PayPal's refusal to address concerns raised by the UK's Competition and Markets Authority over its takeover of Sweden's iZettle have opened the door for a full-blown Phase 2 investigation by the watchdog.
The CMA in November raised fears that PayPal's $2.2 billion takeover of mobile payments firm iZettle could lead to higher prices and worse service for UK customers.
The CMA believes that customers, including the SMEs which use both companies' mPOS offerings, could end up paying higher prices or receiving a "lower quality of service".
In addition, the CMA says that had iZettle remained independent "it could have provided strong competition for PayPal and potentially benefitted customers by driving future innovation and lower prices".
Concerns were also raised that the merger could negatively impact future competition in the emerging market for ‘omni-channel’ payment services.
The CMA said it would refer the deal for an in-depth Phase 2 investigation unless PayPal offered acceptable ways to address its concerns.
"As PayPal has chosen not to offer proposals to address the CMA’s concerns, the merger will now be referred for a Phase 2 investigation by an independent group of CMA panel members," the watchdog states. "The deadline for the final decision is 21 May 2019."