European regulators put brakes on UK NFC joint venture

The European Commission has opened an in-depth investigation into the planned NFC joint venture between Everything Everywhere, Telefónica and Vodafone UK which will delay launch until after the London Olympics and casts doubts over the timetable for the introduction of similar projects in a number of other European countries.

Orange, O2, Vodafone, T-Mobile
PROJECT OSCAR: Delayed while EC looks into competition issues

The European Commission has announced that it has decided to open an in-depth investigation under EU merger regulations into the planned NFC joint venture between mobile network operators Vodafone, Telefónica and Everything Everywhere.

“The Commission’s initial investigation revealed that the joint venture and its three parent companies may have the technical and commercial ability and incentive to block future competitors from offering their own mobile wallet services to customers in the UK, or to degrade the quality of these competing mobile wallets so that they become less attractive,” says the EU. “The Commission will now investigate the proposed acquisition in-depth to determine whether these initial concerns are confirmed or not.”

The three mobile network operators first announced plans to create a joint venture company to introduce NFC services in the UK in June 2011. A formal request to go ahead with the joint venture was filed on 6 March 2012. The UK’s fourth mobile network operator, Three, which was not invited to join the joint venture, has consistently objected to the venture.

“The Commission’s preliminary investigation indicated potential competition concerns in the nascent markets of mobile payment applications supply (so-called ‘mobile wallets’), mobile advertising and related data analytics services, where the joint venture may have very high market shares,” says the Commission

However, “the opening of an in-depth inquiry does not prejudge the final result of the investigation,” it adds. The Commission now has 90 working days, until 27 August 2012, to make a decision on whether the proposed transaction would reduce effective competition in the European Economic Area (EEA).

“The Commission is in favour of any initiative that will develop the promising mobile commerce sector in Europe and bring new and innovative payment and interactive advertising experience to consumers,” says Joaquín Almunia, Commission vice president in charge of competition policy. “At the same time, we need to make sure that competing services can keep emerging on this market, so that incentives to innovate remain and customers get the best mobile commerce services at the best cost.”

In a detailed statement responding to the EU’s decision, a spokesperson for the three carriers says:

Everything Everywhere, Telefonica UK and Vodafone UK have been informed by the European Commission that their plans to form a mobile commerce joint venture in the UK will require further discussions.

The EC decision to enter into a second phase of investigation follows constructive discussions with the EC about the purpose and scope of the joint venture. The discussions have been positive and the shareholders in the proposed joint venture remain focused and determined to progress with the project.

During the course of discussions with the EC it has become apparent that the embryonic nature of the mobile payments market in particular means that more time is needed to fully consider the proposed joint venture’s plans for a mobile wallet and engage with the views of other interested parties. We remain confident that an extended review will conclude that the proposed joint venture is pro-competitive and will provide robust competition to global players.

The joint venture shareholders believe the proposed joint venture will bring significant benefits to consumers as well as all businesses and organisations that want to offer mobile market and m-payments services. At the heart of the proposed joint venture is a desire to bring to the UK an easy and simple solution for businesses to create and consumers to enjoy m-commerce services.

The proposed joint venture will make it easy for companies of all sizes to create brand new services that will sit in the mobile wallet. The proposed joint venture will also provide a single contact point for advertisers, media agencies, retailers and brands that will enable them to book advertising space and create campaigns across all opted-in mobile users, affording economies of scale that they could not ordinarily achieve. For consumers, this means they will be able to receive the discounts and offers that they want to receive from the brands that are relevant to them.

The partners in the proposed joint venture want to keep UK PLC at the forefront of digital innovation, creating jobs, promoting innovation, fostering competition, investing in and contributing to the growth of new digital industries.

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