Tuesday, May 17, 2011

Justice Department Sues to Block Acquisition of Payment Terminal Seller

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

The Department of Justice Antitrust Division filed a civil antitrust lawsuit in Washington, D.C. on May 12 to block point-of-sale (POS) terminal seller VeriFone Systems Incorporated’s proposed $485 million acquisition of Hypercom Corporation, a competitor.

The Antitrust Division said that the proposed deal would substantially lessen competition in the sale of POS terminals in the United States, resulting in higher prices and reduced innovation, quality, product variety, and service.

POS terminals are used by retailers and other firms to accept electronic payments such as credit cards and debit cards. According to the government, VeriFone and Hypercom together control more than 60 percent of the domestic market for the POS terminals used by the largest retailers, and they are two of only three substantial sellers of other types of POS terminals.

Proposed Divestiture

A proposal by VeriFone and Hypercom to resolve the government’s antitrust concerns with the merger by divesting Hypercom’s U.S. business to Ingenico S.A. did not adequately lessen those concerns, the government said. Ingenico is the largest provider of POS terminals worldwide and the only other significant competitor to VeriFone and Hypercom in the United States, the government noted.

According to the Antitrust Division’s complaint, the planned spinoff would not improve the competitive landscape raised by the VeriFone/Hypercom transaction because the assets are to be sold to another significant competitor in the market in a manner that does not create a new, independent, long-term competitor.

In addition, the structure of the agreements between Ingenico and VeriFone, the only two significant POS sellers in the United States post-merger, enhances VeriFone and Ingenico’s ability to coordinate pricing for all POS terminals.

The complaint is U.S. v. VeriFone Systems Inc., Case: 1:11-cv-00887, May 12, 2010. Text of the complaint appears here. A press release on the action appears here.

Further details will appear at CCH Trade Regulation Reporter ¶45,111.

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