Delivery services Glovo and Delivery Hero faced penalties amounting to EUR 329 million for engaging in collusive practices, as decided by Brussels.
Food Delivery Giants Fined Heftily for Cartelisation
In a shocking move, the European Commission slapped food delivery companies Glovo and Delivery Hero with a colossal €329 million fine, on Monday, for breaking EU competition rules.
Apparently, these companies have been playing dirty by not poaching each other's workers, sharing commercially crucial information, and dividing market territories, as revealed in a statement from the executive body.
This underhand dealings spanned over a four-year period, encompassing the European Economic Area (EEA - EU, Iceland, Liechtenstein, and Norway), a period that included Delivery Hero's acquisition of Glovo.
The European Commission's investigations unveiled that the partnership between Delivery Hero and Glovo aimed to eliminate competitive pressure between the two companies, spanning from July 2018 to July 2022.
Delivery Hero and Glovo, being two of the most influential food delivery companies in Europe, can also cater to grocery products and non-food retail products via their apps or websites.
The relationship between Delivery Hero and Glovo took a new turn in July 2018 when Delivery Hero acquired a minority, non-controlling stake in Glovo. This minority stake gradually increased through subsequent investments. Fast forward to July 2022, Delivery Hero acquired complete control of Glovo.
However, it was the pre-acquisition period, specifically Delivery Hero's minority stake in Glovo, that instigated the European Commission's investigation and subsequent penalties.
What's the backstory?
Before the full acquisition, Delivery Hero held a minority stake in Glovo. This minority share allowed for collaborative work and the exchange of sensitive information beyond the role of a typical investor.
The companies coordinated market entries, sidestepping competition in each other's national markets. They also struck 'no-poach' agreements, preventing the hire of each other's employees, which may have curbed wages and labor mobility.
Impact on Market Competition
The partnership between Delivery Hero and Glovo led to reduced competition in the European food delivery market. By partitioning geographical markets and suppressing direct competition, they potentially standardized their offerings and strategies, potentially stifling innovation and escalating prices for consumers. The 'no-poach' agreements further obstructed labor market competition, impacting workers negatively by reducing opportunities and potentially suppressing wages.
European Commission's Response
- Fine and Settlement: The European Commission imposed a hefty €329 million fine on Delivery Hero and its subsidiary Glovo for participating in cartel activities. This included €223 million for Delivery Hero and €106 million for Glovo. The settlement agreement acknowledged a lower intensity of the issues during specific periods, resulting in a fine slightly below the anticipated amount.
- Commitment to Compliance: Delivery Hero has fully cooperated with the investigation and expressed its dedication to maintaining a culture of compliance and ensuring ethical operations in the competitive food delivery sector.
In essence, while the acquisition of Glovo by Delivery Hero signified a significant business growth, it was the pre-acquisition collusion and exchange of sensitive information that led to the antitrust fines. The European Commission's action aims to ensure fair competition and discourage similar practices in the future, highlighting the importance of compliance in sustaining competitive markets.
The fine imposed by the European Commission on Delivery Hero and its subsidiary Glovo, totaling €329 million, was a result of their involvement in cartel activities within the fintech industry, particularly in business competition within the finance and delivery sectors. This agreement, which involved no-poach agreements and sharing sensitive information beyond the role of a typical investor, potentially stifled innovation and escalated prices for consumers, as well as impacting workers negatively by reducing opportunities and potentially suppressing wages. Delivery Hero, after fully cooperating with the investigation, has expressed its commitment to maintaining a culture of compliance and ensuring ethical operations in the competitive food delivery and fintech sectors.
