Bundeskartellamt clears GZS/Telecash merger subject to conditions

The Bundeskartellamt has cleared the acquisition of GZS Gesellschaft für Zahlungssysteme mbH, Bad Vilbel (“GZS”) by Telecash GmbH & Co. KG, Stuttgart (“Telecash”) subject to the condition that GZS will sell its subsidiaries easycash Holding GmbH and easycash GmbH (“easycash”).

Telecash is a subsidiary of First Data Corporation, USA, an internationally active payment service provider. GZS is currently owned by several companies in the banking and savings bank sector. The merger affects services connected with the processing of card payments, from the point of sale to the debiting of the customer’s account.

The Bundeskartellamt distinguishes between the three markets for “issuing processing”, “acquiring processing” and network services. The market for “issuing processing” covers all contacts between “issuers” (banks) and their customers (such contacts include: the opening of a card account, customer information services, billing, settlement and dunning procedures). The market for “acquiring processing“ comprises contacts between the banks issuing the cards and the merchant outlets accepting card payments and includes services such as the registration and authorisation of merchants, the processing of transactions, the management of merchant master data and the calculation of transaction fees and merchant remuneration. Finally, the network services comprise services such as the connection of terminals, provision and loading of the respective software and collection and transmission of payment data to the issuing processors or the acquiring processors. Due to the special characteristics of the German debit card system these network services are confined to Germany.

The merger would have created a dominant position in the market for network services because the joint market shares of the parties to the merger would have added up to more than 50 per cent and the market share lead over the next largest competitor would have been significantly increased. In addition, there are legal and structural barriers to market entry in the market for network services, which means that a market entry of potential competitors is not likely, at least not in the near future.

The President of the Bundeskartellamt, Ulf Böge, stated: “In my view, control of corporate conduct by the market is preferable to control by state intervention. To achieve this, we have to ensure that merger control safeguards the competitive structures of a market. In the present case this requires that GZS sell its subsidiary easycash. Thus easycash remains an independent competitor on the market for network operators. The merger has been cleared subject to this obligation to sell.”