CMA has competition concerns over MasterCard/VocaLink merger – unless acceptable remedies are offered

CMA has competition concerns over MasterCard/VocaLink merger – unless acceptable remedies are offered

The Competition and Markets Authority has stated that the proposed £700 million acquisition by MasterCard of VocaLink will be referred for a Phase 2 merger investigation unless acceptable undertakings in lieu are offered.  VocaLink provides the technology behind three of the UK’s main payment systems (Bacs, FPS and the LINK ATM network).

The transaction takes place against a backdrop where, in July 2016, the Payment Systems Regulator found in its final report on its infrastructure market review that there was no effective competition in the provision of payments infrastructure services to Bacs, FPS and LINK.  It recommended that the four largest banks sell their interests in VocaLink.

The CMA has concluded that the transaction may lead to a substantial lessening of competition in the supply of payment infrastructure services to the LINK ATM network.  The CMA has found that the merging parties are two of the most credible infrastructure services providers to the LINK ATM network and that the merger would limit the ability of LINK to obtain good value when tendering for an infrastructure provider.

The CMA has ruled out competition concerns over the supply of payment infrastructure services to Bacs and FPS, citing “many credible alternatives” for those companies. 

The CMA’s concerns in relation to the supply of infrastructure services to LINK appear to be based on the reduction in the main suppliers from 3 to 2.  However, if the CMA could be persuaded that the relevant market was a genuine bidding market that concern should be reduced.  It appears that the CMA is not so convinced.

The CMA has indicated that the parties have until 11 January to offer remedies that will address the CMA’s concerns.