Delivery Hero and Glovo are the target of antitrust inspections in the European Union.
the European Commission announced today that it has conducted unannounced inspections of a number of online food, grocery and consumer goods delivery companies in two Member States — citing concerns about possible violations of EU competition laws against cartels and other restrictive trade practices.
“The Commission is concerned that the companies involved may have violated Article 101 of the Treaty on the Functioning of the European Union, which prohibits cartels and restrictive commercial practices,” it wrote in a statement. 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,” it added.
The Commission did not name any of the companies inspected — and refused to provide more details when asked — but Reuters reported that Berlin-based Delivery Hero was one of the companies inspected.
Delivery Hero confirmed this to us when reached for comment and sent this statement:
“Delivery Hero confirms that the European Commission has carried out an inspection of its offices in Berlin. The fact that the Commission conducts such an inspection does not mean that the Commission has concluded that there has actually been an infringement of competition law, nor does it prejudge the outcome of the investigation itself. Delivery Hero undertakes to cooperate fully with the Commission.”
We also confirmed that Barcelona-based Glovo, majority-owned by Delivery Hero since the end of 2021, 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 believe Glovo complies with 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 are actively working with the European Commission authorities to support their investigations.”
The Commission’s PR on the raids mentions that companies in two Member States were inspected – presumably a reference to Germany and Spain, as these are the home markets of Delivery Hero and Glovo respectively.
We reached out to a number of other deliverers in those markets to ask if they’ve visited as well.
At the time of writing, the Berlin-based Gorillas had confirmed it was not the target. “With regard to this matter, we can confirm that Gorillas have not been the target of the 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 that no raids had been conducted or requests sent regarding the investigation.
Difficult market conditions
The timing of the inspection is interesting as the on-demand delivery space faces extremely challenging operational conditions.
The global economic downturn has made it harder for startups to generally increase the high loss/burn rates of some of these delivery/q-commerce platforms – which tend to prioritize growth over profitability in an attempt to boost the markets. to dominate and squeeze out the competition in the longer run — making them look particularly vulnerable to the end of the ‘good times’ of fundraising.
So while high-speed trading quickly exploded in the wake of a pandemic-driven surge in demand for app-based shopping and delivery, there has likely been an equally rapid cooling of investors in the sector in recent months — as rising interest rates and rising inflation predominate. causing funds to reconsider pumping even more capital into a battle for convenience, which may turn out to be more ‘flash in the pan’ than paradigm shopping shift.
Delivery Hero and Glovo are particularly interesting cases here too – given that Glovo had already given up on his solo run and threw his lot with the German rival. (The acquisition was announced on December 31 after 11pm CET – which doesn’t really suggest they were eager to trumpet the news.)
Delivery Hero stocks have taken a beating in recent months – collapse almost 60% in Q1according to Bloomberg, whose April news report quoted HSBC analyst Andrew Porteous, who wrote: “The Glovo deal continues to stun us” — noting that Delivery Hero expected Glovo to post a $330 million loss in 2022, suggesting that the acquisition has expanded to address its operational challenges and raise questions about where the advantage is?
In addition to a lot of consolidation, the on-demand delivery space is characterized by rapid revisions to operational footprints – with players typically launching operations in multiple markets as they look for scale, before often pulling back just as quickly when spending levels have become too high vs. potential profit.
Startups in the space often talk about wanting to be the number one or two player in a given market – which has led to a patchwork of brands operating fragmented across Europe, rather than uniform competition among all operators. But in such a high cash-burn environment, dominating the market isn’t really a nice to have – rather it’s a necessity. And the relative footprint of on-demand delivery players can sometimes resemble: coordinated agreements to split up different markets – even if it’s the burn rate that ultimately dictates where they each operate.
Given all this pressure and the broader downturn that has terrified the industry, the Commission now looks interesting to poke around Delivery Hero and Glovo.
While the EU emphasizes that the inspections it has carried out so far are “a preparatory step towards suspected anti-competitive practices” – and the two companies have no formal objections at this stage.
“The fact that the Commission conducts such inspections does not imply anticompetitive behavior by the companies, nor does it prejudge the outcome of the investigation itself,” the Commission added.
There is no deadline for the EU to complete the investigations. And it remains to be seen if any formal charges will be delivered.
Its PR points out that the Commission has a leniency program — allowing it to offer companies involved in a secret cartel immunity from fines or significant reductions in fines in exchange for reporting the conduct and cooperating with an investigation. While individuals are also encouraged to report cartel or other anti-competitive behavior on an anonymous basis through its whistleblower tool†