The U.S. Department of Justice today said it filed a civil antitrust lawsuit to block the proposed acquisition by VeriFone of Hypercom, saying the deal would substantially lessen competition in the point-of-sale (POS) market and bring higher prices and reduced innovation, quality, product variety and service.
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VeriFone and Hypercom together control more than 60% of the U.S. market for the POS terminals used by the largest retailers. They are two of only three substantial sellers of other types of POS terminals, the DoJ stated.
In an effort to resolve antitrust issues with the merger, Hypercom said in April it had entered into an agreement to sell its U.S. business for $54 million to France's Ingenico S.A, the largest provider of POS terminals worldwide and the only other significant competitor to VeriFone and Hypercom in the United States, the DoJ said. But the DoJ didn't buy that solution. VeriFone agreed to purchase Hypercom for $485 million in November 2010.
According to the DoJ's complaint, the planned sale of Hypercom's U.S. POS terminal business to Ingenico does not resolve the antitrust concerns raised by the VeriFone/Hypercom transaction because the assets are to be sold to another significant competitor in the market in a manner that does not create a new, independent, long-term competitor. In addition, the structure of the agreements between Ingenico and VeriFone, enhances VeriFone and Ingenico's ability to coordinate pricing for all POS terminals, the DoJ stated.
POS terminals, especially those that can handle contactless payments are a potentially huge market. According to the NFC Retailers Blog, about 2% of the approximately 7 million card-accepting merchants in the United States are equipped to handle contactless cards or phones. If Near Field Communications technology for payments takes off, POS terminal vendors believe they will see a thriving business not only for hardware, but for software and services for payment, couponing, loyalty and other mobile-commerce applications. Such huge players as Google and mobile operators AT&T and Verizon Wireless will be pushing NFC-based mobile commerce and are recruiting merchants.