Delivery Hero and Glovo have been targeted for antitrust inspections in the European Union.
The European Commission announced today that it has carried out unannounced inspections of a number of businesses delivering food, groceries and online consumer goods in two member states, citing concerns about breaches of EU competition laws against cartel formation and other restrictive business practices.
“The Commission is concerned that the companies concerned may have breached Article 101 of the Treaty on the Functioning of the European Union, which prohibits cartels and restrictive business practices,” it wrote in a press release.
“The investigation concerns an alleged agreement or concerted practice to share national markets for the online ordering and delivery of food, groceries and other consumer goods in the European Union,” a- he added.
The Commission did not name any of the companies that were inspected – and declined to provide further details when asked – but Reuters reported that Berlin-based Delivery Hero was one of the companies inspected.
Delivery Hero confirmed this to us when contacted for comment, sending this statement:
“Delivery hero confirms that the European Commission has carried out an inspection at its offices in Berlin. The fact that the Commission carries out such an inspection does not mean that the Commission has concluded that there has been an actual infringement of competition law, nor does it prejudge the outcome of the investigation itself. Delivery hero undertakes to cooperate fully with the Commission.”
We have also confirmed that Barcelona-based Glovo, which – since the end of 2021 is majority-owned by Delivery Hero – has also been approached by the Commission.
“As part of its investigation, we can confirm that the European Commission has approached Glovo,” a Glovo spokeswoman told us. “We are confident that Glovo meets all antitrust and compliance requirements, as defined by law, and the initial investigation does not prejudge the outcome of the investigation itself. We are always cooperating with authorities and actively cooperating with European Commission authorities to facilitate their investigation.
The Commission’s PR on the raids clarifies that companies from two Member States were inspected – presumably a reference to Germany and Spain, given that these are the national markets of Delivery Hero and Glovo.
We contacted a number of other delivery players in these markets to ask if they had also received a visit.
At the time of writing, Berlin-based Gorillas had confirmed he was not targeted. “On this issue, we can confirm that the gorillas were not targeted by raids organized by the European Commission,” a spokesperson told us.
We also understand that UberEats was not involved in the Commission’s action.
Berlin-based Flink also told us he had not been raided or sent any inquiries related to the investigation.
Difficult market conditions
The timing of the inspection is interesting given that the on-demand delivery space faces particularly difficult operational conditions.
The global economic downturn has made it harder for startups to grow, in general, but the high loss/burn rates of some of these delivery/q-commerce platforms – which tend to prioritize growth over profitability with the aim of dominating markets and crowding out competition in the longer term — making them look particularly vulnerable when the “good times” of fundraising end.
So while fast trade exploded rapidly following a pandemic-triggered surge in demand for app-based shopping and delivery, there was likely an equally rapid cooling from investors. of the sector in recent months – as rising interest rates and soaring inflation cause funds to reconsider investing more capital in a rush to convenience that could prove more “lightning in the market”. saucepan” than a paradigm shift in purchasing.
Delivery Hero and Glovo are also particularly interesting cases here, given that Glovo had already dropped his solo run and cast his spell with the German rival. (The acquisition was announced on Dec. 31 after 11 p.m. CET – which doesn’t exactly suggest they wanted to break the news.)
Shares of Delivery Hero, meanwhile, have taken a hit in recent months – plunging nearly 60% in the first quarter, according to Bloomberg, whose April report quoted HSBC analyst Andrew Porteous as writing : “The Glovo deal continues to baffle us” – and pointing out that Delivery Hero expected Glovo to post a loss of €330m in 2022, suggesting the acquisition has heightened its operational challenges, raising questions about where is the benefit?
In addition to numerous consolidations, the on-demand delivery space has been characterized by rapid revisions to operational footprints – with players typically launching operations in multiple markets as they rush to expand, often before pulling out altogether as quickly if they judge the level of expenditure has become too high in relation to the potential gain.
Space startups often talk about wanting to be number one or number two in a given market, which has led to a patchwork of brands operating piecemeal across Europe, rather than uniform competition. between all operators. But in such a high cash burn environment, dominating the market isn’t really a “nice to have” – it’s more of a necessity. And the relative footprints of on-demand delivery players can sometimes appear as coordinated deals to divide up different markets – even if it’s the burn rate that ultimately dictates where they each operate.
Given all of this pressure and the broader downturn that’s turning the screws on the sector, Commission sniffing around Delivery Hero and Glovo now looks interesting.
Although the EU stresses that the inspections it has carried out so far are “a preliminary step in the alleged anti-competitive practices” – and the two companies do not face any formal objections at this stage.
“The fact that the Commission carries out such inspections does not mean that the companies are guilty of anti-competitive behavior, nor does it prejudge the outcome of the investigation itself,” adds the Commission.
There is no deadline for the EU to complete the investigations. And it remains to be seen if formal charges will be delivered.
His PR points out that the Commission offers a leniency program – under which it can offer companies that have been involved in a secret cartel immunity from fines or significant reductions in fines in return for reporting the behavior and cooperation in an investigation. While individuals are also encouraged to report cartel or other anti-competitive behavior anonymously through its whistleblower tool.