First published in PaymentsCompliance, August 2019
The UK competition regulator has issued a rare order to payments provider Bottomline to unwind part of its acquisition of a competitor’s payment gateway.
Bottomline’s UK subsidiary acquired the payments gateway of Experian, the Ireland-based credit reporting giant, for $12.5m in March.
In May, the purchase caught the attention of the Competition and Markets Authority (CMA), which issued an enforcement order and brought the handover to a halt. It also kicked off the first phase of an investigation into whether the deal warrants full scrutiny.
It is understood that Bottomline did not report the transaction to the CMA under the UK’s voluntary notification model, and that the watchdog began examining the deal after gathering its own intelligence.
The unwinding order, which was issued on August 2 but only publicly released on Tuesday, orders Bottomline to disentangle the parts of the gateway it had already incorporated into the business before the enforcement order was issued.
The regulator said that the integration had hampered its ability to properly investigate the acquisition.
“Significant integration of confidential data (including customer data) had already happened before the CMA imposed an initial enforcement order … which prevented any further integration of the two businesses,” a spokesperson for the authority said.
“As the integration that had taken place risked prejudicing the outcome of the CMA’s investigation or impeding any remedies that might be needed, it has decided to impose an unwinding order requiring the firms to take steps to make sure that confidential data can be kept separate while its inquiry is ongoing.”
It is only the second time the competition regulator has issued an unwinding order, and the first time it has done so during the initial stage of a merger investigation.
The unwinding order stipulates that Bottomline must not use any of the information it has already gained from the transaction to “solicit any [Experian gateway] customer in relation to any product or service that competes with the [Experian gateway] business”.
The company was also instructed to identify and secure confidential information belonging to Experian and prohibit access for Bottomline staff.
A Bottomline spokesperson told PaymentsCompliance: “We are doing all we can to assist the CMA with its review.”
Bottomline is a New York-listed provider of a range of payment and technological solutions. It operates in the UK through its subsidiary Bottomline UK.
Stephen Smith, a partner in the competition practice of law firm Bristows, said that from a CMA perspective the cost to Bottomline of carrying out the unwinding order is “the cost of choosing not to notify transactions which on their face raise potential issues”.
Although the UK’s voluntary notification regime does not compel firms to turn to the regulator, Smith said “the business always know themselves when they’re acquiring something that potentially gives rise to a sizeable overlap in one or more areas where either competitors or customers are likely to raise issues”.
“I think that they [Bottomline] should have been aware that there was significant overlap with what Experian were doing and they should have assessed it,” he said.
“The CMA’s view is that if you had assessed it, you had an opportunity either to notify it pre-emptively or at least to make public the acquisition, and then wait to see if the CMA was interested in dealing with it.”
Smith said that the swift issuance of the unwinding order suggests the regulator may be inclined to advance its investigation to the second phase.
The authority’s move “is certainly evidence of a more interventionist CMA”, according to Al Mangan, a partner with Addleshaw Goddard.
“For all but the least-contentious transactions our regime now largely resembles a mandatory and suspensory regime — like the EU Merger Regulation,” he said.