⚖️ EU Raids and Investigations
Berlin-based Delivery Hero, a major food delivery company, has warned that it might face a hefty €400M antitrust fine. This follows unannounced raids by the European Union on the offices of Delivery Hero and its Spanish subsidiary, Glovo. These inspections took place in July 2022 and November 2023. The European Commission expressed concerns about potential breaches of competition laws, including the formation of cartels and other restrictive business practices. Both Delivery Hero and Glovo confirmed the inspections at the time.
💼 Investor Warning and Provisions
In a note to investors issued on Sunday evening, Delivery Hero stated it could be fined for "alleged anti-competitive agreement to share national markets, exchanges of commercially sensitive information, and no-poach agreements." Last year, the company had set aside €186M after the EU inspections. However, following recent informal engagements with the European Commission and detailed analysis, Delivery Hero has increased this provision, indicating the seriousness of the potential fine.
🛍️ Strategic Moves and Acquisitions
Delivery Hero's warning comes after acquiring a majority stake in Glovo at the end of 2021. Glovo had previously consolidated three of its sub-brands about half a year before Delivery Hero's acquisition. This rapid consolidation highlights the competitive nature of the food delivery market, where companies aim to dominate top positions to improve their financial viability. However, such aggressive strategies have drawn scrutiny from regulatory bodies like the European Commission.
📉 Challenges in the Food Delivery Market
The food delivery sector has faced numerous challenges, especially post-pandemic. The boom in food delivery during lockdowns has faded, leading to market exits and business closures. The thin-margin nature of the industry means that only the top players can hope to succeed. Delivery Hero's potential €400M fine underscores the difficulties in maintaining a profitable and compliant business model in this space. As Delivery Hero intends to cooperate fully with the European Commission, it remains to be seen how this financial hit will impact its operations and future strategies.
Will Delivery Hero overcome its antitrust challenges?
