On 15 June 2012, the New Zealand Commerce Commission declined the application by epay (owned by US payment processor Euronet Worldwide) for clearance to buy New Zealand-owned company Ezi-Pay.
Ezi-Pay and epay each distribute a variety of pre-paid vouchers through point-of-sale terminals in retail outlets throughout New Zealand.
Out of the five product markets identified by the NZCC (calling cards, gift cards, pre-paid mobile phone top-ups, digital content and pre-paid electricity), the only market which raised concerns was the market for the distribution and in-store payment processing of pre-paid mobile phone top-ups. Two out of the three Commissioners were not satisfied that the proposed acquisition would not have (or be likely to have) the effect of substantially lessening competition in that market.
In its clearance application, epay had argued that other available methods for topping up pre-paid credit, as well as the power of large telecom companies (who encourage their users to purchase credit directly from them and bypass agents like epay and Ezi-Pay) were factors which would act as sufficient competitive constraints. However, the NZCC was not satisfied that the merged entity would be sufficiently constrained by other factors such as new entry and / or expansion or the countervailing power of mobile phone companies.
This is the first merger application that the NZCC has declined since Tegel Foods’ proposed acquisition of rival chicken company Brinks Group in October 2008. It is similarly rare for the ACCC to oppose a merger. Of the 141 mergers reviewed in 2010-11, only three were publicly opposed by the ACCC, the most notable being the ACCC’s decision to oppose Metcash’s proposed acquisition of Franklins, a decision that was ultimately turned over on appeal to the Federal Court. Read more about the Metcash proceedings in our previous competition alert.
While the NZCC has not yet published its full reasons for the epay / Ezi-Pay decision, the reasons should be available within the next two weeks and we will keep you updated.
Photo credit: 401(K) 2012 / Foter / CC BY-SA
