The deal was finally done just weeks after the U.S. Department of Justice put the kibosh on an earlier plan for Ingenico to take over Hypercom's U.S. operations, which would have left VeriFone and Ingenico with more than 90 percent of U.S. market share between them. But what the DOJ finally approved last week still leaves some big questions about how much PIN-pad competition there will be, especially because Gores Group, the new owner of Hypercom's U.S. business, is the former owner of VeriFone—and that's where VeriFone CEO Doug Bergeron got his job.
Under the DOJ-approved deal, Gores is taking over the #3 PIN-pad business in the U.S., with about 18 percent market share. That's big enough that the DOJ wasn't willing to let either VeriFone (at 48 percent) or Ingenico (at 26 percent) simply snap up that chunk of the market.
It should leave three large-enough players to discourage too much coziness. And that's certainly what the DOJ was afraid of when it filed a lawsuit in May to block the original shuffle of the business. Its complaint quoted Bergeron saying in 2007 that the industry was trending toward a "very benevolent duopoly" consisting of VeriFone and Ingenico—not the sort of language antitrust enforcers like to hear.
"Bergeron's description of such a potential duopoly as 'very benevolent' has led VeriFone to eschew robust and vibrant competition in favor of cooperation with, and benevolence toward, competitors," the lawsuit said. "Consummation of the proposed transaction would achieve Mr. Bergeron's vision."
A week after the lawsuit was filed, VeriFone and Ingenico gave up on that idea. But will bringing in Gores provide any more real competition? Maybe it will, but the signs aren't promising.
For the record, the president of Gores' as-yet-unnamed new acquisition, Clint Jones, is making very competitive noises. "We plan on rolling out the world's most advanced multilane POS solutions throughout the remainder of 2011, to be followed by a suite of world-class products for countertop and banking," Jones said in the press release announcing the deal.
But it was Gores Group that bought VeriFone from Hewlett-Packard in 2001—and hired Bergeron to run it. Bergeron left Gores the following year, when it sold VeriFone to another private equity firm in Chicago, which eventually took VeriFone public.
That means there's a very short path between Gores' newest acquisition and its biggest competitor. It's not quite as incestuous as VeriFone's original plan of marrying off Hypercom-U.S. to Ingenico, but it's close enough to be uncomfortable for anyone hoping for competition to hold down prices and improve products.
Then again, maybe that won't matter much. With Visa's new bid to convert as many card-swipe terminals as possible in the U.S. to support EMV, contactless and NFC transactions, and Google, ISIS and other players pushing for their own PIN-pad changes, what has been a cozy and mature business is about to become a lot more competitive no matter what VeriFone, Ingenico and Gores do.