EU to probe Delivery Hero and Glovo for potential food delivery cartel

European Commission Investigates Delivery Hero and Glovo for Cartel Concerns

The European Commission has announced the launch of a formal investigation into the Berlin-based food delivery giant Delivery Hero and its Spanish subsidiary, Glovo. The investigation centers around potential anticompetitive activities between the two companies.

Focus on Market Allocation and Information Sharing

The Commission's primary concern is that before its full acquisition of Glovo, Delivery Hero, and Glovo might have agreed to divide geographic markets between themselves. There is also suspicion that the companies engaged in sharing commercially sensitive information, including details about commercial strategies, pricing, capacity, costs, and product characteristics.

Employee Poaching Agreements

Another aspect of the investigation is whether Delivery Hero and Glovo had agreed not to poach each other’s employees. The European Commission fears that these potentially anti-competitive practices might have been facilitated by Delivery Hero's minority stake in Glovo.

Background and Previous Activities

The investigation follows unannounced raids on the local offices of both companies. From July 2018, Delivery Hero held a minority share in Glovo, eventually gaining full control by July 2022.

Highlighting the uniqueness of this situation, the Commission mentioned that this is the first time it is investigating anti-competitive agreements possibly arising from one entity holding a minority stake in a competitor.

Responses and Potential Implications

Both companies were approached for comments on the investigation. A Glovo spokesperson confirmed that while the investigation by the European Commission is in progress, it does not yet conclude any infringement of competition laws or predict the final outcome. Glovo assured full cooperation with the Commission and a commitment to adhere to compliance and regulatory guidelines.

In contrast, Delivery Hero warned investors about the possibility of facing an antitrust fine of up to €400 million as a result of the EU investigation.

Market Dynamics and Sector Challenges

The food delivery industry is known for its thin margins, which force companies into strategic positioning to achieve a viable market standing, typically aiming for the first or second spot. The sector saw a temporary spike in activity during the 2020-2021 coronavirus pandemic. However, it has since experienced volatility including consolidation, market exits, layoffs, and the shutdowns of startups.

This investigation adds another layer of complexity to an already challenging market landscape.