British Competition Authorities Question Mastercard’s VocaLink Acquisition

The United Kingdom’s Competition and Markets Authority (CMA) is questioning Mastercard Inc.’s planned $920 million acquisition of London-based VocaLink Holdings Ltd., a deal which if consummated would give Mastercard a strong presence in several non-card payment systems, including the Faster Payments initiative in the United States.

VocaLink operates Bacs, the U.K.’s automated clearing house network linking bank accounts, as well as the country’s Faster Payments Service (FPS) for real-time account-to-account payments via online systems, mobile devices, and telephones. VocaLink also runs the U.K.’s Link ATM network.

The CMA’s concerns, announced Wednesday, involve Link. The combination of Mastercard and VocaLink would put two of the country’s three leading ATM network-services suppliers, the other being Visa Inc., under one corporate roof.

“As such, the merger would reduce the number of bidders and limit the ability of the Link scheme to obtain good value when tendering for an infrastructure provider,” the CMA said in a news release.

Andrea Coscelli, the CMA’s acting chief executive, said in a statement that “the Link ATM network provides an essential service for millions of customers. It’s important that Link has a good choice of providers when it comes to supplying the necessary infrastructure so it can take advantage of the opening up of payment systems to competition. These concerns warrant a closer investigation in the event that Mastercard cannot address them at this stage.”

Regarding Bacs and FPS, the CMA said it did not find that the deal would affect the provision of payment infrastructure for those networks “since there are many credible alternatives to VocaLink and Mastercard.”

The CMA gave Mastercard and VocaLink until Jan. 11 to address its concerns. “The companies can avoid the merger being referred for an in-depth investigation if they can offer a remedy to address the competition concerns identified,” the release says.

Mastercard issued a statement saying “we welcome” the CMA’s decision regarding the planned acquisition, which Mastercard announced more than five months ago.

“The thoroughness of the CMA’s review reflects the significance of this deal and its potential for the industry,” Mastercard said. “In its announcement, the CMA noted that it has no concerns related to providing payment infrastructure services to Bacs or the Faster Payments Service.

“We’re pleased to have the opportunity to address their one concern, regarding the Link ATM scheme, in the timeframe provided,” the statement continues. “This acquisition promises to bring greater choice and innovation to the payment ecosystem, enabling people, governments, and businesses to pay the way they want to pay.”

In the U.S., VocaLink has become a key player in the budding faster-payments movement by providing technology that New York City-based The Clearing House Payments Co. is using for its planned faster-payments system. The Clearing House also is working with Jacksonville, Fla.-based processor Fidelity National Information Services Inc. (FIS) on the project, which if completed as announced would be an entirely new set of payment rails, separate from the existing ACH and card networks.