AdC issues draft prohibition decision on the acquisition by SIBS of UNICRE assets

Press release 10/2017
AdC issues draft prohibition decision on the acquisition by SIBS of UNICRE assets
The Portuguese Competition Authority (AdC) issued a draft prohibition decision on the acquisition of the merchant acquiring business of UNICRE by SIBS, considering that the acquisition would strengthen the barriers to entry and competition in the market, which could ultimately lead to a monopoly in the Portuguese payment system and, consequently, cause serious harm to merchants and the final consumer.
So far, the AdC has not received any communication from the notifying party concerning the draft decision.
The European Commission has recently adopted new rules imposing maximum limits to interchange fees on debit and credit card payments. These lower interchange fees have not led to generally lower merchant service charges which reflects a low level of competitive pressure in the merchant acquiring market in Portugal.
Due to the strengthening of barriers to entry, the proposed transaction would avoid merchant service charges to reflect the decrease of the interchange fees set by the EC Regulation.
These impediments to the reduction in merchant service charges identified by the AdC may result in smaller merchants bearing significant costs to accept payment cards. Consumers might also be negatively affected by a reduction in the number of merchants accepting card payments.
Unicre’s acquiring business, under the brand name “Redunicre” is the largest card payment acquirer in Portugal, with a market share four times larger than its closest competitor, Netcaixa, owned by Caixa Geral de Depósitos.
As Caixa Geral de Depósitos is a shareholder of SIBS, the bank would have a direct stake in the merchant acquiring business of UNICRE due to the merger, which would lead to an alignment of incentives and behaviour of the two main competitors in the market, thereby restricting competition.
Therefore, the main negative impacts on competition identified by the AdC are the following:
§  Horizontal negative effects related to an increase in the concentration level in the merchant acquiring markets resulting from the direct interest that CGD would have in the merchant acquiring business of SIBS, which would enhance the alignment of incentives and behaviour between the two competitors, thereby restricting competition.
§  Vertical effects of market foreclosure resulting in impediments to the competitive ability of current and potential competitors to SIBS’ acquiring and processing businesses.
SIBS states these markets are characterised by low barriers to entry for cross-border operators, and that the European Commission aims to create a single market for card payment systems.
The AdC refutes such arguments. The investigation concluded that there are significant barriers to entry that impede alternative players from entering the national processing and merchant acquiring markets in sufficient scope and magnitude to deter or defeat the anti-competitive effects of the merger. The AdC further concluded that, indeed, as a result of the proposed merger, such barriers would be strengthened.
SIBS submitted a set of remedies to address the risks of anti-competitive effects of the proposed transaction. The AdC concluded that the proposed remedies were not sufficient or adequate.
 14 July 2017