The Competition and Markets Authority (CMA), the UK's competition watchdog, has warned PayPal that its most recent acquisition of iZettle – a Swedish fintech company – for $2.2bn may have run afoul of UK anti-trust laws. It claims the purchase may cause a reduction in competition and thus lead to higher prices for consumers in the future.
The CMA claims that PayPal purchased the "market-leading rival" that would have fostered increased competition and ultimately led to better products and prices for customers. With the emerging "omnichannel" payment market – financial services which allow a number of different online and offline payment options – on the horizon, the CMA's Phase 1 investigation is concerned that the acquisition is hobbling the necessary innovation within the market that healthy competition naturally breeds.
Andrea Gomes da Silva, the executive director of the CMA, reiterated this point saying: "While iZettle is a relatively recent entrant to payment services, it has already established a market-leading position in mobile point of sale devices and was well-placed to compete against PayPal in other emerging markets.
"That's why we are concerned that PayPal's takeover could lead to higher prices or reduce the quality of the services available to customers," she added.
Following the CMA's comments, a spokesman for PayPal released a statement noting: "PayPal continues to work cooperatively with the CMA as it conducts its review of the acquisition of iZettle. We are now working to address the CMA's concerns and demonstrate to the CMA that the market will remain competitive, so we can move forward with integrating iZettle into our global platform."
The CMA will commence a much more in-depth Phase 2 investigation with the cooperation of both companies and over the next couple months.