for the payment of invoices, which are mainly used for payments that are
        recurring (e.g. monthly utilities bill) but can also be used for the payment of one-off
        invoices. The Commission ultimately left open the question of whether A2A invoice
        payment services are part of a wider market for invoice payment services including
        recurring card-based payments, or segmented based on the types of transactions (e.g. C2B,
        B2B) and A2A payment methods (such as direct debit (i.e. A2A payment initiated by the
        payee on the basis of payer’s consent), credit transfer (i.e. A2A payment initiated by payer),
        payment slip, etc.).
        (b)       The Parties’ views
(21)    In addition to the segmentations considered in the past decisional practice, the Parties
        envisage a distinction between (i) invoice messaging services (i.e. the technical validation
        and distribution of e-invoice messages allowing the processing and forwarding of payment
        requests but excluding the actual payment handling) (also referred as e-invoicing) and (ii)
        invoice payment services (i.e. including the actual payment handling). However, the Parties
19    Responses to question 9.3 of questionnaire Q1 to market participants.
20    Responses to question 9.1 of questionnaire Q1 to market participants.
21    Responses to question 9.2 of questionnaire Q1 to market participants. This is in line with the findings of the
      Commission in M.9744 – Mastercard/Nets, where the Commission found that, in the upstream market for the
      provision of A2A CIS, a distinction between batch and instant payments was not warranted (see paras. 24-29).
22    Responses to question 9.4 of questionnaire Q1 to market participants.
23    M.9744 – Mastercard/Nets (2020), paras. 101-106.
                                                          6
 ---pagebreak---        submit that the Commission does not need to define the exact scope of the market for invoice
       payment services as no competition concerns arise under any plausible market definitions.24
       (c)        The Commission’s assessment
(22)   The market investigation was not fully conclusive regarding the possible alternative
       segmentations of the market for A2A invoice payment services:
       −    Segmentation between card-based and A2A services: the results of the market
            investigation suggest that it may be relevant to distinguish card-based and A2A services.
            Most respondents consider that these different types of payments present different
            competitive dynamics (including different rules set for instance by global card players in
            relation to card payments) and are not interchangeable for customers, as they may
            correspond to different use cases;25
       −    Segmentation by A2A payment methods (e.g. direct debit, credit transfer): the results of
            the market investigation suggest that it may be relevant to distinguish direct debit and
            credit transfer. A small majority of respondents consider that these different types of
            payments present different competitive dynamics and are not interchangeable for
            customers. Others expect a convergence across payment methods in the future;26
       −    Segmentation between instant and batch payment services: the results of the market
            investigation were mixed. A majority of respondents indicate that the two types of
            payments are characterized by different competitive dynamics, in particular as they rely
            on different payment infrastructure. However, most respondents nonetheless consider
            that both types of payment services are interchangeable for customers;27
       −    Segmentation by type of transactions (e.g. C2B, B2B): the results of the market
            investigation were mixed regarding this potential distinction. Around half of
            respondents consider that the competitive dynamics do not differ across types of
            transactions, but a similar share consider that B2B and C2B invoice payment services
            are not interchangeable for customers;28
       −    Segmentation between invoice messaging vs. invoice payment: the results of the market
            investigation were inconclusive as to whether invoice messaging services would
            constitute different products from invoice payment solutions. While a majority of
            respondents consider that customers do not view these as interchangeable, they are
            mixed as to whether competitive dynamics differ between the two segments.29 An
            overwhelming majority of respondents to the market investigation consider that invoice
            messaging services represent the core part of invoice payment solutions.30 Lastly, the
            Commission notes that a potential distinction between invoice messaging services and
            invoice payment is not reflected in the Parties’ own internal documents.31
(23)   In any event, for the purpose of this decision, the Commission concludes that the exact
       scope of the market for A2A invoice payment services can be left open since the Transaction
       does not give rise to serious doubts as to its compatibility with the internal market and with
       the EEA Agreement under any of the above-mentioned plausible market definitions.
24   Form CO, paras. 408 to 434.
25   Responses to questions 34.1 and 35.1 of questionnaire Q1 to market participants.
26   Responses to questions 34.2 and 35.2 of questionnaire Q1 to market participants.
27   Responses to questions 34.3 and 35.3 of questionnaire Q1 to market participants.
28   Responses to questions 34.4 and 35.4 of questionnaire Q1 to market participants.
29   Responses to questions 34.5 and 35.5 of questionnaire Q1 to market participants.
30   Responses to question 36 of questionnaire Q1 to market participants.
31   See e.g. BoD – Appendix 1 20200602 p.41 (Parties’ reply to RFI 4, Appendix 34) referring to the “bill pay market”
     with no distinction between the invoice messaging services and invoice payment services.
                                                         7
 ---pagebreak--- 5.1.3   Payment services to end-users
        (a)       The Commission’s precedents
(24)    Payment services include various types of cashless transactions, such as direct debits
        (i.e. A2A payments initiated by the payee on the basis of payer’s consent), credit transfers
        (i.e. A2A payments initiated by payer), card payments, mobile payments, etc. provided to
        end-customers.
(25)    In previous decisions, the Commission found that the provision of payment services
        constitutes a distinct product market, which could potentially be sub-segmented (i) between
        domestic and international payment services and (ii) between corporate and retail customers.
        The exact scope of the market was ultimately left open.32
        (b)       The Parties’ views
(26)    The Parties submit that payment services should not be further sub-divided, in particular
        between domestic and international payment services, or between corporate and retail
        customers. In any event, they consider that the Commission does not need to conclude on
        the exact delineation of the market as no competition concerns arise under any plausible
        market definitions.33
        (c)       The Commission’s assessment
(27)    No element of the market investigation suggests that, in the present decision, the
        Commission should depart from its previous practice regarding the potential sub-
        segmentations of the payment service market (i) between domestic and international
        payment services and (ii) between corporate and retail customers.
(28)    For the purpose of this decision, the Commission concludes that the exact scope of the
        market for the provision of payment services to end-customers can be left open since the
        Transaction does not give rise to serious doubts as to its compatibility with the internal
        market and with the EEA Agreement under any of the above-mentioned plausible market
        definitions.
5.2     Geographic market definition
5.2.1   The Commission’s precedents
(29)    In its past decisional practice the Commission generally considered that (i) the market for
        payment clearing services;34 (ii) the market for the provision of A2A invoice payment
        services;35 and (iii) the market for payment services36 are national or likely national in scope
        but ultimately left open the exact geographic scope of those markets.
5.2.2   The Parties’ views
(30)    The Parties stress the importance of recent regulatory changes such as the introduction of
        SEPA and the emergence of supranational payment systems (such as P27). However, the
        Parties also admit that the relevant markets are still national in scope, acknowledging that to
32    See e.g. M.8414 – DNB/Nordea/Luminor Group (2017), paras. 107-110. In some earlier decisions, the Commission
      also considered payment services as part of retail and corporate banking (e.g. M.4844 – Fortis/ABN Amro Assets
      (2007), paras. 20-23 and 34; M.5384 – BNP Paribas/Fortis (2008), para. 12).
33    Form CO, paras. 480 to 510.
34    M.3894 – Unicredito / HVB, para.42 and M.2567 – Nordbanken / Postgirot, para. 37.
35    M.9744 – Mastercard/Nets (2020), paras. 110-114.
36    See e.g. M.8414 – DNB/Nordea/Luminor Group (2017), paras. 111-114.
                                                           8
 ---pagebreak---         date the market conditions are not homogenous across the Nordics in terms of pricing,
        regulation and/or standards and competitive landscape.37
5.2.3  The Commission’s assessment
(31)    The market participants largely confirm that the competitive dynamics for the provision of
        clearing services and A2A invoice payment services are not homogenous across the Nordic
        region (due to the existence of national regulations and currencies) 38 Respondents also
        indicate that A2A invoice payment services are typically provided on a national basis.39
        However, the pan-Nordic scope of the P27 project suggest that those markets are moving
        toward a broader regional dimension.40
(32)    Moreover, no element of the market investigation suggests that the Commission should
        depart from its previous practice regarding the likely national scope of the markets for the
        provision of payment services to end-customers in the present decision.
(33)    For the purpose of this decision, the Commission considers that the exact scope of the
        markets for the provision of (i) payment clearing services, (ii) A2A invoice payment
        services and (iii) payment services to end-customers can be left open since the Transaction
        does not give rise to serious doubts as to its compatibility with the internal market and with
        the EEA Agreement, regardless of whether markets are considered national or Nordic-wide.
6.      COMPETITIVE ASSESSMENT
6.1    Assessment of the horizontal effects
(34)    The Transaction gives rise to horizontal overlaps between P27’s and Bankgirot’s activities
        in the Swedish markets for clearing services and invoice payment services where Bankgirot
        is the incumbent provider and P27 will be a new entrant.
(35)    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 or the
        removal of a significant competitive constraint.
(36)    The Commission Guidelines on the assessment of horizontal mergers under the Council
        Regulation on the control of concentrations between undertakings (the “Horizontal Merger
        Guidelines”)41 identify ways in which concentrations between actual or potential
        competitors may significantly impede effective competition. The Horizontal Merger
        Guidelines indicate in particular that mergers involving a potential competitor may restrict
        effective competition by ways of horizontal anti-competitive effects, either coordinated or
        non-coordinated. In this framework, “competition” is understood to mean product and price
        competition (actual or potential), as well as innovation competition.42
(37)    The remainder of this Section will analyse the horizontal overlaps arising from the
        Transaction against this framework.
37    Form CO paras. 399-407 (clearing services), 435-438 (invoice payment services) and 511-514 (payment services).
38    Responses to questions 10 and 38 of questionnaire Q1 to market participants.
39    Responses to question 37 of questionnaire Q1 to market participants.
40    Responses to question 10.1 of questionnaire Q1 to market participants.
41    OJ C31, of 5 February 2004, p.5.
42    M.8084 - Bayer/Monsanto, para. 48.
                                                         9
 ---pagebreak--- 6.1.1      Payment clearing services
           (a)        Overview of the market and the Parties’ activities
(38)       Pre-Transaction, the markets for clearing services in Denmark, Finland and Sweden are
           characterised by the coexistence of various clearing systems at national level, as summarised
           in Table 2 below.
                                 TABLE 2 –     CLEARING SYSTEMS OVERVI EW IN THE NORDICS
                                                                                      Payment          Batch /       Type of
   Clearing system            Operator         Geographic scope        Currency
                                                                                        value          Instant      payments
  P27 Clearing System                                                 DKK, SEK,                          batch,
                                 P27         cross-border (Nordics)                      low                        A2A, card
   (not active to date)                                              EUR, (NOK)                         instant
   Bankgirot Clearing                                                                                    batch      A2A, card
                              Bankgirot        domestic (Sweden)         SEK             low
           BiR                                                                                          instant       A2A
Sum Clearing                                                                                            batch       A2A, card
Intraday Clearing            Mastercard       domestic (Denmark)         DKK             low            batch         A2A
Express Clearing                                                                                       instant        A2A
Siirto ARPP                   Automatia                                  EUR             low           instant        A2A
                                               domestic (Finland)
POPS                      Finance Finland                                EUR             high           batch         A2A
STEP2                                                                                    low            batch       A2A, card
RT1                        EBA Clearing       cross-border (SEPA)        EUR             low           instant        A2A
EURO1                                                                                    high           batch         A2A
NICS                                           domestic (Norway)         NOK          low, high         batch       A2A, card
                                Bits 43
Straks  2.044                                  domestic (Norway)         NOK             low           instant        A2A
Source: Form CO
(39)       As a result, an overlap arises between the future P27 Clearing System and Bankgirot’s
           existing payment clearings services (Bankgirot Clearing for the clearing of A2A and card
           batch payments and BiR for the clearing of instant A2A payments) in Sweden.
(40)       Market share estimates of the various existing providers of clearing services are provided in
           Table 3 below.
                  TABLE 3 – MARKET SHARES FOR THE PROVISION OF CLEARI NG SERVICES (volume, 2019)
                                                                         % of domestic                  % of cross-border
      Operator                     Clearing systems
                                                                       (retail) payments                (retail) payments
                                                           DENMARK
Mastercard               Sum, Intraday & Express Clearing                  [90-100]%                              -
EBA Clearing             STEP2, RT1 & EURO1                                      -                          [90-100]%
                                                            FI NLAND
EBA Clearing             STEP2, RT1 & EURO1                                [90-100]%                        [90-100]%
Finance Finland          POPS                                                [0-5]%                               -
Automatia                Siirto ARPP                                         [0-5]%                               -
                                                            SWEDEN
Bankgirot                Bankgirot Clearing & BiR                          [90-100]%                              -
EBA Clearing             STEP2, RT1 & EURO1                                      -                          [90-100]%
43       Bits is the operator of the payment clearing systems, while the underlying technical infrastructure (i.e. A2A CIS) is
         provided to Bits by Mastercard.
44       Norwegian banks started using Straks 2.0 during the spring of 2020.
                                                                10
 ---pagebreak---               TABLE 3 – MARKET SHARES FOR THE PROVISION OF CLEARI NG SERVICES (volume, 2019)
                                                                      % of domestic              % of cross-border
     Operator                  Clearing systems
                                                                    (retail) payments            (retail) payments
                                                        NORWAY
Bits                  NICS, Straks 2.0                                  [90-100]%                          -
EBA Clearing          STEP2, RT1 & EURO1                                      -                      [90-100]%
                                                    NORDIC REGION
Bits                  NICS, Straks 2.0                                   [40-50]%                          -
Bankgirot             Bankgirot Clearing & BiR                           [30-40]%                          -
Mastercard            Sum, Intraday & Express Clearing                   [10-20]%                          -
EBA Clearing          STEP2, RT1 & EURO1                                  [5-10]%                    [90-100]%
Automatia             Siirto ARPP                                          [0-5]%                          -
Finance Finland       POPS                                                 [0-5]%                          -
Source: Form CO
         (b)      The Parties’ views
(41)     The Parties consider that the Transaction will not give rise to a significant impediment to
         effective competition in payment clearing services, for two main reasons.45 First, they
         submit that the competitive conditions will largely remain unchanged, as Bankgirot is the
         incumbent provider of clearing services in Sweden, [P27’s future market strategy in relation
         to Bankgirot]. Once operational, the P27 Clearing System is expected to compete with EBA
         Clearing for domestic EUR-payments in Finland as well as cross-border EUR payments in
         Denmark, Sweden and Finland. Second, they argue that the introduction of P27 will lead to
         significant efficient gains, by (i) improving the quality of payments including allowing
         cross-country and cross-currency payments, (ii) benefiting from economies of scale, and (iii)
         providing a higher degree of security.
         (c)      The Commission’s assessment
(42)     The Commission’s investigation indicates that regardless of whether the clearing services
         relate to (i) low or high value payments;46 (ii) instant or batch payments, or (iii) A2A or card
         payments, the competitive dynamics remain similar. As such, the Commission’s assessment
         focuses on the overall market for payment clearing services, as well as on its potential sub-
         segment for domestic and cross-border payments.
(43)     First, the Commission’s investigation indicates that payment clearing services present the
         characteristics of natural monopolies, with one single provider of these services at national
         level (i) for domestic transactions (i.e. Mastercard in Denmark, Bankgirot in Sweden, EBA
         Clearing in Finland, and Bits in Norway) and (ii) for cross-border transactions (i.e. EBA
         Clearing throughout the Nordic region), as evidenced by the current situation (see Table 3).
         A large majority of respondents to the market investigation confirmed that payment clearing
         services present the characteristics of natural monopolies, in particular due to strong
         network effects.47 For instance, one respondent noted that “the biggest hurdle is the network
         effects - that you need a large amount of financial institutions using the layer before it
         becomes viable”. Another one confirmed that there is “only room for a few suppliers” due to
         economies of scale.48
(44)     Second, once fully operational, the P27 Clearing System will be able to process all types of
         payment transactions currently processed by the existing domestic clearing systems in
45     Form CO, paragraphs 604 to 629.
46     The Transaction does not give rise to overlap in the potential segment for the clearing of high-value payments
       where neither Bankgirot nor P27 is/will be active.
47     Responses to question 12 of questionnaire Q1 to market participants.
48     Responses to question 22.1 of questionnaire Q1 to market participants.
                                                          11
 ---pagebreak---        Sweden, Denmark and Finland. It is also expected to be substantially more innovative, faster
       and cheaper (owing largely to the abovementioned economies of scale) than the current
       domestic Layer 1 solutions, which are largely outdated.49 Respondents to the market
       investigation consider that, pre-Transaction, the markets for payment clearing services are
       not particularly competitive, especially in Denmark and Sweden.50 They highlight among
       the shortcomings of these domestic systems their outdated technology, high costs, as well as
       their limited scope (in terms of currency in particular) and lack of interoperability with other
       clearing systems.51
(45)   Third, as a result of the above, a large share of the market participants expect existing
       domestic clearing infrastructures (including Bankgirot in Sweden) to be progressively
       phased out and replaced by the P27 Clearing System. 52 For instance, one respondent noted
       that “once the [Tier 1] banks join P27, it will be hard for the other clearing system to afford
       the needed investments to adapt to a changing payment landscape”. A further respondent
       stated that “if [it is] possible for P27 to provide a viable alternative to local solutions, [it is]
       possible this will lead to an out-phasing of existing solutions”. Another one noted that “in
       the future […] the number of clearing systems in the Nordics will decrease because of P27
       in the long run”.53 Payment clearing services are expected to progressively migrate from the
       existing domestic solutions to the P27 Clearing System within 3-5 years according to a large
       majority of respondents.54 This future switch from domestic clearing systems to the P27
       Clearing System is also confirmed by the Parties’ internal documents, which foresee a full
       migration from domestic clearing systems to the P27 Clearing System within the short to
       medium term following the system’s launch.55
(46)   In this context, an overwhelming majority of respondents to the market investigation expect
       Bankgirot to be phased out irrespective its acquisition by P27.56 One respondent states for
       instance that the “instant payment infrastructure requires technical renewal in Sweden and
       standardisation, thus we believe Bankgirot system would be progressively phased out or
       replaced by some new solution”. In other words, while P27 and Bankgirot will be both
       active on the market for clearing systems in Sweden, the competition between their
       respective clearing systems would only be transitory and would unavoidably be resolved in
       favour of the P27 Clearing System.
(47)   Conversely, respondents to the market investigation expect P27 to coexist with pan-
       European clearing systems (namely EBA Clearing’s systems for EUR payments). EBA
       Clearing offers a SEPA-wide solution that goes beyond Finland and thus benefits itself from
       economies of scale. Virtually all respondents to the market investigation expect both
       systems to coexist in the Nordic region, which indicates the Transaction will lead to
       increased competition, in particular for cross-border payments, even if only at the margin.
       However, market participants generally consider that P27 and the pan-European clearing
       systems will be complementary rather than competitors, in particular as P27’s scope is
       limited to the Nordic region.57
(48)   It follows that the Transaction will not entail a reduction in the number of alternative
       clearing service providers available to customers neither in Sweden nor in the other Nordic
       countries, but rather the transfer of pre-existing monopolistic positions of domestic players
49   Responses to question 18 of questionnaire Q1 to market participants.
50   Responses to question 14 of questionnaire Q1 to market participants.
51   Responses to question 19 of questionnaire Q1 to market participants.
52   Responses to question 27.1 of questionnaire Q1 to market participants. This expectation is in line with the results
     of the Commission’s market investigation in M.9744 – Mastercard/Nets (see paras.76 of the decision).
53   Responses to question 27.1 of questionnaire Q1 to market participants.
54   Responses to question 27.3 of questionnaire Q1 to market participants.
55   See e.g. P27’s business plan, Section, Section 7 (“Implementation and migration timeline”) (Appendix 11 to the
     Form CO).
56   Responses to question 28 of questionnaire Q1 to market participants.
57   Responses to question 27.2 of questionnaire Q1 to market participants (e.g. “We believe P27 and Pan-Euro systems
     both having a position to coexist as complementary, mainly due to different scope (EUR vs Krona-currencies)”).
                                                         12
 ---pagebreak---          (including Bankgirot in Sweden) to a new regional player (P27). In this respect, the impact
         of the Transaction on the clearing market will be more limited in Finland than in the other
         Nordic countries. Indeed, in this Eurozone country, the domestic clearing systems (i.e.
         POPS and Siirto AARP) account for a marginal share of the national clearing market, the
         latter being dominated by pan-European clearing systems, which are expected to coexist
         with the P27 Clearing System.
(49)     Fourth, P27’s pricing power will be constrained and limited by the fact that, in the Nordics,
         access to payment clearing services is provided on fair reasonable and non discriminatory
         (“FRAND”) terms to market participants. As detailed in Section 6.2.3, this derives from
         regulatory requirements that currently apply to domestic payment systems (including
         Bankgirot) 58 and would equally apply to P27 post-Transaction, as confirmed by financial
         regulatory agencies in the relevant countries.
(50)     Finally, market participants did not express concerns in relation to horizontal overlaps in
         payment clearing services. In fact, the overwhelming majority of respondents to the market
         investigation expect the Transaction to have a positive or neutral impact on the Nordic
         markets for payment clearing services.59
         (d)         Conclusion
(51)     Based on the above considerations, the Commission considers that the Transaction does not
         raise serious doubts as to its compatibility with the internal market and with the EEA
         Agreement in relation to the market for the provision of payment clearing services in any
         Nordic country or the wider Nordic region.
6.1.2    A2A Invoice payment services (Layer 2)
         (a)         Overview of the market and the Parties’ activities
(52)     Pre-Transaction, the markets for A2A invoice payment services in Denmark, Finland,
         Sweden, and Norway are characterised by the existence of the payment solutions laid out in
         Table 4 below.
                                          TABLE 4 – A2A INVOICE PAYMENT SERVICES
                                                                         Batch and/or            Type of         Market shares
    Provider                 Solution            Type of service
                                                                            instant           transactions           (volume)
                                                             DENMARK
                       Betalingsservice             direct debit             batch                C2B                [60-70]%
Mastercard
                       Leverandørservice            direct debit             batch                B2B                 [5-10]%
Nets A/S               FIK e-invoice              credit transfer            batch              C2B B2B              [20-30]%
Others                                                                                                                 [0-5]%
                                                             FINLAND
Finance Finland        eLasku                     credit transfer            batch              C2B B2B              [80-90]%
Others                                                                                                              [10-20]%
58     An overwhelming majority of respondents confirmed that, in the Nordics, access is already granted pre-Transaction
       on FRAND terms (see Responses to question 15 of questionnaire Q1 to market participants).
59     Responses to question 31 of questionnaire Q1 to market participants. One respondent expects that in Finland, P27
       may lead to higher prices due to the smaller scale of P27 as opposed to the EBA Clearing system which is SEPA-
       wide, stating that “The Finnish community is currently leveraging a very competitive pricing due to the STEP2
       economies of scale by far and large higher than those achievable by the P27 platform. Moreover, compliance with
       SEPA reachability rules would be much more expensive migrating onto the P27 platform”. However, EBA Clearing is
       expected to remain active on the markets post Transaction, and Finland only amounts to a fraction of the SEPA. As a
       result, the Transaction is expected to increase competition in Finland. Another respondent expects a negative impact in
       relation to the vertical integration between Layer 1 and Layer 2 services, which is assessed in Section 6.2.2.
                                                                 13
 ---pagebreak---                                         TABLE 4 – A2A INVOICE PAYMENT SERVICES
                                                                        Batch and/or           Type of        Market shares
    Provider               Solution              Type of service
                                                                            instant        transactions          (volume)
                                                             SWEDEN
                     Autogiro                      direct debit              batch            C2B B2B        [50-60]-[60-70]%
Bankgirot
                     Bg E-invoice                  direct debit              batch            C2B B2B             [0-5]%
CTDs60               E-Faktura                    credit transfer            batch            C2B B2B            [10-20]%
Others                                                                                                      [10-20]-[20-30]%
                                                             NORWAY
                     eFaktura                     credit transfer      instant or batch       C2B P2P            [40-50]%
Mastercard           Avtalegiro                    direct debit              batch               C2B             [30-40]%
                     Autogiro                      direct debit              batch               B2B              [0-5]%
Others                                                                                                      [10-20]-[20-30]%
Source: Form CO
         (b)       The Parties’ views
(53)     The Parties consider that the Transaction will not give rise to a significant
         impediment to effective competition in A2A invoice payment services, for three main
         reasons:61 First, the competitive conditions will largely remain unchanged, as Bankgirot is
         an incumbent provider of A2A payment services in Sweden, and will continue competing
         with CTDs locally. Second, the P27 Bill Payment Solution will coexist and compete with the
         solutions currently available on the market (see Table 4). Third, the creation of the P27 Bill
         Payment Solution will lead to efficiencies including (i) the commercialisation of new and
         innovative services, including by enabling banks and payment service providers (“PSPs”) to
         create on top of it differentiated payment services offerings to end-customers (with e.g.
         different services, prices, terms and conditions) and (ii) further harmonization of the European
         payments landscape.
         (c)       The Commission’s assessment
(54)     As neither Bankgirot, nor P27 is or will be active in card-based invoice payment services,
         their activities only potentially overlap on the narrower possible market for A2A invoice
         payment services. On this possible market, it should be noted that, unless otherwise
         specified, the findings of the Commission, and in particular the results of the market
         investigation, do not materially differ depending on whether the A2A invoice payment
         services are segmented (i) by type of payment method (e.g. direct debit or credit transfer),
         (ii) by type of Transaction (e.g. B2B or C2B), (iii) between batch and instant payments and
         (iv) between invoice messaging and invoice payment services This is notably because (i)
         leading providers of A2A invoice payment services in the Nordics (e.g. Mastercard and
         Bankgirot) are generally active across various segments (covering e.g. different types of
         payment methods and transactions) and [P27’s future market strategy regarding payment
         methods and transactions]; (ii) some segments are converging (e.g. batch and instant
         payments, direct debit and credit transfer), and (iii) invoice messaging services represent the
         core part of invoice payment solutions and both are intrinsically linked.62 In view of the
         above, the Commission’s assessment will primarily focus on the possible market for A2A
         payment services.
(55)     First, the Commission found that A2A invoice payment services present, to some extent,
         characteristic of natural monopolies (due notably to strong network effects, large economies
60     Certified Technical Distributors for E-Faktura, i.e. an invoice payment solution affiliated to Nordea and Swedbank.
       The Parties submit that, in the context of E-Faktura, Nordea and Swedbank are not competitors of P27 and Bankgirot.
61     Form CO paras. 772 to 789.
62     See e.g. responses to questions 36, 41.12, 44.2, 44.3 of questionnaire Q1 to market participants.
                                                                14
 ---pagebreak---        of scale and high barriers to entry). This was confirmed by most market participants 63 and
       further evidenced by the fact that, already pre-Transaction, markets are typically dominated
        by one provider at national level, such as Bankgirot in Sweden (with a market share of
        [50-60]-[60-70]% that is likely underestimated - see below), Finance Finland in Finland
        ([80-90]%) and MasterCard in Denmark ([70-80]%) and Norway ([70-80]-[80-90]%). In
        this respect, the Commission notes that Table 4 likely underestimates the market shares of
        the abovementioned players, notably because the Parties have included in the category
        “others” ([10-20]-[20-30]%) non-interbank invoice payment solutions (i.e. closed solutions
        that are only provided for internal consumption, such Klarna or Qliro). This potential
        underestimation is also corroborated by the results of the market investigation where a
        number of market participants stressed the “current state of the domestic Nordic A2A
        invoice services appear to reflect a monopoly”.64 The Commission received similar feedback
        in Mastercard/Nets (2020) where, for example, several players stressed the quasi-monopoly
        of Mastercard’s (then Net’s) Betalingsservice in Denmark, attributing it a market share
        above [90-100]%.65
(56)    That being said, some respondents to the market investigation also indicated that (i) there is
        some room for competition and differentiation in the A2A invoice payment markets
        (e.g. “there is different needs for Layer 2 services depending the nature of companies (large
        international, utilities vs merchants, local small businesses) as well as different end user
        patterns to use channel applications/wallets. Thus, we see need or room for competitive,
        even specialized solutions to the market […]”);66 and that (ii) the implementation of the
       European directive on payment services67 has “opened up” the market allowing to some
        extent new players to challenge the incumbent providers in the coming years (e.g. “Few
       players in each market for the larger transaction part. However there are many different
       payment service providers have started to use the PSD2 directive”).68
(57)    Second, in line with the Parties’ claim, the market investigation confirmed that the P27 Bill
       Payment Solution is expected to be substantially more competitive than the current domestic
       solutions. Respondents to the market investigation generally consider that, pre-Transaction,
       invoice payment solutions are rather not competitive (especially in Denmark and Sweden).69
       Respondents highlight among the shortcomings of these domestic solutions their outdated
       technology, high costs, as well as their limited scope.70
(58)    Third, as a result of the above, the Commission found that the market for A2A invoice
       payment services is to a large extent expected to migrate from the existing A2A invoice
       payment solutions to the more innovative and cheaper P27 Bill Payment Solution, regardless
       of the type of A2A invoice payment solutions.
(59)    The Parties dispute the above arguing that the P27 Bill Payment Solution will coexist and
       compete with the solutions currently available on the market. However, this claim is
       contradicted by the Parties’ internal documents. For instance, a presentation dated March
       2021 details the P27 Bill Payment Solution’s “Base Case” according to which: [P27 Bill
       Payment Solution base case].71 The Parties’ claim is also contradicted by the fact that only a
63   Responses to questions 39 and 39.1 of questionnaire Q1 to market participants. Some market participants also
     stressed that the provision of A2A invoice payment services require some centralisation. For instance; a competing
     bank explained that: “in order to provide secure, cost efficient solutions with strong consumer protection in
     relatively small markets, you need at least some kind of centralized components”. Similarly, another player stated:
     “we see need to centralize parts of services scope”.
64   Responses to questions 39 and 39.1 of questionnaire Q1 to market participants.
65   M.9744 – Mastercard/Nets (2020), paras. 122-123.
66   Responses to questions 39 and 39.1 of questionnaire Q1 to market participants.
67   Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment
     services in the internal market (OJ L337, of 23.12.2015, p.35) (“PSD2”).
68   Responses to questions 39, 39.1 and 53 of questionnaire Q1 to market participants.
69   Responses to question 41 of questionnaire Q1 to market participants.
70   Responses to question 45 of questionnaire Q1 to market participants.
71   BoD - Attachment 7 (March 2021), p.5.
                                                          15
 ---pagebreak---        minority of market participants expects the existing domestic A2A invoice payment
       solutions to coexist with and to exert competitive constraints on the P27 Bill Payment
       Solution. In fact, most respondents consider that the existing domestic solutions will be
       either (i) progressively phased out and replaced by the P27 Bill Payment Solution (within
       the next 3-5 years) or (ii) complementary to the P27 Bill Payment Solutions (rather than
       exerting competitive constraints on the latter).72 More specifically, all respondents to the
       market investigation expect Bankgirot’s A2A invoice payment solutions to phase out
       irrespective of its acquisition by P27.73
(60)   It follows that, at national level, the Transaction will not entail a reduction in the number of
       alternative A2A invoice payment solutions available to customer neither in Sweden nor in
       the other Nordic countries, but rather the transfer of pre-existing dominant positions of
       domestic national players (including Bankgirot in Sweden) to a new regional player (P27).
       Similarly, at Nordic level, the phasing out of the existing domestic solutions and their
       replacement by the P27 Bill Payment Solution will not entail a reduction in the number of
       providers from a customer perspective: the existing domestic A2A invoice payment
       solutions have different national scope and, thus, do not compete against each other pre-
       Transaction.
(61)   Fourth, as explained in Section 6.2.4, the market investigation revealed that the P27 Bill
       Payment Solution will be subject to regulatory requirements of open access and FRAND
       terms. This will constrain P27 and limit its pricing power.
(62)   Finally, the Commission notes that market participants did not express concerns in relation
       to the horizontal overlaps in A2A invoice payment services in the Nordics.74 On the
       contrary, the vast majority of them expects the Transaction to have a positive impact on this
       market, in terms of “lower transaction costs”, “foster[ing] innovation”, possibly
       “attract[ing] other providers if they can look at the Nordics as one market”, “quality of
       service” and “security”.75
       (d)        Conclusion
(63)   Based on the above considerations, the Commission considers that the Transaction does not
       raise serious doubts as to its compatibility with the internal market and with the EEA
       Agreement in relation to the market for the provision of A2A invoice payment services in
       any Nordic country or the wider Nordic region.
72   Responses to questions 54 and 54.2 of questionnaire Q1 to market participants. For instance, a market participant
     stated that: “existing solutions will/should be progressively be phased out, though there can be significant
     differences timewise per country”. Another player indicated that “some of the national, legacy services may be
     phased out and replaced with P27”. The above market feedback is consistent with the Commission’s findings in
     M.9744 – Mastercard/Nets (2020) (see para. 131-139 of the decision).
73   Responses to questions 54 and 55 of questionnaire Q1 to market participants (e.g. “We expect to phase out
     Autogiro and e-faktura and replace them with a new solution”, “in Sweden, our bank services provider has already
     started the transition to the P27 Bill Payment Solution to replace Bankgirot for invoice payments services”, “the
     einvoice solution in Sweden will be phased out”).
74   For completeness, concerns related to P27’s ability to market other not-yet-defined Layer 2 services in the future
     that could have been developed independently by the banks and, in the absence of competition, offering them in
     higher prices given that the detailed pricing model for P27’s Layer 2 services has not been settled yet. However,
     both the Commission and the company expressing concern acknowledge that (i) those concerns are rather uncertain
     at this stage; (ii) the pricing concerns is not really merger specific; and that (ii) the Transaction would most likely
     lead to cost and efficiency advantages. Besides, should the above concerns materialise, national competition
     authorities could potentially intervene in the future, as such restriction would unlikely qualify as ancillary
     restrictions, notably because they would not be “necessary to the implementation” of the Transaction in the sense
     that the Transaction could be implemented in the absence of such restrictions.
75   Response to question 62 of questionnaire Q1 to market participants.
                                                             16
 ---pagebreak--- 6.2    Assessment of the vertical effects
6.2.1  Introduction
(64)   As previously explained, the Transaction gives rise to three vertical links between the
       provision of:
        −   Layer 1 services (upstream) and Layer 2 services (downstream);
        −   Layer 1 services (upstream) and payment services to end-customers (downstream); and
        −   Layer 2 services (upstream) and payment services to end-customers (downstream).
(65)   The Commission Guidelines on the assessment of non-horizontal mergers under the Council
       Regulation on the control of concentrations between undertakings (the “Non-Horizontal
       Merger Guidelines”)76 distinguish between two main ways in which vertical mergers may
       significantly impede effective competition, namely input foreclosure and customer
       foreclosure.
(66)   For a Transaction to raise input foreclosure competition concerns, the merged entity must
       have a significant amount of market power upstream.77 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 on competition downstream.78
(67)   For a Transaction to raise customer foreclosure competition concerns, it must be the case
       that the vertical merger involves a company which is an important customer with a
       significant degree of market power in the downstream market. 79 In assessing the likelihood
       of an anticompetitive customer foreclosure scenario, 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 its upstream rivals, (ii) whether it would have the
       incentive to reduce its purchases upstream, and (iii) whether a foreclosure strategy would
       have a significant detrimental effect on consumers in the downstream market. 80
(68)   In the remainder of this Section, the Commission will analyse the vertical links arising from
       the Transaction against the above framework.
6.2.2  Vertical link between the Layer 1 and Layer 2 markets
(69)   The Transaction gives rise to a vertical link between the Layer 1 services (payment clearing
       services) provided by P27 (and Bankgirot) (upstream) and the Layer 2 services (value added
       payment services, such as invoice payment services) provided by P27 including Bankgirot
       (downstream).
       (a)       The Parties’ views
(70)   The Parties do not discuss in detail the vertical link arising from the Transaction between the
       provision of Layer 1 and Layer 2. They only submit that the P27 Bill Payment Solution will
       be “rail-agnostic”, i.e. that Layer 2 services can be processed by clearing systems other than
76    OJ L24, 29.1.2004, p.1.
77    Non-horizontal Merger Guidelines, para. 35.
78    Non-horizontal Merger Guidelines, para. 32. Each of these points will be analysed separately although the
      Commission recognises that they are intertwined.
79    Non-horizontal Merger Guidelines, para. 61.
80    Non-horizontal Merger Guidelines, para. 59.
                                                       17
 ---pagebreak---         the P27 Clearing System. In other words, the P27 Clearing System and P27 Bill Payment
        Solution will not be integrated solutions. […].81
        (b)        The Commission’s assessment
Assessment of the risk of input foreclosure
(71)    During the pre-notification phase, one market participant contacted by the Commission
        expressed concerns about the Transaction claiming that the vertical link between the Layer 1
        and Layer 2 markets arising from the Transaction would lead to a risk of foreclosure of
        third-party providers of Layer 2 services (input foreclosure). In particular, this participant
        feared that providers of Layer 2 services may be excluded (i) from future opportunities to
        supply P27 with technical services related to the Layer 2 services and (ii) from having
        access to the P27 Clearing System (Layer 1) to provide Layer 2 services. According to the
        company; the above risk of foreclosure is mainly due to three factors:
        a.    The increased vertical integration resulting from the Transaction, with P27 having the
              ability and incentive to offer integrated Layer 1 and Layer 2 services/solutions, which
              could lead to the creation of an integrated ecosystem and, thus, prevent third-party
              providers to compete effectively with P27 and the Parent Companies;
        b.    The choice of Mastercard as P27 partner for the Layers 1 and 2, which would enable
              Mastercard to be present throughout the entire payment value chain in the Nordics (both
              for card and A2A payments). According to this company, this constitutes a major
              competitive advantage and a unique market position that may enable Mastercard to
              prevent third-party provider to compete on the same level playing field for the provision
              of Layer 2 services in the Nordics;
        c.    The consolidation of a large share of the payment volumes at pan-Nordic level resulting
              from the Transaction and the partnership with Mastercard, which would make difficult
              for any players willing to enter the Nordic markets to build sufficient volumes, which
              would be all the more problematic considering that, in the payment value chain,
              profitability depends on the volumes of transactions processed.
(72)    The market investigation did not confirm the above claims and, for the reasons set out
        below, the Commission concludes that the vertical link arising from the Transaction
        between the provision of Layer 1 services (upstream) and Layer 2 services (downstream)
        does not raise serious doubts as to the compatibility of the Transaction with the internal
        market and with the EEA Agreement.
(73)    First, as previously indicated, the Commission found that access conditions to the Layer 1
        for PSPs are protected by the existence of regulatory requirements of open access and
        FRAND terms applicable to the P27 Clearing System (see Section 6.2.3), which limits P27’s
        ability to engage in a foreclosure strategy.
(74)    Moreover, the evidence on file suggests that, in terms of ability to foreclose, the situation
        post-Transaction is largely similar to the situation pre-Transaction:
        a.    It is not clear to what extent the Transaction will materially increase the level of vertical
              integration between the Layer 1 and Layer 2 services in the Nordics. The feedback
              received from the market in that respect is very mixed. 82 In particular, several market
              participants stressed that, already pre-Transaction, in Sweden, the Layer 1 and Layer 2
              markets are dominated by the same player (i.e. Bankgirot) and that the same applies in
81    Form CO, paras. 247 and 266. For instance, the Parties explain that P27’s future Layer 2 offering could potentially
      include fraud monitoring solutions and that such solutions would unlikely be rail-agnostic as they would need to
      use the data that is being processed via the P27 Clearing System.
82    Responses to question 60 of questionnaire Q1 to market participants.
                                                            18
 ---pagebreak---              Denmark and Norway with Mastercard (see Tables 3 and 4). As regards Finland, the
             Commission notes that, although there is no vertically integrated player pre-
             Transaction, it is not clear that the vertical integration of P27 will have a material
             impact in this Eurozone country where the upstream Layer 1 market is currently
             dominated by pan-European clearing systems, which are expected to coexist with the
             P27 Clearing System rather being phased out (see Section 6.1.1 and Table 3). The
             Commission also notes that, in contrast to its initial claims, the same company which
             initially raised concerns stated in response to the Commission’s questionnaire that it
             “does not know” whether the Transaction would increase the level of integration
             between the two layers as it will depend on various factors (such as the “rule books for
             Layer 2 services”);83
       b.    a large majority of respondents considers the barriers to entry in the Nordic markets for
             Layer 2 services will not increase as a result of the Transaction.84 In this respect, the
             Commission also notes that, the company which raised concerns did not reiterate its
             initial claim according to which the consolidation of the Nordic payment volumes
             resulting from the Transaction will increase the barriers to entry. In contrast, the same
             company stated in response to the Commission’s request for information that it “does
             not know” whether the Transaction would increase the barriers to entry (with no
             mention of the payment volume consolidation). 85
(75)   Second, in terms of incentives to foreclose, the Commission notes that internal documents of
       the Parties indicate that P27 will not have an incentive to engage in a foreclosure strategy.
       P27’s business plan states that: [P27’s future market strategy regarding Layer 2 services].86
       In addition, according to P27’s Business Plan, the Layer 2 services falling within the scope
       of P27 will only include value-added payment services “that benefit from a Nordic scale and
       scope” and that all other value-added payment services build on top of the P27 Clearing
       System, constitute “Layer 3 services” that [P27’s future market strategy regarding services]
       and whose development [P27’s future market strategy regarding services].87
(76)   Moreover, the company expressing concerns in pre-notification claims that the Parties may
       favour Mastercard for the provision of technical services relating to P27’s future Layer 2
       solutions, which could lead to the foreclosure of third-party providers. In this respect, the
       Commission observes that, even if there was the ability to foreclose, it is not evident that the
       Parties would have any incentive to engage in such a foreclosure strategy, which would
       mainly benefit Mastercard, rather than the Parent Companies. Indeed, the Parent
       Companies’ incentive is instead to choose the most cost-efficient and highest quality
       technical service provider for P27, to increase the attractiveness of the platform. In any
       event, the Commission considers that the choice of Mastercard as P27’s partner (for the
       provision of the underlying infrastructure) is the result of P27’s procurement process
       (including an open competitive tender process in relation to the Layer 1) and, therefore, not
       merger specific.
(77)   Finally, as regards the effects, the Commission notes that market participants did not echo
       the concerns raised in the pre-notification phase.88 Market participants do not expect the
       Transaction to have a negative impact on the Layer 2 market. In fact, most of them
       anticipate efficiencies. Moreover, several market participants stressed that competition in the
       Layer 2 market is expect to increase in the coming years as a result of the implementation of
       the PSD2.
83   Responses to question 60 of questionnaire Q1 to market participants.
84   Responses to question 51 of questionnaire Q1 to market participants.
85   Responses to question 60 of questionnaire Q1 to market participants.
86   Form CO, Appendix 11 (emphasis added).
87   Form CO, Appendix 11 (emphasis added), Sections 4.3 and 13. See also Section 4.2, which states that P27 will
     only offer Layer 2 services [P27’s future market strategy regarding Layer 2 services].
88   Only one respondent raised similar concerns, in particular linked to the choice of Mastercard as the technical
     partner of P27, which, as mentioned is not merger specific.
                                                          19
 ---pagebreak--- Assessment of the risk of customer foreclosure
(78)    The Commission considers that no risk of customer foreclosure arises from the vertical link
        between the provision of Layer 1 services (upstream) and Layer 2 services (downstream) in
        the Nordics given (i) the lack of upstream competitors to foreclose due to the monopolistic
        nature of the upstream Nordic Layer 1 markets (see Section 6.1.1) and (ii) the fact that none
        of the respondents to the market investigation raised concerns related to such a risk.
(c)     Conclusion
(79)    In view of the above considerations, the Commission conclude that the vertical link between
        the provision of Layer 1 services (payment clearing services) (upstream) and the provision
        of Layer 2 services (value added payment services, such as invoice payment services)
        (downstream) does not raise serious doubts as to the compatibility of the Transaction with
        the internal market and with the EEA Agreement.
6.2.3   Vertical link between the (upstream) supply of clearing services (Layer 1) and the
        (downstream) supply of payment services to end-customers
(80)    The Transaction gives rise to a vertical link between the provision of payment clearing
        services (Layer 1) by P27 and Bankgirot (upstream) and the provision of payment services
        to end-customers by the Parent Companies (downstream).
        (a)       The Parties’ views
(81)    The Parties submit that the above vertical link does not raise any risk input foreclosure for
        the following main reasons.89
(82)    First, the Parties would not be able to foreclose downstream rivals on the grounds that (i)
        the P27 Clearing System will be subject to open access and neutrality regulatory
        requirements; (ii) the Transaction documents expressly provide that all PSPs fulfilling
        objective criteria (i.e. the eligible direct participants)90 shall be granted access to the P27
        Clearing System on objective, FRAND terms (including in relation to the pricing) and that
        all of them shall be treated equally irrespective of whether it is a Parent Company or a third
        party;91 and (iii) the P27 Clearing System will be operated based on an open rulebook owned
        and managed by an independent third party association, namely the Nordic Payments
        Council (the “NPC”).92
(83)    Second, the Parties argue that the implementation of a customer foreclosure strategy would
        not be in their interest as it could undermine the success of the P27 Clearing System, whose
        business case relies on third-party volumes to achieve network effects and scale efficiencies,
        which is the reason why the participation model of the P27 Clearing System has been
        designed as being as inclusive as possible.
(84)    Finally, the Parties claim that the provision of clearing services has a limited impact on the
        downstream market for the provision of payment services to end-customers. In their view,
89    Form CO, paras. 604 and ff. (The Parties do not discuss the risk of customer foreclosure.
90    The Parties explained that the participation to the P27 Clearing System will be open to all entities that fulfil
      objective access criteria (such as compliance with the PSD2 and with the regulatory requirements in relation to
      capital and liquidity), which are needed to protect the payment systems against financial risks. The market players
      that do not fulfil the above participation requirements can be an indirect participant, relying on a direct participant
      to access the P27 Clearing System, under terms and conditions agreed bilaterally.
91    P27 SHA, Articles 2.4.1 and 2.4.3 (Appendix 11 to the Form CO). See also Schedule 2.4 to the P27 SHA, Art. 6:
      “the Company [P27] will under the participation agreement commit to apply the same unit transaction fees for all
      Participating Entities”.
92    See P27 SHA, Preamble recital I (Appendix 11 to the Form CO): “The rulebooks will be managed by a separated
      rulebook management forum, fully detached from the governance of the Company [P27], to ensure openness
      towards all interested payment service providers and other relevant stakeholders”.
                                                            20
 ---pagebreak---         clearing services are underlying services offered to all PSPs, which do not constitute a
        differentiating parameter of competition on the downstream market and, thus, do not impact
        the end-customers’ choice of PSPs. The Parties further submit that the competitive
        conditions on the upstream Layer 1 market will remain unchanged post-Transaction and that
        the establishment P27 will lead to significant efficiencies for Layer 1 customers (e.g. improved
        costs and quality of services) (see Section 6.1.1).
        (b)       The Commission’s assessment
Assessment of the risk of input foreclosure
(85)    The market investigation generally confirms the Parties’ claims and, for the reasons set out
        below, the Commission concludes that the vertical link arising from the Transaction
        between the provision of payment clearing services (upstream) and payment services to end-
        customers (downstream) does not raise serious doubts as to the compatibility of the
        Transaction with the internal market and with the EEA Agreement.
(86)    First, the Commission found that the Parties would not have the ability to foreclose the
        access to the P27 Clearing System given the existence of open access and FRAND
        regulatory requirements applicable for the provision of payment clearing services in the
        Nordics. This was confirmed by both the market participants and the Nordic financial
        regulators.93 More specifically:
        −    in Sweden, (i) the Swedish Securities Markets Act (Chapter 20) and the Swedish
             Payment Services Act (Chapter 7) provide respectively that (i) clearing systems
             established under Swedish law (such as the Bankgirot and P27 clearing systems) are
             subject to open access and neutrality requirements and (ii) entities responsible for a
             payment system must ensure that their participation requirements are objective, non-
             discriminatory and proportionate. The Swedish FSA expressly confirmed that above
             requirements are already applicable today to Bankgirot and will also apply to P27;94
        −    in Denmark, pursuant to the Danish Capital Market Act, clearing systems registered at
             national level are subject to open access and FRAND requirements, under the
             supervision and oversight of the Danish central bank. Being a Swedish company, P27 is
             not automatically subject to the above domestic legislation. However, the Danish central
             bank indicated that, “in the negotiations between P27 and Danmarks Nationalbank, it
             has [already] been agreed that P27’s clearing of payments in Denmark will be subject
             to Danish law”. In other words, P27 has to register in Denmark and to obtain a Danish
             clearing license, and will thus become subject to the Danish open access and FRAND
             requirements;95
        −    in Finland, the Finnish regulator explained that the Layer 1 activities of P27 will be
             subject to the European Central Bank’s oversight principles, including in particular
             principle 18 on “Access and participation requirements” pursuant to which “[a financial
             market infrastructure] should have objective, risk-based, and publicly disclosed criteria
             for participation, which permit fair and open access”.96 Similarly, the Parties also
             submit that P27 will be subject to open access and FRAND requirement laid down in
             Article 16 of the Regulation of the European Central Bank n° 795/2014 on oversight
             requirements for systemically important payment systems (applying to all systemically
             important payment systems in the Eurozone); and
93    Responses to question 15 of questionnaire Q1 to market participants and Responses to question 1 of the
      questionnaires to the Nordic financial regulators dated 07.06.2021.
94    Responses to question 1 of the questionnaires to the Nordic financial regulators dated 07.06.2021.
95    Responses to question 1 of the questionnaires to the Nordic financial regulators dated 07.06.2021.
96    Responses to question 1 of the questionnaires to the Nordic financial regulators dated 07.06.2021.
                                                            21
 ---pagebreak---         −     in Norway, the Norwegian Payment Systems Act (Sections 5-2 and 5-3) implementing
              the PSD2 provides that rules on access of authorised or registered PSPs to payment
              systems shall be objective, non-discriminatory and proportionate and not inhibit access
              more than is necessary to safeguard against specific risks. The above rules do not apply
              to payment systems designated by Norway pursuant to the Settlement Finality Directive
              98/26/EC (P27 could potentially fall within this category). However, in such a case, the
              regulation still requires (direct) participants in the designated payment system to allow
              requesting PSPs (that are not direct participants) to pass transfer orders through the
              designated payment system in an objective, proportionate and non-discriminatory
              manner.97
(87)    Moreover, almost all respondents confirmed that the NPC, i.e. the Swedish non-profit
        association founded by national banking associations owning and managing the scheme
        rulebook (i.e. the set of rules regulating the payment scheme, including in terms of access to
        the system) used in the P27 Clearing System, is sufficiently independent from the Parties.98
(88)    As a result of the above, the vast majority of market participant considers that, post-
        Transaction, the Parent Companies would not have the ability to restrict the access of
        competing banks and PSPs to the P27 Clearing System.99
(89)    Second, the evidence in the Commission’s file largely confirms that the Parent Companies
        would have no incentive to engage in input foreclosure as it could undermine the success of
        the P27 Clearing System, which depends on the combined volumes of the Parent
        Companies, third-party banks and other PSPs to achieve the optimal network effects and
        scale efficiencies. This is corroborated by the Parties’ internal documents, including P27’s
        business plan, which states that: [P27’s Participation model strategy].100 For instance, the
        Parties explained that to avoid any preferential treatment of the Parent Companies, the P27
        Clearing System will apply to all customers a cost-plus distribution model, which will be
        fully transparent (with publicly available principles and computation methodology). In line
        with the above, the vast majority of respondents consider that the Parties would have no
        incentive to restrict the access to the P27 Clearing System to competing banks and PSPs.101
(90)    Finally, none of the market participants expressed specific concerns about the above vertical
        link. On the contrary, virtually all of them expect the Transaction to have a positive or
        neutral impact on the concerned markets and on their business.102
Assessment of the risk of customer foreclosure
(91)    As illustrated in Table 5, the Parent Companies are amongst the largest banks in the Nordics
        and account together for a very large share of the downstream Nordic markets for the
        provision of payment services to end-customers.103
97    Responses to questions 15.4 and 15.5 of questionnaire Q1 to market participants.
98    Responses to question 30 of questionnaire Q1 to market participants. See also (i) the preamble of P27 SHA,
      recital I: “the rulebooks will be managed by a separated rulebook management forum, fully detached from the
      governance of the Company [P27], to ensure openness towards all interested payment service providers and other
      relevant stakeholders.” (Appendix 11 to the Form CO) and (ii) P27’s business plan referring to the “clear
      separation of scheme management (NPC) and operational activities (P27)” and to the fact that NPC is “an
      independent entity […] separate from the P27 Nordic Payments Platform” (Appendix 11 to the Form CO).
99    Responses to question 15 of questionnaire Q1 to market participants.
100   Appendix 11 to the Form CO.
101   Responses to question 30 of questionnaire Q1 to market participants.
102   Responses to questions 31, 63, 64 of questionnaire Q1 to market participants.
103   Most of the Parent Companies with the exception of Danske Bank, and Handelsbanken (save for Finland) are
      unable to provide marker shares segmented between corporate and retail payments. The Parties confirmed that to
      the best of their knowledge (i) SEB, Swedbank, OP and Nordea’s market shares would not materially differ from
      those for the overall market for domestic transfers in each of the relevant countries and (ii) Handelsbanken’s
      market share in Finland would not materially differ from those for domestic transfers in Finland. This is confirmed
                                                           22
 ---pagebreak---                   TABLE 5 – MARKET SHARES FOR PAYMENT SERVICES TO END- CUSTOMERS (2019) 104
                         Denmark                   Finland                     Sweden                   Norway
   Provider
                 Domestic International Domestic International Domestic           International   Domestic International
Danske           [30-40]%      [20-30]%     [10-20]%    [10-20]%       [0-5]%        [0-5]%       [0-5]%       [0-5]%
Bank
Handelsbanken [0-5]%            [0-5]%       [0-5]%      [0-5]%       [10-20]%     [10-20]%       [0-5]%       [0-5]%
Nordea           [10-20]%      [20-30]%     [20-30]%    [20-30]%      [10-20]%     [10-20]%      [10-20]%     [5-10]%
OP                    -             -       [30-40]%    [30-40]%          -             -            -            -
SEB                [0-5]%       [0-5]%       [0-5]%      [0-5]%       [10-20]%     [10-20]%       [0-5]%       [0-5]%
Swedbank           [0-5]%       [0-5]%       [0-5]%      [0-5]%       [30-40]%     [20-30]%          -            -
    combined     [50-60]%      [50-60]%     [80-90]%    [70-80]%      [80-90]%     [70-80]%      [10-20]%    [10-20]%
Others           [50-60]%      [40-50]%     [20-30]%    [20-30]%      [10-20]%     [20-30]%      [80-90]%    [80-90]%
Source: Form CO, Appendix 33
(92)      However, the Commission notes that (i) given the monopolistic nature of the upstream
          Nordic clearing markets (see Section 6.1.1), there would be no upstream competitors to
          foreclose and that (ii) none of the respondents to the market investigation raised concerned
          related to such a risk. Therefore, the Commission considers that no risk of customer
          foreclosure arise from the vertical link between the provision of clearing services (upstream)
          and the provision of payment services to end-customers (downstream) in the Nordics.
          (c)        Conclusion
(93)      In view of the above considerations, the Commission concludes that the vertical link
          between the provision of payment clearing services by P27 including Bankgirot (upstream)
          and the provision of payment services to end-customers by the Parent Companies
          (downstream) does not raise serious doubts as to the compatibility of the Transaction with
          the internal market and with the EEA Agreement.
6.2.4     Vertical link between the (upstream) supply of A2A invoice payment services (Layer 2) and
          the (downstream) supply of payment services to end-customers
(94)      The Transaction gives rise to a vertical link between the A2A invoice payment services
          provided by P27 and Bankgirot (upstream) and the payment services provided by the Parent
          Companies to end-customers (downstream).
          (a)        The Parties’ views
(95)      The Parties submit that the above vertical link does not raise any risk input foreclosure for
          the following main reasons.105
(96)      First, they argue that they would be unable to foreclose third-party banks and PSPs that are
          willing to offer to their end-customers payment services based on the P27 Bill Payment
          Solution. The Parties explain that, under the Transaction documents, access to P27’s Layer 2
          services (including the P27 Bill Payment Solution) shall be provided on FRAND terms
          (including in relation to pricing) to all PSPs fulfilling objective criteria (i.e. eligible direct
          participants), which shall be treated equally irrespective of whether they are a Parent
          Company or a third party.106 The Parties also stress that the requirements defining the
          eligible direct participants will be objectively justified, i.e. P27 will only apply legitimate
          regulatory and technical requirements that are strictly necessary to secure the integrity and
        by the fact that where the information (for Danske Bank and Handelsbanken) is provided, the market shares of the
        companies generally do not differ materially.
104     In terms of volume of transaction.
105     Form CO, paras. 772 and ff. The Parties do not discuss the risk of customer foreclosure.
106     P27 SHA, Articles 2.4.1 and 2.4.3, as well as Schedule 2.4 (Appendix 11 to the Form CO).
                                                            23
 ---pagebreak---         security of P27’s Layer 2 solutions.107 Moreover, the Parties stated that the regulatory
        requirement of open access and FRAND terms applicable to the Layer 1 (see Section 6.2.3)
        will also apply to Layer 2 services related to the P27 Clearing System. That being said,
        according to them, not all the Layer 2 services provided by P27 will automatically fall
        within this category as it will depend on an analysis of the specific service, which will be
        subject to discussions with the relevant financial regulators.
(97)    Second, the Parties further submit that the competitive conditions on the upstream Layer 2
        markets will in fine remain unchanged post-Transaction (see Section 6.1.2).
(98)    Finally, it is also claimed that the introduction of the P27 Bill Payment Solution will lead to
        significant efficiencies (e.g. in terms of costs and quality of services) (see Section 6.1.2). In
        particular, the Parties submit that the P27 Bill Payment Solution will be pro-competitive as
        it will enable its (direct and indirect) participants (i.e. banks and other PSPs) to create on top
        of it new and differentiated payment services offerings to end-customers (with e.g. different
        services, prices, terms and conditions), which will increase competition on the downstream
        market for payment services.
        (b)        The Commission’s assessment
Assessment of the risk of input foreclosure
(99)    The market investigation generally confirms the Parties’ claims and, for the reasons set out
        below, the Commission concludes that the vertical link arising from the Transaction
        between the provision of A2A invoice payment services (upstream) and payment services to
        end-customers (downstream) does not raise serious doubts as to the compatibility of the
        Transaction with the internal market and with the EEA Agreement.
(100)   First, the Commission found that the Parties would not have the ability to restrict the access
        of third parties to P27’s Layer 2 services (including the P27 Bill Payment Solution). Indeed,
        the market investigation revealed that, post-Transaction, P27 will be subject to regulatory
        obligations requiring it to provide its Layer 2 services (including the P27 Bill Payment
        Services) to all PSPs fulfilling objective criteria (i.e. eligible direct participants) on FRAND
        terms. This was confirmed by virtually all respondents, including the Nordic financial
        regulators.108 In particular:
        −     in Sweden, the Swedish FSA expressly confirmed that all Layer 2 services performed by
              a clearing organisation (including the P27 Bill Payment Solution) are considered as
              “activities related to the clearing organisation” and, thus, subject to the above open
              access and FRAND requirements.109 In case of breach of the above requirements, the
              Swedish FSA could impose penalty fees to P27 or, in case of a very serious
              infringement, decide to withdraw P27’s clearing license;110
107   The market players that do not fulfil the above participation requirements can be indirect participants, relying on a
      direct participant to access P27’s Layer 2 solution, under terms and conditions agreed bilaterally.
108   Responses to questions 42, 43.1 and 57 of questionnaire Q1 to market participants and Responses to the
      questionnaires to the Nordic financial regulators dated 07.06.2021, 16.06.2021 and 22.06.2021.
109   Responses to the questionnaires to the Nordic financial regulators dated 07.06.2021 (question 2), 16.06.2021
      (question 1) and 22.06.2021 (question 1). The Parties do not dispute the above but submit that not all the Layer 2
      services provided by P27 will automatically fall within this category and that it “will depend on an analysis of the
      specific service, which will be subject to discussions with the relevant financial regulators” (Form CO, fn. 294,
      emphasis added). This caveat notably reflects the fact that the scope and the content of the future Layer 2 services
      of P27 are still rather uncertain as they are not precisely defined yet. That being said, the Commission notes that
      the Swedish FSA expressly indicated that the above open access and FRAND requirements already apply to
      Bankgirot’s Layer 2 services and will apply to the P27 Bill Payment Solution.
110   Responses to question 1 the questionnaires to the Nordic financial regulators dated 22.06.2021.
                                                            24
 ---pagebreak---         −    in Denmark, Finland and Norway, the existence of domestic regulatory requirements of
             open access and FRAND terms applicable to P27’s Layer 2 services is less clear.111 In
             particular, the Danish regulators indicated that P27 Layer 2 services will be subject to
             the national requirement of open access and FRAND applicable to the Layer 1 “in the
             event that the Level 2 services are considered payment systems”,112 which will depend
             on the exact scope and content of the Layer 2 services offered by P27. The Finnish FSA
             indicated that, although there is no domestic legislation regulating the provision of
             Layer 2 services, “if there were any reason to believe that the access were not open”, it
             could and would “take actions”.113
(101)   In any event, the evidence on file indicates that the Swedish regulatory requirements of open
        access and FRAND terms applicable to P27’s Layer 2 services will most likely be
        implemented by P27 in all the Nordic countries where P27 is active, including Denmark,
        Finland and potentially Norway. This argument raised by the Parties is corroborated by the
        feedback received from the Nordic FSAs.114 This is because, although, from a strict legal
        point of view, the Swedish regulation is only applicable in Sweden, in practice, it is very
        unlikely that P27 would apply different terms and conditions depending on the Nordic
        countries knowing that the purpose of P27 is precisely to establish a pan-Nordic cross-
        border payment platform.
(102)   In addition, the market investigation revealed that the Nordic financial regulators are closely
        cooperating for the supervision and oversight of P27’s Layer 1 and Layer 2 services. For
        instance, the Danish central bank explained that “the Nordic authorities have already met
        several times and are expected that a formalised cooperation will be developed after P27
        has obtained their licence in Sweden”. Similarly, the Finnish FSA explained that it is
        “participating in the Nordic supervision and oversight cooperation” and that “through this
        cooperation with our Nordic colleagues FIN-FSA could take action [if P27’s Layer 2 were
        not open to all market participants]”.115
(103)   As a result of the above, a large majority of market participants considers that, post-
        Transaction, the Parent Companies would not have the ability to restrict the access of
        competing banks and PSPs to the P27 Bill Payment Solution.116
(104)   Second, in terms of incentives, most respondents (including both market participants and
        Nordic financial regulators) indicated that it would not be in the Parent Companies’ interest
        to restrict the access to the P27 Bill Payment Solution.117 For instance, competing banks
        stated that “There have to be non-discriminatory terms if P27 wants to succeed” and that
        “the P27 solution relies and scale as the enabler for profitability. […] there would be little
        incentive to restrict access to other than the founders of P27”.118 Similarly, Nordic financial
        regulators indicated that “neither P27 nor its parent companies will likely have any incentive
        to restrict access to their own solution” and that “it is in P27’s own interest to increase the
        volume in the system, i.e. they do not seem to have an interest in restricting the access”.119
        The Parent Companies’ incentives to open up P27’s Layer 2 services is also illustrated by
111   Responses to questions 42 of questionnaire Q1 to market participants and Responses to the questionnaires to the
      Nordic financial regulators dated 07.06.2021, 16.06.2021 and 22.06.2021.
112   Responses to question 2 of the questionnaires to the Nordic financial regulators dated 07.06.2021.
113   Responses to the questionnaires to the Nordic financial regulators dated 07.06.2021 (question 2) and 22.06.2021
      (question 1). In such a case, the intervention of the Finnish FSA would take place in the context of the Nordic
      supervision and oversight cooperation (see recital (102)).
114   Responses to the questionnaires to the Nordic financial regulators dated 07.06.2021 (question 1) and 22.06.2021
      (question 2).
115   Responses to questionnaires to the Nordic financial regulators dated 07.06.2021 (question 3) and 22.06.2021
      (question 1).
116   Responses to question 57 of questionnaire Q1 to market participants.
117   Responses to question 57 of questionnaire Q1 to market participants and Responses to question 2 of the
      questionnaires to the Nordic financial regulators dated 07.06.2021.
118   Responses to question 57 of questionnaire Q1 to market participants.
119   Responses to question 2 of the questionnaires to the Nordic financial regulators dated 07.06.2021.
                                                            25
 ---pagebreak---         the Transaction documents, pursuant to which access to these services shall be provided on
        FRAND terms to all eligible direct participants, with no distinction between the Parent
        Companies and third parties.120
(105)   Third, the Commission found the Parties are currently envisaging to restrict the possibility
        for some specific PSPs, namely non-banks PSPs, to become direct participants of the P27
        Bill Payment Solution. Under this so-called “coupled model”, non-bank PSPs would only be
        able to become indirect participants (i.e. relying on an intermediary that is a direct
        participant). According to internal documents, this coupled model could potentially have a
        negative impact on competition (in terms e.g. of innovation and the P27 Bill Payment
        Solution’s uptake and market reach).121 However, the market investigation revealed that such
        restrictions (i) might be objectively justified notably to ensure sufficient protections against
        fraudulent or illegal payments (this claim raised by the Parties was largely confirmed by
        both market participants and the Nordic financial regulators);122 and (ii) would lack merger-
        specificity since, already pre-Transaction, non-banks PSPs may be subject to similar
        restrictions (both with respect to Layer 1 and Layer 2 services), which, under certain
        circumstances, may be authorised by the regulatory frameworks applicable in the Nordics
        (including PSD2).123 In any event, it is not clear that indirect participants would be less
        competitive than direct participants. The feedback received during the market investigation
        is very mixed in that respect. In particular, a non-bank PSP stated that “market competition
        gives enough options for indirect participants to partner for P27 services, and thus will
        secure competitive position”.124
(106)   Finally, subject to very limited exceptions, no market participants expressed specific
        concerned about the above vertical link. On the contrary, most of them expect the
        Transaction to have a positive impact on the concerned markets and on their business.125
Assessment of the risk of customer foreclosure
(107)   The Commission considers that no risk of customer foreclosure arise from the vertical link
        between the provision of A2A invoice payment services (upstream) and the provision of
        payment services to end-customers (downstream) in the Nordics. Indeed, although the
        Parent Companies account together for a very large share of the downstream markets (see
        Table 5 above), the Commission notes that (i) given the monopolistic nature of the upstream
        Nordic market for A2A invoice payment services (see Section 6.1.2), there would be no
        upstream competitors to foreclose and that (ii) none of the respondents to the market
        investigation raised concerns related to such a risk.
        (c)       Conclusion
(108)   In view of the above considerations, the Commission conclude that the vertical link between
        the provision of A2A invoice payment services by the JV (upstream) and the provision of
        payment services to end-customers by the Parent Companies (downstream) does not raise
        serious doubts as to the compatibility of the Transaction with the internal market and with
        the EEA Agreement.
120   P27 SHA, Articles 2.4.1 and 2.4.3, as well as Schedule 2.4 (Appendix 11 to the Form CO).
121   20201211 Advisory Board v2, p.17 2021-02-05 Advisory Board v1, p.5.
122   Responses to question 59 of questionnaire Q1 to market participants and Responses to question 2 of the
      questionnaires to the Nordic financial regulators dated 07.06.2021. For instance, a Nordic Financial Regulator
      explained that “concerns [over know-your-customers, anti-money-laundering and counter terrorism financing
      rules] are difficult to eliminate given the differences in customer relations between the two types of entities”.
123   See e.g. responses to questions 3 and 4 of the questionnaires to the Nordic financial regulators dated 22.06.2021.
124   Responses to question 58 of questionnaire Q1 to market participants.
125   Responses to questions 61 to 64 of questionnaire Q1 to market participants.
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 ---pagebreak--- 6.3     Assessment of the cooperative effects of the JV
(109)   Under Article 2(4) of the Merger Regulation, where the creation of a full-function joint
        venture has as its object or effect the coordination of the competitive behaviour of
        undertakings that remain independent, such coordination shall be appraised under Article
        101 TFEU. According to Article 2(5) of the Merger Regulation the Commission shall take
        into account in particular: (i) whether parent companies retain, to a significant extent,
        activities in the same market(s) as the joint venture or in a market which is downstream,
        upstream, or neighbouring; and (ii) whether the coordination which is the direct
        consequence of the creation of the joint venture affords the undertakings concerned the
        possibility of eliminating competition in respect of a substantial part of the products or
        services in question.
(110)   Post-Transaction, the Parent Companies will retain their activities in the retail and corporate
        banking markets, including in particular the market for payment services, which are
        downstream of the markets where P27 (including Bankgirot) will be active.
(111)   However, the Commission considers that the Transaction does not give rise to serious
        doubts as to its compatibility with the internal market and with the EEA Agreement as a
        result of cooperative effects.
(112)   First, the Commission notes that no market participants expressed concerns about a
        potential risk of cooperative effects resulting from the Transaction.
(113)   Second, the structure of the relevant markets are not conducive to coordination between the
        Parent Companies. First, there is a relatively high number of parent companies (i.e. six),
        with asymmetric market shares in payment services to end-customers and different
        geographic footprints in the Nordics (see Table 5 above), which makes coordination less
        likely. In addition, post-Transaction, the Parent Companies will continue facing other
        competitors accounting for a large share of the markets for payment services to end-
        customers in each Nordic countries (see Table 5 above).
(114)   Third, the comparison between the (expected) turnover of P27 with the turnover of the
        Parent Companies (in total and in the market for payment services) show that the activities
        of P27 are not economically significant in comparison. 126
(115)   Fourth, any coordination would not be a direct consequence of the creation of P27, which
        has its object the creation and operation of the P27 Clearing System and related value-added
        services including invoice payment services (as well as the operation of Bankgirot in
        Sweden until the roll-out of the P27). In fact, the Parent Companies have also implemented
        safeguards to prevent the exchange of commercially sensitive information. P27 will only
        receive information from P27 participants, including the Parent Companies, that is strictly
        necessary (including information on payee and payer, bank account number, alias etc.). P27
        will not have access to any competitively sensitive information of participants (including the
        Parent Companies), such as prices of to end customers.
(116)   Finally, in relation to Sweden specifically, any cooperation between the Parent Companies
        would lack merger-specificity, as pre-Transaction, five of the six Parent Companies (those
        with banking activities in Sweden) were already cooperating as shareholders of Bankgirot.
126   P27’s revenues are expected to be EUR [revenue forecast] at maturity in relation to clearing services. The Parties
      indicate that revenue forecasts do not exist for P27’s Layer 2 services due to their premature development stage.
      However the Parties explicitly confirmed that the economic significance of P27 as a whole will be low compared to
      the (i) the total net turnover achieved by the Parent Companies (approximately […] in 2019) or (ii) the turnover
      achieved by the Parent Companies in the downstream market for payment services (approximately […] in 2019).
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 ---pagebreak--- (117) Based on the above considerations, the Commission considers that the Transaction does not
      raise serious doubts as to its compatibility with the internal market and with the EEA
      Agreement in relation to potential cooperative effects of the joint venture.
7.    CONCLUSION
(118) For the above reasons, the European Commission has decided not to oppose the notified
      operation and to declare it compatible with the internal market and with the EEA
      Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger
      Regulation and Article 57 of the EEA Agreement.
                                                        For the Commission
                                                        (Signed)
                                                        Margrethe VESTAGER
                                                        Executive Vice-President
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