The European Commission has cleared the proposed acquisition of France-based Morpho by Advent International of the US. The approval is conditional on the divestiture of Morpho's payment smart card business in France.Morpho is the identity and security solutions business of the Safran group. Advent International, a private equity firm, controls smart card and digital security provider Oberthur. Both Oberthur and Morpho develop and supply identification and security solutions, including smart cards for the banking, telecommunication and identity document sectors.The Commission's investigation found that in France there are only three viable suppliers of payment smart cards with the necessary national certifications and production sites to supply the country's banks. The takeover would cut that number to only two, which would significantly reduce competition. It focused in particular on the firms' overlapping activities in smart card markets.For SIM cards and eID documents, the Commission concluded that the merged entity would continue to face a number of credible competitors. However, it found that for payment smart cards, the proposed transaction, as initially notified, would have significantly reduced competition in the market for payment smart cards in France. This market is particularly difficult to enter, reducing the ability of suppliers not currently active in France to compete effectively.The Commission found that in order to supply payment smart cards in France, manufacturers need to obtain and maintain certification for the domestic debit card scheme, Cartes Bancaires (CB), on top of the global EMV certification standard. In addition, to compete effectively, suppliers must run in France a CB-certified manufacturing site for the personalisation of CB-certified cards.Consequently, the Commission considered that the transaction, as notified, raised serious doubts as to its compatibility with the Single Market with regard to the market for payment smart cards in France. To address these concerns, the parties offered to divest Morpho's French subsidiary CPS, which supplies and personalises CB-certified payment smart cards to banking customers in France.In view of the remedies proposed, the Commission concluded that the proposed transaction, as modified, would not significantly reduce competition in the European Economic Area (EEA) or any substantial part of it, including France. Its decision is conditional upon full compliance with the commitments.More information on this case will be available on the Commission's competition website, in the public case register, under the case number M.8258.