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Ingenico Group SA and Paymark Limited – Clearance Application

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Ingenico Group SA and Paymark Limited – Clearance Application PUBLIC VERSION 20 April 2018 INGENICO GROUP SA – NOTICE SEEKING CLEARANCE FOR ACQUISITION OF PAYMARK LIMITED COMMERCE ACT 1986: BUSINESS ACQUISITION SECTION 66: NOTICE SEEKING CLEARANCE Dated: 20 April 2018 The Registrar Mergers and Authorisations Commerce Commission PO Box 2351 WELLINGTON Pursuant to section 66(1) of the Commerce Act 1986, notice is hereby given seeking clearance of a proposed business acquisition. 1 091281591/6235612.1 PUBLIC VERSION 20 April 2018 INGENICO GROUP SA – NOTICE SEEKING CLEARANCE FOR ACQUISITION OF PAYMARK LIMITED EXECUTIVE SUMMARY A Ingenico Group SA ("Ingenico"), a member of the Ingenico Group is seeking clearance to acquire 100% of the shares in Paymark Limited ("Paymark") (the "transaction" or “the acquisition”). Limited New Zealand presence B Ingenico currently has a very limited New Zealand presence via: (i) acting as a wholesale supplier of POS payment terminals to New Zealand resellers (such as Skyzer and EFTCO); and (ii) operating a digital payments gateway business in New Zealand via a recently-acquired business, Bambora. C Ingenico manufactures payment terminals which are resold into New Zealand by unrelated third party distributors. No aggregation in main areas of operation D Paymark's primary business is a payment switch operator. It switches electronic transactions between consumers, merchants, consumers’ card issuing financial institutions and merchants’ acquiring financial institutions. E Ingenico has experience operating switch businesses around the world, but has no switching business or infrastructure in New Zealand. The transaction will provide Ingenico with an opportunity to enter the New Zealand market as a switch provider, and to leverage Ingenico's global expertise and experience. F Similarly, Paymark is not a terminal wholesaler in New Zealand. G Ingenico's business and Paymark business are generally complementary in nature, rather than competing. Market share aggregation in digital payments market is low H Paymark does, however, operate a digital gateway business in New Zealand, meaning that there will be a degree (albeit a very small degree) of market share aggregation in the digital payments market. I Ingenico's Bambora business is a relatively small operator in the New Zealand digital payments market. It estimates its market share at less than 2 091281591/6235612.1 PUBLIC VERSION 20 April 2018 INGENICO GROUP SA – NOTICE SEEKING CLEARANCE FOR ACQUISITION OF PAYMARK LIMITED [ ] (perhaps [ ]) and is one of many players in the very long tail of operators in that market - including Apple Pay, Android Pay, goMoney wallet, Braintree (owned by PayPal), Stripe, Cybersource, Datacom, Shopify, Adyen and many others. Those firms sit behind a number of larger gateway market participants - including DPS Payment Express (the major digital payments provider in New Zealand), Paystation (owned by TradeMe) and e- Way, as well as Paymark. J Ingenico considers that the transaction should not give rise to any material competition concerns in the digital payments market on the basis that: (i) the level of digital payments market share aggregation resulting from the combination of Paymark with Bambora’s [ ] share is low, and the resulting combined (post-merger) market share is within the Commission's concentration indicators, indicating that the transaction should be unlikely to raise competition concerns; (ii) the digital payments market is highly competitive with a large number of well-resourced and dynamic competitors; (iii) barriers to entry and expansion in the digital payments market are extremely low; and (iv) the digital payments market (like other fintech markets) is being disrupted by a number of alternative technologies / “direct access” payment options. Pro-consumer, pro-competitive outcomes K The transaction will vertically integrate Ingenico's terminals business with Paymark's switching business. Rather than any negative competition outcomes, Ingenico expects that such integration will generate significant operating efficiencies and create pro-competitive effects in the relevant markets. L Other than Paymark, the two largest competing switch providers – Verifone and Payment Express – both operate vertically integrated businesses, supplying terminals and switching services to their customers. Globally, there is a trend towards more integrated payments providers, with POS hardware and software, processing, eCommerce and merchant acquiring all provided by vertically integrated payment providers. 3 091281591/6235612.1 PUBLIC VERSION 20 April 2018 INGENICO GROUP SA – NOTICE SEEKING CLEARANCE FOR ACQUISITION OF PAYMARK LIMITED GLOSSARY OF TERMS Term Definition Acquirer An organisation, typically a bank, which provides access to the payment system on behalf of merchants for the clearing and settlement of funds in a transaction. An acquirer may or may not also be the bank that provides other services to a merchant, such as lending and deposits. Cardholder/customer/consumer Buys goods and services from merchants in exchange for payment. Card present transaction Any transaction where a customer is in the same physical location as the merchant. Card not present transaction Any transaction made online, over the phone, or in other situations in which a customer is not in the same physical location as the merchant. eCommerce A form of card not present transaction where a website or application is used to store or input a consumer’s payment details to transact with a merchant. EFTPOS Electronic Funds Transfer at Point of Sale. Issuer An organisation, typically a bank, which issues cards and provides debit and/or credit services to customers. Merchant A party that provides goods or services in return for payment. Includes retailers, wholesalers, utilities companies, and central and local government. MSF Merchant Service Fee, made by a merchant to an acquirer for certain types of retail payment. 4 091281591/6235612.1 PUBLIC VERSION 20 April 2018 INGENICO GROUP SA – NOTICE SEEKING CLEARANCE FOR ACQUISITION OF PAYMARK LIMITED Term Definition PCI / PCI DSS Payment Card Industry / Data Security Standard. Proprietary EFTPOS The ‘traditional’ form of card payment in New Zealand, which utilises magnetic-stripe technology. Standards are maintained by Payments New Zealand, but then is no ‘owner’ of proprietary EFTPOS as such. POS Point Of Sale. Scheme Includes Visa, MasterCard, American Express, and Diners Club, amongst others. Schemes develop technology and base product features, and set the commercial model and card system rules. They may issue cards and attract merchants through banks (open system – Visa and MasterCard) or directly (closed system – American Express, Diners Club, etc.). Only relevant for non- proprietary-EFTPOS transactions. Switch Payments infrastructure that sends transaction information to the correct issuer or acquirer (depending on the type of transaction) so that the funds can be taken from the customer's account and delivered to the merchant. Switch-to-acquirer (STA) The process by which information about certain card payments, notably credit cards, contactless scheme debit, card-not-present and international transactions, is sent between institutions. Attracts interchange (except for closed schemes) and MSFs. Switch-to-issuer (STI) The process by which information about certain card payments, notably proprietary EFTPOS and inserted/swiped scheme debit, is sent between institutions. Attracts no interchange fee or MSF. 5 091281591/6235612.1 PUBLIC VERSION 20 April 2018 INGENICO GROUP SA – NOTICE SEEKING CLEARANCE FOR ACQUISITION OF PAYMARK LIMITED PART 1: APPLICANT’S DETAILS 1 Ingenico Group applies for clearance to acquire all of the shares in Paymark Limited (Paymark). 2 Ingenico Group is a global company, headquartered in Paris. Its shares are traded on Euronext. (a) Ingenico’s contact details are: Postal address: 29/32 Boulevard de Grenelle 75015 Paris, France Physical address: 29/32 Boulevard de Grenelle 75015 Paris, France Telephone number: + 33 (0)1 58 01 80 00 Web address: www.ingenico.com (b) Ingenico’s contact persons for this application are: (i) Sylvie Lallement ([email protected]), and (ii) Dominic White ([email protected]). (c) Ingenico’s individuals responsible for this notice are: Names: Philippe Lazare (CEO) Sylvie Lallement (General Counsel) Dominic White (VP Pacific) Email addresses: [email protected] [email protected] [email protected] Telephone number: +61 412 404 984 (Dominic White) 3 Ingenico Group has a number of subsidiaries and related entities around the world. There is a full list of those entities in Ingenico’s 2016 registration document.1 1 Available here: http://registration-doc.ingenico.com/2016/index.html and also provided to the Commission as Appendix Four. 6 091281591/6235612.1 PUBLIC VERSION 20 April 2018 INGENICO GROUP SA – NOTICE SEEKING CLEARANCE FOR ACQUISITION OF PAYMARK LIMITED 4 The Ingenico entity intending to acquire the Paymark Shares, and the applicant for clearance, is Ingenico Group SA (the applicant). In this application “Ingenico” refers to the Ingenico Group as a whole, including the applicant, unless a particular Ingenico entity is identified. 5 Ingenico’s annual report and 2017 financial results can be found in its registration documents here. 6 All correspondence and notices in respect of this application should be directed in the first instance to: Name: Matt Sumpter / Colin Fife Address: Chapman Tripp 23 Albert Street Auckland Telephone: +64 9 357 9075 / +64 9
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