The UK’s Competition and Markets Authority (CMA) has warned that the PayPal iZettle deal could lead to competition issues, ultimately resulting in customers paying higher prices or getting inferior service.

The verdict comes following the completion of CMA’s phase 1 investigation into the deal.

The merger deal, valued at around $2.2bn, was first announced in May 2018 and closed in September.

PayPal iZettle takeover

After assessing the deal’s impact on the emerging market for omni-channel payment services, CMA conceded that iZettle could have been a strong competitor of PayPal had it not been purchased.

According to the watchdog, the competition would have ultimately resulted in innovation and reduced costs.

CMA executive director Andrea Gomes da Silva said: “While iZettle is a relatively recent entrant to payment services, it has already established a market-leading position in mobile point of sale devices and was well-placed to compete against PayPal in other emerging markets.

“That’s why we are concerned that PayPal’s takeover could lead to higher prices or reduce the quality of the services available to customers.”

The deal will be referred for an in-depth phase 2 probe on failing to address the watchdog’s concerns. The probe will be conducted by a group of independent CMA panel members.