The Competition and Markets Authority (CMA) has been investigating PayPal’s $2.2 billion (£1.7b) takeover of Swedish mobile payments company, iZettle.

The merger, which was completed in September this year, brought together two of the largest suppliers of mobile point of sale devices in the UK.

The CMA is concerned that this move could lead to higher prices or reduce the range of services for consumers.

Insufficient Competition

Following the completion of its Phase 1 investigation, the CMA found that PayPal has positioned itself as the top supplier of devices in the UK and, as such, could face insufficient competition.

The findings of the investigation raise significant concerns that customers could pay higher prices or even receive a lower quality service – this customer base includes a broad variety of firms across the UK, ranging from small to medium-sized businesses.

The CMA has also considered the impact of the merger on the emerging market for ‘omni-channel’ payments services, an area in which PayPal has already established a strong position.

According to the authority, if iZettle had not been acquired, it could have provided strong competition for PayPal and potentially benefitted customers by driving future innovation and lowering costs.

Market Positions

CMA Executive Director, Andrea Gomes da Silva, commented: “Payment services markets are evolving so it’s particularly important to look to the future when we assess competition and the effects of mergers on customers.

“While iZettle if 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.”

She added: “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.”

The CMA said that if both businesses are unable to address concerns, the merger will be referred for an in-depth Phase 2 investigation. This investigation, the authority said, would be carried out by a group of “independent CMA panel members”.