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EU regulators dismiss competition concerns over UK mobile wallet joint venture

Out-Law News | 05 Sep 2012 | 5:25 pm | 2 min. read

The European Commission has "unconditionally approved" a joint venture between Telefónica's O2, Vodafone and Orange and T-Mobile-owner Everything Everywhere (EE) that will enable the firms to collaborate on a new mobile payments service.

The three companies announced last year that they planned to form a joint venture company, dubbed Project Oscar, to develop a "mobile wallet" payment service that would "enable customers to transfer their entire physical wallet onto their mobile device" in order to "purchase products or services online."

However, the move drew criticism from rival mobile network Three. It claimed that the partnership would have "serious implications" for consumers and businesses. Three said that the companies, which between them have about a 90% share of the UK mobile operator market, were trying to "weaken Three’s ability to be a competitive force in the UK". Three said its rivals could not claim to provide a ‘One Stop Shop’ for mobile commerce without including it within the plans.

In April the Commission opened an investigation into the proposed joint venture, but it has now concluded that the partnership would "not likely lead to a significant impediment to effective competition" within the European Economic Area. Major merger or takeover deals involving companies with big market share are ruled on by the European Commission using its Merger Regulation.

O2, Vodafone and EE's joint venture will provide "various mobile commerce services to businesses, including mobile payment transaction services, mobile marketing services, and associated data analytics services," the Commission said in its statement.

“Mobile commerce is a nascent sector that may radically change the consumer buying experience in the next few years," the EU's Competition Commissioner Joaquín Almunia said. "The proposed joint venture is one of several initiatives to develop the sector in Europe. The Commission is keen on promoting innovation in this area and ensuring that the markets remain open so that a number of competing solutions can emerge without undue obstacles, to the benefit of consumers."

Technology and payments law expert Angus McFadyen of Pinsent Masons, the law firm behind Out-Law.com, said that the Commission's decision was "huge for advertising" and that potentially lucrative revenue streams could open up for companies involved in the joint venture.

"This will add to the momentum of consumer adoption in the UK making mobile wallets and mobile payments a real alternative to plastic and cash," he said.

McFadyen said that there had been "inevitable frustration" that Project Oscar had not yet been launched, but that whilst the joint venture "is not going to go live overnight now that it has the green light" the companies still stand to derive great benefits from the new mobile wallet platform.

"Once it’s up and running, the Oscar platform will provide a single point of access to multiple mobile network operators and consistent standards of service which should further boost uptake – this is a key advantage that it’ll have over existing wallet solutions," McFadyen said. "This could lead to a surge of similar initiatives around Europe that have been ‘on ice’ pending this decision."

"That said, one of the largest, the Dutch ‘Sixpack’ have abandoned a joint venture structure with the view that it was unnecessary for what they were trying to achieve. The Commission's decision to investigate Oscar may have had some influence on this decision. However, mobile wallet joint ventures still seem to be on the cards in Sweden, Germany, Denmark and Hungary," he added.

Individual mobile operators have already begun creating their own mobile wallet systems. In April O2 announced that it had launched a new mobile wallet service to enable customers to transfer money to friends, pay for goods and services and take advantage of discount offers.