NATIONAL LAW UNIVERSITY, JODHPUR

MID TERM PROJECT TOWARDS THE FULFILLMENT OF COMPANY LAW II

NAME RAGHAV GOYAL

ROLL NO 1927
ONE THOUSAND NINE HUNDRED AND
TWENTY SEVEN
SUBJECT COMPANY LAW II

TOPIC NEXI/NETS MERGER

FACULTY MR. SARTHAK MISHRA

ASSISTANT PROFESSOR
FACULTY OF LAW

1
ACKNOWLEDGEMENT

This project enabled us to discover various aspects of company law involved in a merger.
This also enables me to discover European laws as well as competition law and commercial
law. It was through this project that I realized that a merger does not only involve laws it also
involves various aspects of commercial wisdom.

I would like to acknowledge the tremendous support and help given to us by the faculty in
charge. Mr. Sa rthak Mishra. He was readily available at all times to satisfactorily address our
queries. He also assisted the in search.

Sincerely,

Raghav Goyal

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 TABLE OF CONTENTS

INTRODUCTION......................................................................................................................4
Legal Framework....................................................................................................................4
Mergers and Acquisitions.......................................................................................................4
Companies Involved...............................................................................................................5
Timeline of Events.....................................................................................................................8
Agreement on the European Economic Agreement.................................................................10
HORIZONTAL MERGER..........................................................................................................16
NON- HORIZONTAL MERGER...............................................................................................17
SCENARIO OF THE AFFECTED MARKETS...............................................................................18
HORIZONTALLY AFFECTED MARKETS..................................................................................19
COMPETITIVE ASSESSMENT OF NON-HORIZONTALLY AFFECTED MARKETS.......................21
CONCLUSION........................................................................................................................27

3
INTRODUCTION

Legal Framework

The European Union's legal system includes its merger regulations. Its task is to control
corporate structure mergers involving two or more businesses. Concentrations that may or
may not hamper competition are under the purview of this organisation. Although mergers
must adhere to the commission's rules and regulations, some mergers are exempt if they
advance consumer welfare. Deals that don't adhere to the common market may be rejected. It
is a component of competition law and is intended to prevent corporations from gaining too
much market dominance on a free market, endangering the interests of consumers, the
economy, and society at large. Particularly, the degree of control could result in increased
prices and less innovation.

Mergers and Acquisitions

Mergers and acquisitions (M&A) are business transactions in which the ownership

of companies, other business organizations, or their operating units are transferred to
or consolidated with another company or business organization. M&A, a component of
strategic management, can enable businesses to expand or contract, change the character of
their operations, or alter their competitive position. Technically speaking, an acquisition
happens when one entity buys the stock, equity interests, or assets of another corporation. A
merger, on the other hand, is the legal fusion of two commercial entities into one. If both
CEOs concur that working together is in the best interest of both of their companies, a deal
may be euphemistically referred to as a merger of equals. Both mergers and acquisitions,
from a legal and financial perspective, typically lead to the consolidation of assets and
liabilities under one organisation, and it is not always evident how they differ from one
another. Most nations have to follow competition laws for mergers and acquisitions.
Due to the potential for economic power concentration in the hands of a smaller number of
parties, mergers and acquisitions are subject to competition law regulations. The Economic
Concentration Regulation 139/2004, and the Directive 2005/56/EC on Cross-Border Mergers,
both of which are under the control of the European Union, have established the competition

4
regulations.1 According to the law, businesses looking to merge must request the
Commission's prior approval in writing. Concentrations that reach particular levels fall under
the sole jurisdiction of the European Commission (EC).2 The community dimension is what
is meant by this. The following concentrations will bring about commission jurisdiction.
The European Commission must be notified of and given the opportunity to review any
cross-border mergers whose combined annual revenue exceeds EUR 250 million in the
Community and EUR 5000 million globally. Therefore, projecting future post-merger market
situations is a key component of merger regulation. The standard set by the law is whether a
combination would "significantly impede effective competition... in particular as a result of
the creation or strengthening of a dominant position..."3
Businesses might be encouraged to merge in order to lower the transaction costs associated
with negotiating bilateral contracts.4 Another is to profit from bigger economies of scale.
Enhanced market size and share, however, may also result in increased market power,
enhancing the company's negotiation position. This is advantageous for the company, but it
may be detrimental to rivals and downstream organisations (such as distributors or
consumers). The most severe situation is a monopoly, in which case prices may be increased
to the monopoly price rather than the higher equilibrium price. Another potentially
unfavourable circumstance where prices may be higher than in a market with more
competitors is an oligopoly.

Companies Involved

Nexi offers payment services such as merchant acquisition, point of sale ("POS") terminal
provision and related services, smart payment cards, automated cash handling, clearing
services for payments, and digital corporate services.
Nets provides, among other product and services, merchant acquiring services, POS terminals
and enabled payment gateways, card processing services, and smart payment cards. Nets is
currently solely controlled by funds managed by Hellman & Friedman LLC (“Hellman &
Friedman”, USA).

1
Articles 3(1)(g), 308 and 83 of the Treaty establishing the European Community (TEC).
2
Merger Regulation of the EU, European Commission; https://competition-policy.ec.europa.eu/mergers_en.
3
Art. 2(3) Reg. 129/2005.
4
Coase, Ronald H. (November 1937) "The Nature of the Firm", Economica : 386–405;
https://web.archive.org/web/20070113063048/http:/www.cerna.ensmp.fr/Enseignement/CoursEcoIndus/
SupportsdeCours/COASE.pdf.

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On November 15, 2020, Nexi also signed a legally binding framework agreement (as later
amended) (the "Nets Framework Agreement") containing the terms and conditions of the
cross-border merger by incorporation of Nets.
Additionally, the Framework Agreement gives CDPE the ability to secure that the
extraordinary shareholders' meeting of SIA decides on a share capital increase in order to
neutralise or mitigate the dilutive effect on its prospective equity stake in the Combined
Entity as a result of the completion of the Nets-Nexi Merger. This possibility is granted to
CDPE only.
Last but not least, it should be highlighted that on June 30, 2021, all of the prerequisite
conditions outlined in the Nets Framework Agreement were satisfied. As a result, on July 1,
2021, the Nets-Nexi Merger went into force.
Board of Directors (Nexi)

As from the Effective Date and until the earlier of

 the date of the Shareholders’ Meeting approving the annual financial statements of the
Combined Entity as of December 31, 2021 and
 the date of the Shareholders’
Meeting appointing a new Board of Directors following the one in office at the Effective
Date (hereinafter, referred to as the “First Term”), the Board of Directors is composed as
follows:
 6 members – of whom 1 non-independent member to be appointed as vice-chairman
and 4 members to qualify as independent directors and 1 member to satisfy the
gender-equality requirements – jointly designated by CDPE and FSIA;
Paolo Bertoluzzo, as CEO of Nexi (the “Initial CEO”);
 4 members – of whom 1 to be appointed as chairman, 3 members can also qualify as
non-independent, and 1 member to qualify as independent director and 2 members to
satisfy the gender-equality requirements – designated by Mercury;
 1 (one) member – who can also qualify as a non-independent director – designated by
AB Europe;
 1 (one) member –who can also qualify as a non-independent director – designated by
Eagle SCA; and
 2 (two) members – who can also qualify as non-independent directors – designated by
the H&F Investor.

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If the combined shareholding percentage of the capital of the Combined Entity owned,
directly or indirectly (including through the CDPE Vehicle), by CDPE and FSIA during the
First Term decreases below the Governance Threshold (as defined in the Shareholders'
Agreement), the composition of the Board of Directors may be changed.
Board of Statutory Auditors (Nexi)
The Board of Statutory Auditors is made up of the following individuals during the First
Term: 
 One effective member and one alternate member jointly designated by CDPE and
FSIA; and 
 the remaining two effective members, one of whom serves as the Board of
Statutory Auditors' chairman, and one alternate member jointly designated by
Mercury and the AB Investors.
To analyze the effects of Nexi merger on Europe (that is Italy, Slovakia, Croatia, Denmark,
Norway and Finland), the report of European Commission (Case M.10075 - NEXI / NETS
GROUP, REGULATION (EC) No 139/2004 MERGER PROCEDURE) has been critically
perused.

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TIMELINE OF EVENTS

[extracted from the official website: https://www.nexigroup.com/en/group/overview/history/ ]

Nexi SpA was created in 2017 with the union of ICBPI and CartaS, two companies founded
in 1939 and 1986, respectively. The Milan-based Italian business provides payment
technology solutions that enable banks, merchants, and customers to transfer and receive
electronic funds.

A private equity-backed business with headquarters in Ballerup, Denmark, Nets A/S was
established in 1968. Throughout the Nordic area, it offers services and related technological
solutions. Three Nordic payment firms, Teller, BBS, and PBS from Norway, were combined
to become Nets in 2010. In 2012, Nets acquired Luottokunta, the top supplier of digital
payments in Finland, to become the dominant player in pan-Nordic payments.

Nexi announced the €4.56 billion agreement with Sia on October 4, 2020. The agreement will
establish one of the largest payment systems in Europe. In exchange, SIA investors receive
30% of the merged new business, leaving Nexi stockholders with 70%.

On November 2, 2020, Nexi announced that it has begun formal negotiations to acquire the
Nordic-focused Danish operator Nets. Less than two weeks later, on November 15, 2020, it
signed the agreement to purchase Nets for €7.8 billion in enterprise value and €6 billion in
equity. The consideration shall consist of shares of 406.6 million new Nexi Shares. Following
completion, Nets' shareholders will own 39% of the combined business. An earnout of up to
€250 million, payable in shares, may be awarded in 2022, depending on performance. To
purchase Nets, Nexi outbid rival U.S. company Global Payments.

The transaction is anticipated to close in Q2 2021, pending antitrust approvals. Following its
marriage to Sia last month, the organisation led by Paolo Bertoluzzo is prepared to surpass
France-based company Worldline and keep up the pace of global digital payments
consolidation.

The cross-border merger via integration of Nets into Nexi (the "Nets Merger") went into
effect on July 1st, 2021. Additionally, they said the binding framework agreement for the
merger of all the shares had been signed.

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When the merger is complete, Bo Nilsson, the former CEO of Nets, will become chairman of
the board of directors of Nets and a non-executive board member of Nexi, while Paolo
Bertoluzzo, the current CEO of Nexi, would assume the position of group CEO. The former
CFO of Nets, Klaus Pedersen, will take over as CEO.

The Merger follows Nexi's announcement last month that it had signed a Memorandum of
Understanding regarding a strategic alliance between Nexi and SIA, which is separate from
the Merger and is consistent with the consolidation process underway at the European and
global levels in the digital payments sector. Although the two deals are unrelated to one
another, they both will help realise the goal of developing a truly European PayTech leader.

After the two transactions are completed, the new combined group consisting of Nexi, Nets,
and SIA (the "New Group") will become one of the European PayTech leaders with the scale,
reach, and breadth of capabilities to spearhead the continent's shift to a cashless society from
a position of strength.

CONTROVERSIES

The talks between Sia and Nexi broke down several times over governance and valuation
issues. One of the main hurdles around the valuation was over the terms and the extension of
the contract between Sia and lender UniCredit, its main client. The agreement was extended
for another 10 years to 2036 and the parties came to an agreement on the payment of upfront
commissions, two people said.

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AGREEMENT ON THE EUROPEAN ECONOMIC AGREEMENT

The EU Member States and the three EEA EFTA States—Iceland, Liechtenstein, and
Norway—are joined in a single market known as the "Internal Market" by the Agreement on
the European Economic Area, which came into effect on 1 January 1994.
Equal rights and obligations for persons and economic operators inside the EEA are
guaranteed under the EEA Agreement. It allows for the integration of EU regulations
governing the free movement of people, capital, products, and services across the 30 EEA
States. The Agreement also covers cooperation in other significant fields, commonly referred
to as "flanking and horizontal" policies, including research and development, education,
social policy, the environment, consumer protection, tourism, and culture.

Pursuant to Article 6(1)(b)5 of Council Regulation No 139/20041 and Article 57 of the

Agreement on the European Economic Area6, the European Commission discussed the
merger of the two parties; Nets and Nexi. On 1 February 2021, the European Commission
received notification of a proposed concentration pursuant to Article 4 of the Merger
Regulation by which Nexi SpA (“Nexi”) intends to acquire within the meaning of Article
3(1)(b) of the Merger Regulation sole control over Nets A/S, Denmark, and the Concardis
Payment Group, Germany (“Nets”).

THE OPERATION
Nexi will continue to exist as the surviving entity after the merger of Nets TopCo 2, the
company in charge of Nets, with Nexi (the "Transaction"). Nexi will still be under the
supervision of Advent and Bain Capital, with funds under the management of Hellman &
Friedman merely acquiring a non-controlling minority stake. As a result, Nexi will gain full

5
Council Regulation No 139/20041, Article 6(1)(b) - Where it finds that the concentration notified,
although falling within the scope of this Regulation, does not raise serious doubts as to its compatibility
with the common market, it shall decide not to oppose it and shall declare that it is compatible with the
common market.
6
Agreement on the European Economic Area, Article 57 - All holders of marketing authorisations for medicines
in the European Union (EU) and the European Economic Area (EEA) must submit information to the European
Medicines Agency (EMA) on authorised medicines and keep this information up-to-date. This is a legally
binding requirement from the EU pharmaceutical legislation. The Agency uses this information to support the
analysis of data, regulatory activities and communication.

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authority over Nets. According to Merger Regulation Article 3(1)(b)7, the Transaction
qualifies as a concentration.

UNION DIMENSION
Each of the involved companies has EU-wide sales in excess of EUR 250 million, and their
total global turnover exceeds EUR 5000 million. In no case does either of the two Parties
generate more than two-thirds of their combined EU-wide revenue in a single Member State.
According to Article 1(2) of the Merger Regulation, the notified operation has an EU
dimension as a result.

RELEVANT MARKETS
Although the Parties have the diverse geographic reach, they are both engaged in the
provision of financial goods and services, especially in Europe. Nets' activities are mostly
centered in Central and Eastern Europe, the Nordic region, and Germany, Nexi's activities are
primarily concentrated in Italy, where the business generated over [90-100]% of its global
revenue in 2019 and in 2020.8 The activities of the Parties intersect in card payment
services as well as in the production and distribution of customized smart payment
cards.

Card Payment system

 The Parties are both active in the following services related to card payment systems9:
o Merchant acquiring: a set of services that enable merchants to accept
payment cards at their physical POS10 or online, and receive the funds from
card payments.

7
Merger Regulation, Article 3(1)(b) - the acquisition, by one or more persons already controlling at least one
undertaking, or by one or more undertakings, whether by purchase of securities or assets, by contract or by any
other means, of direct or indirect control of the whole or parts of one or more other undertakings.
8
The Report of European Commission (Case M.10075 - NEXI / NETS GROUP, REGULATION (EC) No
139/2004 MERGER PROCEDURE).
9
By using a payment card, such as a debit or credit card, a cardholder can purchase goods and services via card
payment systems. Through these systems, businesses are linked to financial institutions, specifically the bank
issuing the card and the bank certifying the cashless payment to the business' advantage, to carry out the full
transaction from the time of payment until the business' account is credited.
10
POS terminals are physical equipment, specifically card readers into which a payment card is inserted while
performing a payment transaction in-store. POS terminals are frequently provided by financial institutions along
with related services, such as the management of a terminal or terminal fleet.

11
 o Acquiring processing: technological support for card-based transactions on
the merchant's end, particularly for the routing of payments to the issuer
processor.

Smart Payment Card Manufacture, supply and personalisation

 Although Nexi does not make smart payment cards, it does provide
personalization services for them in Italy.11
 Smart payment cards are not produced by Nets. Lone a small portion of Nets'
personalization offerings are available in the European Economic Area (EEA).
From its only personalization plant in Zagreb, Croatia, Nets offers
personalization services12 for smart payment cards in Croatia, Hungary,
Slovakia, Slovenia, and Romania.
 The actions of Nets are focused on customising smart cards. In addition to
producing (non-personalized) smart payment cards that are sold all over the
world, IDEMIA, a portfolio business that is solely under Advent's control
(which also co-controls Nexi with Bain Capital), provides personalization
services in a number of EEA nations.

Market Definition
The Commission assessed whether the merchant acquiring market could be further
subdivided on the basis of: (i) types of payment card schemes (international or domestic); (ii)
payment card brands (e.g., Visa or Mastercard); (iii) type of payment card (debit or credit);
(iv) physical payment via a POS terminal (“POS merchant acquiring”) or web-based payment
(“e-commerce merchant acquiring”); and (v) wholesale merchant acquiring (to banks) and
retail merchant acquiring (to merchants) in Italy13.
11
See Commission decision of 19 April 2017, Advent International/Morpho, Case M.8258, paragraph 21; Smart
payment cards have microprocessor chips built into them. They are bought by banks for usage by final users.
These cards are initially created in an impersonal format, meaning they just have the bank's or payment card
company's logo. The cards are then personalised, that is, the cardholder's name and account number are stamped
on them, and their electronic data is loaded onto the card's chip
12
See The Report of European Commission (Case M.10075 - NEXI / NETS GROUP, REGULATION (EC) No
139/2004 MERGER PROCEDURE); Reply to RFI 2, question 2.
13
See The Report of European Commission (Case M.10075 - NEXI / NETS GROUP, REGULATION (EC) No
139/2004 MERGER PROCEDURE); See Cases COMP/M.9776 - Worldline/Ingenico, decision of 30.9.2020,
paragraphs 15 et seq; COMP/M.9759 - Nexi/Intesa Sanpaolo (Merchant Acquiring Business), decision of
26.6.2020, paragraphs 35 et seq; COMP/M.7873 - Worldline/Equens/Paysquare, decision of 20.4.2016,
paragraphs 19 et seq; COMP/M.7241 - Advent International/Bain Capital Investors/Nets Holding, decision of
8.7.2014, paragraphs 12 et seq; COMP/M.7711 - Advent International/Bain Capital/ICBPI, decision of

12
The Commission concluded that separate relevant markets exist for Italian wholesale and
retail merchant acquiring; separate relevant markets exist for POS merchant acquiring and e-
commerce merchant acquiring; and it can be left open whether any additional segmentations
are relevant for POS merchant acquiring. In the end, the Commission's evaluation of the
Transaction in relation to merchant acquisition is unaffected by the market segmentation.

Geographic Market Definition

In Nexi/ISP, the Commission considered the distinction between wholesale and retail
merchant acquiring as being relevant to Italy but eventually left open the question whether
the geographic scope of this market is national or EEA-wide.14 The market for POS merchant
acquiring (and any potential sub-segments) is therefore considered to be national in scope for
the purposes of this judgement, but the market for e-commerce merchant acquiring services is
at least EEA-wide in scope. In making this conclusion, the Commission also evaluated the
Italian market for retail POS merchant purchasing.

Acquiring Process
Prior to now, the Commission had recognised the presence of discrete markets for purchasing
processing services and issuing processing services 15 within the larger market for card
processing. The Commission addressed the potential of categorising the market under
acquiring processing based on I the payment card scheme (domestic/international) and (ii) the
platform, separating between actual POS terminals and web-enabled interfaces (e-
commerce). Ultimately, there was no definitive market definition. The Commission recently
decided that additional segmentation is not necessary because purchasing processing
represents a distinct product market.16

17.9.2015, paragraphs 23 et seq; COMP/M.6956 - Telefonica/Caixabank/Banco Santander, 14.8.2013,

paragraph 46; and COMP/M.5241 - American Express/Fortis/Alpha Card, decision of 3.10.2008, paragraphs 28
et seq.
14
See, for example, Case COMP/M.9776 - Worldline/Ingenico, decision of 30.9.2020, paragraph 36; In
Worldline/Ingenico, the Commission considered that (i) the market for the provision of POS merchant acquiring
services (and its possible sub-segmentations regarding credit/debit cards, card brands, and
international/domestic card network schemes) is national in scope and (ii) the market for the provision of e-
commerce merchant acquiring services is at least EEA-wide in scope
15
See Cases COMP/M.9452 - Global Payments/TSYS, decision of 16.9.2019, paragraphs 17-25;
COMP/M.7873 - Worldline/Equens/PaySquare, decision of 20.4.2016, paragraphs 33-37; and M.7241 - Advent
International/Bain Capital Investors/Nets Holding, decision of 8.7.2014, paragraph 31-36.
16
Nexi acknowledges that card processing should be divided into acquiring processing and issuing processing,
particularly given that each activity is conducted through a distinct platform and is targeted at a different
consumer. Nexi believes it would not be acceptable to differentiate between POS and e-commerce transactions
when processing acquisitions; See The Report of European Commission (Case M.10075 - NEXI / NETS

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In this case, the Commission believes there is no justification to change from its most recent
decision-making procedure, as mentioned above. As a result, the Commission concluded that
acquisition processing should not be further segmented for the purposes of this decision
because it constitutes a separate product market.

Provision and Management of POS Terminal

In this instance, the Commission believes it is permissible to leave open whether the market
for purchasing processing services may be regarded as having a national or EEA-wide scope
for the purposes of this judgement. Therefore, the Commission believes that the provision
and management of POS terminals, which do not require additional segmentation, constitutes
the relevant market for the purposes of this decision.

Smart Card Payments

Prior to this judgement, the Commission had assumed that the geographic market for the
provision and administration of POS terminals was likely to be national in scope. 17 In the
present case, there is no reason to depart from the decisional practice described above.
Therefore, the Commission considers that, for the purposes of this decision, the market for
the provision and management of POS terminals should be considered as national in scope.18
The results of the Commission’s market investigations did not confirm Nexi’s arguments19.
GROUP, REGULATION (EC) No 139/2004 MERGER PROCEDURE).
17
In Advent International/Morpho, the Commission observed that most banks source non-personalised cards
and card personalisation services from the same supplier. Thus, the Commission considered a relevant product
market that includes both the manufacture and supply of non-personalised smart payment cards and their
personalisation. Nonetheless, the Commission also highlighted the differences between these two services. The
Commission ultimately left open whether the smart payment card market can be segmented into the (i)
manufacture and supply of non-personalised smart payment cards and (ii) personalisation of smart payment
cards.
18
Financial institutions utilise smart payment cards that have microprocessor chips incorporated in them that
store and secure cardholder data and offer embedded security features not found on conventional magnetic stripe
cards. The market for manufacturing and providing smart payment cards to financial institutions is distinct from
the general market for safe plastic cards, according to a prior finding by the Commission.
19
The manufacture, supply, and personalization of smart payment cards are all considered to be a part of a
single relevant market by Nexi. Nexi continues by saying that it is not required to make a distinction between
the creation and distribution of non-personalized smart payment cards and their personalization. Nexi claims
that this is the case for two reasons: I all significant non-personalized smart payment card manufacturers (such
as Thales, G+D, IDEMIA, and AustriaCard) also provide personalization services; and (ii) issuers frequently
purchase both card manufacturing and card personalization from the same supplier. In any case, Nexi contends
that the relevant product market definition for the manufacture, supply, and personalization of smart payment
cards can be left open because the Transaction does not raise competition-related issues under any conceivable
definition of the market (i.e., a single market that encompasses both manufacture, supply, and personalization,
or separate markets for each of these activities).

14
In light of the above, for the purposes of this decision, the Commission considers that there
are separate relevant product markets for the (i) manufacture and supply of non-personalised
smart payment cards and (ii) personalisation of smart payment cards.

Legal Framework
In Advent International/Morpho, the Commission determined that a market exists that is
more expansive than just a single country, i.e., the entire EEA or even the entire world, for
the production and supply of non-personalized cards. In that ruling, the Commission also
noted that a national or possibly regional market for smart card personalization is possible
(e.g., for EEA countries lacking domestic card schemes). The reason is that since
personalised smart payment cards must be given to the final consumer within days, they
cannot be dispatched from a great distance. If the relevant market for personalising smart
payment cards is I EEA-wide or (ii) national in scope, the Commission finally left this
question unanswered.
 The Commission notes the following:
o The majority of customers indicated that they source non-personalised smart
payment cards through competitive bidding processes at EEA-level or through
bilateral agreements at EEA-level.
 As one competitor put it, “The conditions of competition for card manufacture and
supply are fairly similar across the EEA but the relative strength of each competitor
varies from country to country...”.
 The market investigation was inconclusive regarding the geographic scope of the
relevant market for smart payment card personalisation services (namely, whether it is
national or regional):
 In order to meet the rigorous deadlines for personalising smart payment cards, a
number of vendors offer these services from facilities that are situated in the same
nation as the client. One rival asserts that "for replacing lost/stolen cards, or for new
cards, the personalization centre needs to personalise and dispatch the card the same
or the next day after receiving the bank's request for replacement." In most cases, the
card is sent straight to the cardholder. Personalization services are frequently offered
from facilities in the customer's country because to the need for same-day or next-day
delivery. For all major nations, this is the general rule. The majority of responding
rivals said that "the conditions of competition that [they] faced in the market

15
 investigation" On the other hand, for customers based in smaller countries,
personalisation services can also be provided from neighbouring countries. This is the
case in Central and Eastern Europe. For example, Nets serves customers in Croatia,
Hungary, Romania, and Slovakia through its personalisation centre in Croatia.
AustriaCard offers services to customers in Czechia, Slovenia and Slovakia through
its personalisation centre in Austria.
 Given the foregoing, the Commission believes that the relevant market for the
creation and distribution of non-personalized smart payment cards has at least EEA-
wide geographic reach for the purposes of this judgement. Since the Transaction does
not raise any significant concerns about its compatibility with the internal market even
on the basis of the most limited plausible geographic market definition, i.e., at the
national level, the precise geographic scope of the market for smart payment card
personalization services can be left open.
 According to Merger Regulation Articles 2(2) and 2(3), the Commission must
determine whether a proposed concentration will materially impair effective
competition in the internal market or in a considerable portion of it, particularly
through the development or strengthening of a dominant position.

HORIZONTAL MERGER

A merger can entail horizontal effects 20. In this respect, the Commission Guidelines on the
assessment of horizontal mergers under the Council Regulation on the control of
concentrations between undertakings (“the Horizontal Merger Guidelines”) distinguish
between two main ways in which mergers between actual or potential competitors on the
same relevant market may significantly impede effective competition, namely

(a) by removing significant competitive constraints on one or more firms, which would have
increased market power without the use of coordinated behaviour (non-coordinated effects);

(b) by altering the nature of competition so that firms that had not previously coordinated
their behaviour are now significantly more likely to coordinate and raise prices or otherwise
harm effective competition (coordinated effects)21.
20
Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
concentrations between undertakings (2004/C 31/03), Official Journal of the European Union; https://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2004:031:0005:0018:EN:PDF.
21
Horizontal Merger Guidelines, paragraph 22.

16
NON- HORIZONTAL MERGER

Additionally, when businesses that operate in similar markets or at different levels of the
same supply chain join, non-horizontal impacts may result. According to the Commission
Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the
control of concentrations between undertakings (the "Non-Horizontal Merger Guidelines") 22,
non-horizontal mergers do not result in a reduction in direct competition between merging
companies in the same relevant market and offer room for efficiency. Non-horizontal mergers
can, however, seriously hamper effective competition in some situations. This is in particular
the case if they give rise to foreclosure 23. In the assessment of non-horizontal mergers, the
Commission distinguishes between two broad types of such mergers: vertical mergers and
conglomerate mergers.
Vertical mergers involve companies operating at different levels of the supply chain. For
example, when a manufacturer of a certain product (the ‘upstream firm’) merges with one of
its distributors (the ‘downstream firm’), this is called a vertical merger.
Conglomerate mergers are unions of businesses that do not have a vertical or horizontal link
(i.e., they are rivals in the same market) (as suppliers or customers). The Commission focuses
on mergers between businesses that operate in closely related markets in reality (e.g. mergers
involving suppliers of complementary products or products that belong to the same product
range). The Commission examines whether a merger results in foreclosure, limiting or
eliminating real or potential rivals' access to resources or markets as a result of the
transaction, diminishing their capacity and/or motivation to compete. The entry or growth of
competitors may be deterred by such foreclosure, while their departure may be prompted.
Therefore, foreclosure is still possible even if the competitors who are being foreclosed on
are not compelled to leave the market; it just requires that the competitors suffer a
disadvantage and as a result, become less competitive. When the merging companies—and
perhaps some of their rivals as well—are able to increase the price that consumers pay
profitably, such foreclosure is viewed as anti-competitive.
There are two types of vertical foreclosure, according to the Non-Horizontal Merger
Guidelines. The first is where the merger is anticipated to increase prices for competitors
downstream by denying them access to a crucial input (input foreclosure). In the second case,
22
OJ C 265, 18.10.2008, p. 6.
23
Non-Horizontal Merger Guidelines, paragraph 18.

17
the merger may prevent upstream competitors from accessing a large enough consumer base,
so forcing them out of business (customer foreclosure). The Commission considers several
factors when evaluating vertical foreclosure, including I whether the combined entity would
be able to engage in foreclosure, (ii) whether the combined entity would have an incentive to
do so, and (iii) what the overall effect of such a foreclosure strategy would be on effective
competition in the affected markets.
Foreclosure is a major issue in the context of conglomerate mergers. The combining of items
in similar markets may give the merged entity the capacity and incentive to leverage a strong
market position from one market to the next by tying, bundling, or other exclusive business
methods. Common techniques like tying and packaging generally have no negative effects on
competition. In order to provide their customers better items or offerings in more affordable
ways, businesses tie and bundle their products. The capacity or motivation of current or
potential competitors to compete, however, may be diminished in some situations as a result
of these tactics. Due to lessened competition pressure, the combined business may be able to
raise prices.
When determining the likelihood of such a scenario, the Commission looks at three factors:
first, whether the combined company would have the ability to foreclose on its competitors,
second, whether it would have the financial incentive to do so, and third, whether a
foreclosure strategy would have a materially negative impact on competition, harming
consumers. Considering how closely related they are, these elements are frequently addressed
in practise simultaneously.

SCENARIO OF THE AFFECTED MARKETS

Nexi and Nets have been the market players in services like merchant acquiring, acquiring
processing, smart cards personalization (for payments), and the management and provision of
POS terminals. Nexi is jointly controlled by Advent, which solely controls IDEMIA.
IDEMIA manufactures non-personalised smart payment cards and also offers personalisation
services for smart payment cards.

Against this background and taking into account the market definitions discussed in Section 4
above, the Transaction gives rise to several horizontally affected markets:

a. POS merchant acquiring services in Denmark and Germany and retail POS merchant
acquiring services in Italy
18
 b. Acquiring processing services in Croatia, Denmark, Norway and Slovenia
c. Provision and management of POS terminals in Italy and Sweden
d. Personalisation services for smart payment cards in Hungary, Slovakia, and Romania

The Transaction also gives rise to the following vertically affected markets:

a. Acquiring processing (upstream) and merchant acquiring (downstream)

b. The manufacture and supply of non-personalised smart payment cards (upstream) and
the personalisation of smart payment cards (downstream).

HORIZONTALLY AFFECTED MARKETS

No affected market arises at EEA level, where the combined market share of the Parties is
approximately 10-20 % or less under all plausible relevant product market sub-
segmentations.24

The Commission considers that the Transaction does not give rise to serious doubts as to its
compatibility with the internal market regarding the market for merchant acquiring services
(or any segment thereof) in Denmark, Germany, or Italy. 25 This is because the Parties are not
particularly dynamic competitors in these countries either, as their share of transaction values
remained similar between 2017 and 2020 in Italy (for Nets), and in Denmark and Germany
(for Nexi). The results of the market investigation clearly confirm that Nets is not perceived
as exerting a meaningful competitive constraint in Italy, and conversely that Nexi does not
exert a meaningful competitive constraint in Denmark or Germany. The Parties do not appear
to be close competitors.26 At least four other players would remain active on the POS
merchant acquiring market post-Transaction, in each relevant country and segment where an
affected market arises. Each of these players holds a market share far exceeding the
increment brought about by the Transaction.

With these factors in mind, the Commission had concluded that the Transaction does not give
rise to serious doubts as to its compatibility with the internal market for merchant acquiring
services (or any segment thereof) in Denmark, Germany, or Italy.

24
The Report of European Commission (Case M.10075 - NEXI / NETS GROUP, REGULATION (EC) No
139/2004 MERGER PROCEDURE).
25
The Report of European Commission (Case M.10075 - NEXI / NETS GROUP, REGULATION (EC) No
139/2004 MERGER PROCEDURE).
26
Nexi and Nets virtually never participated in the same tenders in any of the affected markets in the last three
years. Out of the tenders for merchant acquiring services the Parties participated in over the last three years, they
only met in multi-country tenders.

19
Acquiring Processing

The Commission considers that the Transaction does not give rise to serious doubts as to its
compatibility with the internal market regarding the markets for acquiring processing in
Croatia, Denmark, Norway and Slovenia. This is because the increment brought about by the
Transaction is minimal on all affected markets, as it remains below [0-5]%.27 Nothing in the
market investigation suggests that Nexi would exert a competitive constraint on Nets or vice
versa as regards acquiring processing. In particular, Nexi is not a recent entrant in any of the
markets. Nexi is not a particularly dynamic competitor either, as its share of transaction
values remained similar between 2017 and 2020 in Croatia, Denmark, and Slovenia. The
results of the market investigation also largely indicate that Nexi does not exert a competitive
constraint on Nets in the relevant countries. The Parties do not appear to be close
competitors. Nexi and Nets have never participated in the same tenders in any of the affected
markets in the last three years. At least three other players would remain active on each of the
affected markets post-Transaction. Each of these players holds a market share far exceeding
the increment brought about by the Transaction.

The Commission concluded that the Transaction does not give rise to serious doubts as to its
compatibility with the internal market for acquiring processing in Croatia, Denmark, Norway
and Slovenia.

Provision and Management of POS terminals

The commission opined that the Transaction does not give rise to serious doubts as to its
compatibility with the internal market regarding the market for the provision and
management of POS terminals in Italy or Sweden. The market shares of the Parties are
moderate in the relevant countries.28 Nothing in the market investigation suggests that Nexi

27
The Report of European Commission (Case M.10075 - NEXI / NETS GROUP, REGULATION (EC) No
139/2004 MERGER PROCEDURE).
28
The Report of European Commission (Case M.10075 - NEXI / NETS GROUP, REGULATION (EC) No
139/2004 MERGER PROCEDURE); Sweden: the combined market shares of the Parties are below 25% in
Sweden. When the parties shares are below 25% in the markets where their activities overlap, concentrations are
unlikely to raise competition concerns. Italy: the combined market shares of the Parties are close to the 25%
threshold on the market for the provision and management of POS terminals, and below in relation to traditional
POS terminals (where an overlap arises, as Nets only offers traditional POS in Italy).

20
would exert a competitive constraint on Nets or vice versa as regards the provision and
management of POS terminals. In particular, Nexi is not a recent entrant in Sweden, nor is
Nets in Italy. The companies are also not particularly dynamic competitors either, as their
share in terms of number of POS terminals supplied has remained similar over the last three
years in Italy (for Nets) and Sweden (for Nexi). The Parties do not appear to be close
competitors. In Sweden, Nexi only offers traditional POS, whereas Nets offers other
categories of POS terminals as well. Conversely, in Italy, Nets only offers traditional POS,
whereas Nexi offers other categories of POS terminals. Post-Transaction, at least six other
players will remain active in Sweden, and seven in Italy. Each of these players holds a market
share far exceeding the increment brought about by the Transaction.

The Commission concludes that the Transaction does not give rise to serious doubts as to its
compatibility with the internal market for the provision and management of POS terminals in
Italy or Sweden.

Personalization of smart payment cards

The Commission concluded that the Transaction does not give rise to serious doubts as to its
compatibility with the internal market in the market for personalisation services for smart
payment cards in Hungary, Slovakia and Romania.

COMPETITIVE ASSESSMENT OF NON-HORIZONTALLY AFFECTED MARKETS

Acquiring processing (upstream) – POS Merchant acquiring (downstream)

Some merchant acquirers outsource the technical management and routing of a payment
transaction as well as the acquiring processing. A vertical link between the supply of
acquiring processing services (upstream) and POS merchant acquiring services may occur
when merchant acquirers purchase their acquiring processing services from a third party
(downstream). The shares of Nexi and Nets in the pertinent vertically impacted markets are
listed below.

Input Foreclosure - Slovenia, Finland and Italy

21
When a merged business may alter the general availability of inputs for the downstream
market by restricting access to its own upstream goods, it has the power to foreclose
downstream rivals29.

The Commission believes that it is unlikely that the Transaction would lead to input
foreclosure issues in the downstream markets in Slovenia, Finland, and Italy. The
Commission believes that the combined entity would not have the ability or the motivation to
foreclose its downstream competitors in POS merchant acquiring services (or any of the
market's sub-segments) in Finland or Slovenia. Additionally, by limiting access to acquiring
processing services on a national level, the merged business would not have the power or
desire to shut out its downstream rivals in Italy's retail POS merchant acquiring services (or
any of the market's sub-segments).

The Commission observes that Nets is now engaged upstream in acquire processing and
downstream in POS merchant acquiring in Finland and Slovenia with regard to incentives to
foreclose. However, Nexi does not provide acquiring processing services to its downstream
rivals. In both the upstream and downstream markets, the Transaction's share augmentation
would be negligible ([0-5]% or less). Therefore, it is unclear that the proposed Transaction
will alter the combined entity's incentives to pursue an input foreclosure strategy in the
downstream markets of Finland, Italy, or Slovenia.

Input Foreclosure - Croatia, Denmark, and Norway

In the downstream markets in Croatia, Denmark, and Norway, the Commission believes that
the Transaction is unlikely to give rise to input foreclosure concerns. The Commission
believes that by limiting access to acquiring processing services at the national level, the
proposed Transaction would not incentivize the combined entity to foreclose its downstream
competitors in POS merchant acquiring services (or any of the market's sub-segments). These
countries include Croatia, Denmark, and Norway.

In Croatia, Denmark, and Norway, Nets is already involved in the upstream and downstream
processing of acquisitions. The Transaction would result in a very small share increase ([0-
5]% or less) in both the upstream and downstream markets30.

With regard to a potential input foreclosure for acquiring processing services purchased by
providers of POS merchant acquiring services (including retail POS merchant acquirers in
29
Non-Horizontal Merger Guidelines, paragraph 36.
30
Non-Horizontal Merger Guidelines, paragraphs 61 and 66.

22
Italy), the Commission concludes that the Transaction does not raise serious concerns about
its compatibility with the internal market.

Customer Foreclosure - Only when a corporation is an essential client for the upstream
product does a merged entity have the authority to engage in customer foreclosure31.

Croatia, Denmark, Finland, Norway, Slovenia and Italy

The Commission believes that the Transaction is unlikely to give rise to consumer
foreclosure concerns in Croatia, Denmark, Finland, Norway, or Slovenia, which are credible
national markets for purchasing processing services. For the following reasons, the merged
business would not be able to prevent its upstream rivals from acquiring processing services
in these nations by limiting access to a sizable merchant acquiring client base.

a) The proposed Transaction will not affect the combined entity's capacity because Nexi
is not at all involved in POS merchant acquiring services in these two nations.32
b) Nets and its supply source provide acquiring processing for its own merchant
acquiring activities in Croatia and Slovenia. The combined firm cannot be regarded as
a significant client due to its weak downstream presence (with a market share below
[0-5]%). The proposed Transaction does not affect the combined entity's capacity to
engage in customer foreclosure in Croatia and Slovenia because Nexi is not at all
involved in POS merchant acquiring services in these two nations.

In any case, none of the respondents to the market inquiry engaged in offering acquisition
processing services expressed worries about client foreclosure33.

In the Italian downstream market for retail POS merchant acquiring, Nexi now controls a
share of [30-40]%. In Italy, Nets doesn't provide acquiring processing services. Additionally,
the uplift caused by the transaction on the downstream market for Retail POS Merchant
Acquiring is negligible (between 0 and 5%). Therefore, it is extremely unlikely that the
proposed Transaction will alter the combined entity's incentives to pursue a client foreclosure
strategy in Italy.

31
Non-Horizontal Merger Guidelines, paragraphs 61 and 66.
32
Nets manages almost [90-100]% of its internal acquiring processing requirements in Denmark, Finland, and
Norway, hence it cannot be regarded as a significant client of suppliers of acquiring processing services.
Additionally, the little increase brought about by Nexi (less than [0-5]%) has no appreciable effect on the
merged entity's capacity to carry out consumer foreclosure in Denmark.
33
Responses to questionnaire to competitors in acquiring processing sent on 2 February 2021 by European
Commissiom DG Competition

23
With regard to a possible consumer foreclosure for purchasing processing services obtained
by POS merchant acquirers, the Commission believes that the Transaction does not raise
major concerns about its compatibility with the internal market in light of the aforementioned
factors.

Manufacture/supply of non-personalised smart payment cards (upstream) –

Personalisation of smart payment cards (downstream)

Smart payment cards without a personalization are an input for businesses that provide card
personalization services. While Nets and IDEMIA provide personalization services, IDEMIA
produces non-personalized smart payment cards.

1. Input Foreclosure

The deal is unlikely to give rise to input foreclosure issues, according to the Commission. For
the following reasons, the merged firm and IDEMIA would not be able to exclude its
downstream rivals in personalization services in Croatia, Hungary, Slovakia, Slovenia, or
Romania by limiting access to generic smart payment cards34.

When a merged business may alter the general availability of inputs for the downstream
market by restricting access to its own upstream goods, it has the power to foreclose
downstream rivals35. Regarding the availability of non-personalized smart payment cards, this
is not the case for the merged business and IDEMIA for the following reasons:

a) Despite having a high market share of [40–50%] in the EEA for personalization
services for smart payment cards, IDEMIA is constrained by competition from
other market participants. Thales, G+D, and AustriaCard are a few of these
participants. Responding competitors assessed Thales as a player stronger than
IDEMIA in the EEA-wide market for the production/supply of non-personalized
smart payment cards during the market inquiry36.
b) If IDEMIA decides to foreclose on any downstream businesses, its rivals in the
upstream market may increase output to sell non-personalized smart payment

34
Replies to RFIs 4 and 5, question 9
35
Non-Horizontal Merger Guidelines, paragraph 36.
36
Questionnaire Q1 to smart payment cards competitors, question 19.1

24
 cards to those parties. In the market study, a number of upstream competitors
claimed to have extra production capacity for generic smart payment cards37.
c) In the market research, every respondent who bought non-personalized cards that
they later customised predicted that there will be enough providers in the EEA
after the Transaction to meet everyone's card needs38.
d) No personalizer in Croatia is now offered non-personalized smart payment cards
by IDEMIA. Therefore, it does not appear to have the power to prevent Nets'
competitors from operating in that nation by limiting access to non-personalized
cards.The majority of rivals who responded do not anticipate that the merged firm
(or IDEMIA) will be able to raise prices or lessen competition in the market for
personalization services for smart payment cards in Hungary, Slovakia, Slovenia,
or Romania39.

2. Customer Foreclosure

According to the Commission, there is little chance that the Transaction would cause
consumer foreclosure issues because of the following reasons.

Only when a corporation is an essential client for the upstream product does a merged entity
have the authority to engage in customer foreclosure40. In the downstream markets for smart
payment card personalization services, this is not the case for the merged entity.

a) Less than [0-5]% of all smart payment cards personalised in the EEA in 2019
were by Nets. Moreover, the five EEA Member States (mentioned in Table 6
above) are the only ones where Nets provides personalization services for smart
payment cards. In the event that the combined entity adopted a customer
foreclosure strategy, IDEMIA's competitors post-Transaction could continue
selling non-personalized smart payment cards to I 22 Member States where Nets
is not active and/or clients representing [90-100]% of all smart payment cards
required in the EEA.
b) Most of Nets' clients do not purchase non-personalized smart payment cards
directly from the company. Instead, the majority of Nets' clients buy their cards

37
Questionnaire Q1 to smart payment cards competitors, question 5.1.
38
Questionnaire Q1 to smart payment cards competitors, question 13 and Questionnaire Q2 to smart payment
cards customers, question 17.
39
Questionnaire Q1 to smart payment cards competitors, questions 25 and 26
40
Non-Horizontal Merger Guidelines, paragraphs 61 and 66.

25
 straight from the producers. For just customers in Slovenia, Nets procured non-
personalized smart payment cards on its own. Less than [0-5]% of the EEA's
overall demand for non-personalized smart payment cards was represented by this
in 201941. A source said during the market inquiry that it does not anticipate a
drop in the level of competition for non-personalized smart payment cards in the
EEA42. This was confirmed by every contender who responded43.

The Commission concludes that the Transaction does not raise significant concerns regarding
its compatibility with the internal market due to input or customer foreclosure on the markets
for the production/supply of non-personalized smart payment cards (upstream) and the
personalization of smart payment cards. This is in light of the aforementioned factors
(downstream).

41
Reply to RFI 7, question 6.
42
Questionnaire Q1 to smart payment cards competitors, question 24
43
Questionnaire Q1 to smart payment cards competitors, question 24

26
CONCLUSION

Due to the aforementioned factors, the European Commission decided not to object to the
announced operation and to deem it compliant with the EEA Agreement and the internal
market. This decision was made in accordance with Article 57 of the EEA Agreement and
Article 6(1)(b) of the Merger Regulation.

27