CN07 - ACCC authorises amalgamation of payment service providers BPAY - eftpos and NPPA
13 October 2021
13 October 2021
On 9 September 2021, the Australian Competition and Consumer Commission ("ACCC") authorised the proposed amalgamation of three payment service providers, BPAY Group Holding Pty Ltd ("BPAY"), eftpos Payments Australia Limited ("EPAL") and NPP Australia Limited ("NPPA"), subject to a court enforceable undertaking (the "Undertaking"), provided by the amalgamated entity's holding company, Australian Payments Plus Ltd ("AP").
Key takeaways
- The ACCC authorised the amalgamation of payment service providers BPAY, eftpos and NPPA. This is only the ACCC's third merger authorisation determination, despite the process being available since 2017.
- The merger authorisation process enables parties to seek authorisation of proposed transactions that may substantially lessen competition, on the basis that they result in net public benefits. Nonetheless, in this authorisation process, a court-enforceable undertaking was offered to address competition concerns (a common feature of informal clearance applications for transactions that raise concerns).
- Unlike the informal clearance process, the merger authorisation process is time bound – the ACCC must make a determination within 90 days, unless the applicant agrees to an extension. In this case, the ACCC issued its determination following a 6-month public review.
- The ACCC's review of the proposed amalgamation of BPAY, EPAL and NPPA illustrates the burdensome and unpredictable nature of the authorisation process.
In March 2021, Industry Committee Administration Pty Ltd (the "applicant") sought merger authorisation from the ACCC to amalgamate ownership of BPAY, EPAL and NPPA under AP+, a new entity. The three companies provide various payment services to Australian businesses and consumers: an electronic bill payment service by BPAY, an electronic platform for point-of-sale payments between customers and merchants known as "eftpos" by EPAL, and open access real-time payments infrastructure by NPPA.
Importantly, there is a degree of common ownership across the payment schemes; the four major Australian banks - Australia and New Zealand Banking Group Limited, Commonwealth Bank of Australia, National Australia Bank Limited and Westpac Banking Corporation (together, the "major banks") - each possess a significant interest in the payment services provided, and will continue to do so after the amalgamation. This interest in, and influence over, the payment services was a key consideration in the ACCC's competition analysis.
In this case, the lengthy authorisation process involved the following steps:
Throughout the authorisation process the ACCC took into account over 70 submissions received from interested parties, including competitors, relevant industry associations, academics and the Reserve Bank of Australia ("RBA").
While financial institutions tended to be supportive of the amalgamation on the basis that it would be pro-competitive and the claimed public benefits would be realised, stakeholders such as Mastercard and the Council of Small Business Organisations believed the amalgamation would have long-term anti-competitive effects on the Australian payments market.
In order to grant an authorisation, the ACCC must be satisfied, in all circumstances, that:
The ACCC was satisfied in all the circumstances, including its acceptance of the Undertaking from AP+, that the amalgamation would not, or would not be likely to, substantially lessen competition, in any market.
The key aspects of the ACCC's competition analysis included:
In the absence of the Undertaking, the ACCC identified a risk that the proposed amalgamation may substantially lessen competition in the market for routing of debit card payments. EPAL's independent eftpos service (the only domestic debit card scheme) plays an important role in maintaining competition in the routing of debit card payments by providing LCR, a viable low-cost alternative to similar debit schemes offered by Visa and Mastercard. The ACCC was concerned that the mixed incentives of the major banks to support eftpos and make LCR available to their customers, and the ability of the major banks to materially affect AP+'s investment decisions, may diminish the role of eftpos in Australia with the amalgamation. To address these concerns, AP+ offered the Undertaking which imposes obligations on AP+ to support eftpos through a variety of behavioural measures, including a commitment to do all things in its control to make available and promote LCR for at least four years. The ACCC concluded that, with the Undertaking, the amalgamation was unlikely to result in a substantial lessening of competition in relation to the routing of debit card payments.
The ACCC considered that the amalgamation would likely soften but not substantially lessen competition between the payment services. While several areas of "potential overlap" between BPAY, EPAL and NPPA were identified in the analysis (e.g. point of sale payments), the parties' core offerings were not in direct competition and were not key competitors of each other. Rather, the payment services were mostly "complementary", and their overlap typically involved fringe components of each business.
The ACCC considered that the amalgamation would reduce incentives for BPAY, EPAL and NPPA to compete to bring new innovations to the market, and this would likely result in some lessening of competition, but concluded that this risk was mitigated by the following factors:
The ACCC considered that the amalgamation was unlikely to materially change third party access to the NPP (open access infrastructure used to facilitate real-time payments between bank accounts within Australia). While the ACCC acknowledged that post-amalgamation AP+ would control multiple payments infrastructure and have some ability to foreclose third party access to the NPP, it was satisfied that there remained significant regulatory constraints (including RBA intervention) to limit AP+'s ability and incentive to deny access.
While it was not necessary for the ACCC to apply the net public benefit limb of the authorisation test, the ACCC considered that the amalgamation was likely to result in some public benefits, and that the public benefits would likely outweigh any likely detriment arising from the amalgamation, including from any lessening of competition.
This is only the third merger authorisation granted by the ACCC since the process became available in November 2017. Interestingly, although the ability to take into account public benefits is one of the key advantages of the merger authorisation process, all three merger authorisations so far have been granted under the competition limb of the authorisation test. The ACCC was satisfied that AP Eagers' acquisition of Automotive Holdings Group (subject to a s87B divestment undertaking) in July 2019, and Gumtree's acquisition of Cox Australia Media Solutions in April 2020, were not likely to substantially lessen competition in any relevant market.
Unlike the previous authorisations, however, the 6 month process for the AP+ amalgamation significantly exceeded the statutory time limit of 90 days (subject to the applicant agreeing an extension). This recent authorisation decision illustrates the burdensome and unpredictable nature of the authorisation process. Parties should expect close scrutiny of public benefit arguments, and be prepared to offer behavioural or divestment undertakings to obtain a favourable determination.
For a comprehensive comparison of the benefits of the informal merger clearance and authorisation processes in Australia, see our Merger Control Review 2020 chapter.
With thanks to Jessica Apel and Veronica Murdoch of Ashurst for their contribution.
The information provided is not intended to be a comprehensive review of all developments in the law and practice, or to cover all aspects of those referred to.
Readers should take legal advice before applying it to specific issues or transactions.