Case Study Short Essay Examination Questions

Essay

Case Study Short Essay Examination Questions
Justice Department Requires VeriFone Systems to Sell Assets
before Approving Hypercom Acquisition
Key Points:
•Asset sales commonly are used by regulators to thwart the potential build-up of market power resulting from a merger or acquisition.
•In such situations, defining the appropriate market served by the merged firms is crucial to identifying current and potential competitors.
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In late 2011, VeriFone Systems (VeriFone) reached a settlement with the U.S. Justice Department to acquire competitor Hypercom Corp on the condition it sold Hypercom's U.S. point-of-sale terminal business. Business use point-of-sale terminals are used by retailers to accept electronic payments such as credit and debit cards.
The Justice Department had sued to block the $485 million deal on concerns that the combination would limit competition in the market for retail checkout terminals. The asset sale is intended to create a significant independent competitor in the U.S. The agreement stipulates that private equity firm Gores Group LLC will buy the terminals business.
San Jose, California-based VeriFone is the second largest maker of electronic payment equipment in the U.S. and Hypercom, based in Scottsdale, Arizona, is number three. Together, the firms control more than 60 percent of the U.S. market for terminals used by retailers. Ingenico SA, based in France, is the largest maker of card-payment terminals. The Justice Department had blocked a previous attempt to sell Hypercom's U.S. point-of-sale business to rival Ingenico, saying that it would have increased concentration and undermined competition.
VeriFone will retain Hypercom's point-of-sale equipment business outside the U.S. The acquisition will enable VeriFone to expand in the emerging market for payments made via mobile phones by giving it a larger international presence in retail stores and the opportunity to install more terminals capable of accepting mobile phone payments abroad.
-Do you believe requiring consent decrees that oblige the acquiring firm to dispose of certain target company assets is an abuse of government power? Why or why not?