Mobile wallet scheme comes under EU probe

European regulators have begun investigating a mobile wallet business set up jointly by Everything Everywhere, Vodafone and O2, following complaints by smaller operator Three.

EU regulators are looking into competition concerns surrounding a joint venture in mobile payments by Everything Everywhere, Vodafone and O2. Photo credit: Orange

The UK's biggest cellular operators said in June that they were creating a clearing house for mobile payments, which would act as an intermediary between advertisers, banks and retailers. However, Three complained to the European Commission that it had been shut out of the deal.

Although the Commission did not cite Three's complaint, it did say in its announcement of the investigation late on Friday that there are "potential competition concerns in the nascent markets of mobile payment applications supply, mobile advertising and related data analytics services, where the joint venture may have very high market shares".

"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," competition commissioner Joaquín Almunia said in a statement. "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."

Many companies are pushing the development of mobile payments, either through the mobile web or using near-field communication (NFC) technology to let customers tap their handsets against readers at the point of sale.

Google has launched its Wallet service in the US, while PayPal, Square and others are also jockeying for position in the nascent market. Barclays and Everything Everywhere brand Orange unveiled an early effort in May, shortly before the trio's proposed joint venture was revealed.

Competition concerns

On Monday, Three said it was not the only company to complain about the idea of the joint venture, which it said "raises serious competition concerns". When the proposal emerged, the operator said that it had only found out about it through press reports and that its larger rivals had made no attempt to get Three involved.

We need to make sure that competing services can keep emerging on this market.

– European Commission

"We support the Commission's finding that this [joint venture] could block future initiatives in the area of mobile commerce services," Three said in a statement on Monday. "We are pleased that it has moved to launch an in-depth investigation into the scope, activities and impact on consumers of this venture as well as the future development of the market for these services."

In their proposal in June, Everything Everywhere, Vodafone and O2 (Telefonica UK) said the joint venture will be run separately from its parent companies. As a standalone business, it will be "open and available to all industry participants", they said, noting that the three operators themselves will be customers of the joint venture themselves.

In a joint statement, Everything Everywhere, O2 and Vodafone characterised the regulatory investigation as "further discussions". The partners expect the "extended review will conclude that the proposed joint venture is pro-competitive and will provide robust competition to global players", they said.

"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," they said on Friday. "The discussions have been positive, and the shareholders in the proposed joint venture remain focused and determined to progress with the project."

The Commission now has 90 working days to establish whether the joint venture does break competition law, meaning a decision on the matter is due by 27 August.

The joint venture, which the partners are hoping to launch by the end of 2012, must also get approval from Ofcom and the Office of Fair Trading.