On August 17, 2020, the Commission conditionally approved Mastercard’s acquisition of Nets’ payment application division, following a Phase I review (“the Transaction”).[1] The Commission reviewed the Transaction following a referral by the Danish Competition and Consumer Authority, and ultimately identified competitive concerns in an EEA-wide market for account-to-account core infrastructure services (“A2A CIS”) in relation to managed solutions that required the transfer of the overlapping business to secure Phase I approval.

Mastercard is a U.S.-based global payments operator. Nets A/S is a Danish payment solutions company, whose account-to-account payment business was the target of the transaction. The Commission found that the parties’ activities overlapped in the provision of A2A CIS and account-to-account payment services (“A2A payment services”). A2A CIS allow for real-time and scheduled payments to be processed directly between banks. A2A payment services allow end-users to transfer money between banks.They include services and applications that allow real- time transfers, without the need for a card. Online payments can thus be initiated without a card, by using online banking services and applications.

The Commission excluded concerns in A2A payment services, finding that competition was national, and that the parties only overlapped in the Nordic countries, where Nets’ products were expected to be replaced by newer and more competitive solutions.

As regards A2A CIS, the Commission distinguished between CIS provided as a software solution, and those provided as a managed solution, i.e., combining software with hardware, infrastructure, and the management of the payment service. The Commission found that both parties were well-established players in the EEA market for the provision of managed A2A CIS, and that the Transaction would strengthen Mastercard’s leading position. The Commission also noted that the parties were particularly close competitors, noting that they had been shortlisted against one another in a number of tenders, in a market where only a small number of rivals offered competing solution.

To address the Commission’s concerns, Mastercard offered to transfer a global license to develop an A2A CIS solution using the technology that Nets’ business itself relied on. The divestment package included an exclusive license within the EEA, and included the necessary personnel, services, and know-how that would allow a suitable purchaser to compete with Mastercard, including through the provision of consultancy services and transitional support services.

The critical importance in the card-payment business of faster and card-free payment transactions has led to increased review of deals in the sector by the Commission. The technology underpinning the new payments applications are typically at the core of the analysis and affect companies’ competitiveness in tenders, as illustrated by the present case.

The transaction is also noteworthy, in that it represents the first time the Danish Competition and Consumer Authority referred a transaction to the Commission under Article 22 of the EUMR,[2] a decision that was supported by the U.K. CMA (which also asserted jurisdiction over the transaction),[3] as well as the national competition authorities of Austria, Finland, Norway, and Sweden.

The sometimes overlooked ability of Member States to refer transactions to the Commission for close scrutiny at an EEA-level can lead to significant delays if the decision to refer is only made after the conclusion of an initial domestic investigation. Based on the Danish Competition and Consumer Authority’s press release, the Parties had commenced national pre-notification discussions as far back as September 12, 2019, with formal notification on February 21, 2020, and the decision to request a referral on only February 27, 2020. This, presumably, led to a renewed pre-notification process with the European Commission, where formal notification made only on June 26, 2020. Given the significant time and expense of engaging in multiple pre- notification processes, which may well involve different authorities focusing on different areas of enquiry, merging parties and their advisors should consider well in advance their strategy for dealing with potential Article 22 referrals, including pro-actively discussing whether a national competition authority intends to make a referral at an early stage of pre-notification if overlapping businesses have an EEA-wide dimension. Executive Vice-President Margrethe Vestager also recently confirmed that the Commission would be accepting referrals from a national competition authority, even in cases where national thresholds are not met, provided the transaction is “worth reviewing at the EU level.”[4] Those referrals are likely to expand considerably in light of her announcement.

[1]      Mastercard/Nets (Case COMP/M.9744), Commission decision of August 17, 2020.

[2]      See https://www.en.kfst.dk/nyheder/kfst/english/news/2020/20200403-the-european-commission-to-decide-on-the-master-card-nets-merger/.

[3]      See https://assets.publishing.service.gov.uk/media/5e86fe8be90e0706f24fe002/Mastercard._Nets_Article_22_Request_-_for_publication_-_03042020_v2.pdf.

[4]      See Margrethe Vestager, The future of EU merger control, Speech to the International Bar Association 24th Annual Competition Conference, September 11, 2020.