The Competition Authority is seeking views on possible conditions that could be imposed on the merger of Rapyd and Valitor.

On 10 September 2021, the Competition Authority received
Notice of the acquisition by Rapyd Europe Financial Network (2016) Ltd. („Rapyd“) of
Valitor hf. („Valitor“). It is proposed that Rapyd intends to merge Valitor's operations.
the acquisition of the operations of Rapyd Europe hf., formerly Korta hf. The acquisition is considered to involve
is a merger subject to notification under the Competition Act No. 44/2005 and is
the proposed merger is subject to the approval of the Competition Authority in accordance with the same
laws.

According to the Competition Authority's preliminary assessment, the relevant services market is considered
the case being the total market for vehicle servicing by Icelandic dealers*. It is clear that the Competition Authority's preliminary assessment is that the proposed merger will, if
unchanged, either significantly strengthen Valitor's potentially dominant market position or
leading to a decisive market-dominating position for the combined company in the overall market
for price maintenance by Icelandic dealers and distort competition with
to a significant extent, to the detriment of sellers and consumers.

The competitive concerns

In essence, the competitive... can be summarised.
concerns arising from the proposed merger in the following manner on the current
stage of the investigation, according to the preliminary assessment of the Competition Authority:

• The great compression that would take place at
  The merger, if left unchanged, would in various ways lead to a significant strengthening of a potential
  the dominant market position of Valitor or a path to a dominant market position for the combined entity
  corporate. The merger would therefore significantly increase the risk of a price for poaching.
  increased due to less direct competition. A stream of market participants' comments that
  The Competition Authority obtained evidence to support this early in the investigation period.
  appetiser.

• Findings of the Competition Authority's investigation
  contain indications that Valitor and Rapyd are close competitors. Then Rapyd could
  is likely to be considered a significant competitive force in the market, in view of the fact that
  The company has doubled its market share over the past two years. At the same time
  SaltPay's (formerly Borgun) market share has shrunk significantly. This
  Indications suggest that the planned merger of Valitor and Rapyd may be
  particularly harmful to competition in the market.

• A reduction in the number of strong competitors in the market with
  the merger would, as things stand, also entail a risk to those competitors in
  The survivors of the market clearance acquired the opportunity to coordinate their behaviour.
  so that so-called tacit coordination could be established, with the attendant damage to
  Business and consumers.

• A reduction in the number of strong competitors in the market could
  The unchanged also resulted in a reduction in the quality of service and innovation on
  in the market.

• It is apparent that at least two domestic parties
  plans to establish itself in the field of data protection in the near future and has it lain
  for the investigation of the matter. It is by no means certain that the new competitors in this
  The sector will, at least to begin with, have the capacity to serve larger retailers.
  which require more complex service solutions, e.g. due to till systems and connections to
  other software. A reduction in competitors could therefore, all else being equal, have a greater impact on
  the options of larger vendors with regard to service providers in transaction processing, however
  but smaller retailers. On the other hand, it should be noted that larger retailers generally
  a specified buyer's subsidy in agreements with the conveyancer.

• In Article 1 of the Central Bank of Iceland's Rules No. 31/2011 on
  settlement of card transactions states that the parties responsible for
  the maintenance of records and the submission of payments for goods and services shall be made
  Settlement of payment card transactions is carried out in Icelandic krónur. It states that
  this applies in cases where both the card issuer and the merchant are
  Icelandic, in addition to which prices for goods and services are stated in Icelandic
  krónum. The rules of the Central Bank mean that the majority of Icelandic sellers
  cannot resort to any foreign settlor, even if they set up
  whether they would be paid in Icelandic krónur or a foreign currency.
  currency. Only four foreign clearing houses have become parties to
  The Central Bank's settlement system for both MasterCard and VISA
  credit card payments and only two of them have a significant share in
  service maintenance by Icelandic dealers (and that share is extremely meagre). This
  indicates that competitive pressure from foreign payment processors is limited
  here.

Proposals for countermeasures and gathering viewpoints

The merger parties have offered to comply with certain conditions.
which include countermeasures intended to eliminate the harmful effects of the merger on
competition. The above list has not taken those countermeasures into account.
The Competition Authority is now considering whether the proposals put forward
that the merger partners are sufficient in this respect. Such conditions must ensure
that the harmful effects of the merger on competition are eliminated in such a way that effective competition in
that businesses can thrive in the market for the benefit of businesses and consumers.

Gathering perspectives from stakeholders in the market can be
an important factor in examining whether the proposed countermeasures have
have been put forward by the merger parties as adequate and likely to achieve
its goal.

The document from the merging parties sets out their proposals for remedies. to delete
the harmful effects of the merger, together with a brief explanation in that regard. Recommendations
The merger parties' objections are set out in the form of possible conditions in
a possible settlement with the Competition Authority regarding the merger.

The Competition Authority draws special attention to Article 5 of
Draft merger conditions. It states, among other things, that the planned
The purchaser of transferor undertakings will be granted certain
technical services for up to five years by the merger parties. At the same time, it is proposed that
that a buyer can grant sellers access to transaction management services on the basis of master licences
merchant acquirer from MasterCard and VISA (clause 5.1(b)) for up to five years. Useful
that the consultees would, among other things, comment on this proposed arrangement.

Market participants' comments on the merger partners' proposals will be used.
as the Competition Authority continues to assess whether the proposals are sufficient
to eliminate the harmful effects of the merger on competition, including whether a criterion
their choice of purchaser for the maintenance contracts from their portfolio (cf. Art. 3.
the conditions in the merger parties' draft documents) are likely to meet the appropriate requirements
on the suitability of such a buyer.

Stakeholders and other interested parties are invited to attend.
presenting its views on the merger partners' proposals for the terms of the settlement regarding remedies
no later than Monday, 31st January. Comments must be submitted electronically to
the email address samkeppni@samkeppni.is.**

Background information

In light of the foregoing, the Competition Authority has
has recently been investigating the proposed merger of Rapyd and Valitor. Both
The companies are transaction custodians, but transaction custody involves a service that makes
enabling merchants to accept payment by credit and debit cards, such as
with VISA and MasterCard, for in-store and online transactions.

In resolving the matter, the definition of markets and positions
of companies of key importance and has therefore a large part of the research been directed
to arrive at the correct conclusion on these matters. Initially, they based
The merger parties believed that transaction processing belonged to a much wider market than the one at hand.
had been set out in case law in the EEA area and in previous rulings
competition authorities and also in preliminary discussions with them regarding the merger. Has
The merger parties' position on the fundamental issues of the matter has been taken into account in this respect.
significant changes to the study.

The Competition Authority's investigation revealed that the merger
would either lead to a significant strengthening of a potential dominant market position
The dominant market position of the merger parties in the relevant market in
total. At the end of November 2021, the merger parties submitted a draft agreement on the terms of the merger.
counter-measures to facilitate the merger. The core of these proposals consisted of
that the merger parties sold a considerable number of transaction processing contracts to another party
service provider.***

On 23 December last, the Competition Authority sent
a letter to the merger parties which contained the regulator's initial assessment of the then-current implementation
of their sales of service contracts from their own ranks. The supervision did
serious observations regarding the merger parties' sales implementation in this regard and
raised certain doubts about the suitability of the party whom the merger parties have decided to
to negotiate the purchase of maintenance contracts from them. The letter included, among other things,.
It was argued in detail that the proposed sale structure would suffice.
not to remedy the merger's harmful effects on competition and they were given the opportunity
to respond to the initial assessment.

Mergers have responded to the preliminary assessment
the competition authority by substantially changing the sales implementation in accordance with
observations of the Competition Authority. In light of this, the Competition Authority considers
to submit the merger parties' proposals for remedial measures to eliminate harmful effects
the merger under market participants by means of the so-called market test (e.g. market test)
which corresponds to the consultation process of which this letter is a part. The Competition Authority
will, however, not take a position on possible conditions for counter-measures in
a possible settlement before the conclusion of the market test.

Rapyd's proposals for mitigating the merger can be accessed here.

Starred explanations:

The total market for move-in cleaning
can be divided into two submarkets, namely, point-of-sale transaction processing and
e-commerce transaction processing. To the preliminary assessment of the Competition Authority, it is apparent
the market for e-commerce fulfilment into two submarkets, i.e. other
on the one hand, with settlement in Icelandic krónur, and on the other hand, with settlement in foreign currency.
Currency. Only online trade settlement in Icelandic krónur is considered
part of the total market for transfer care (including transfer care on
point of sale) with Icelandic sellers referred to in this letter.

Where the processing of merger cases
Due to statutory deadlines, it is not possible to grant a longer consultation period.

In this regard, it is correct
to note that there are precedents for maintenance and repair agreements to be included
units which have been sold in comparable cases in merger matters are taken
to the activity of enforcement authorities in the field of the EEA.