Feeding frenzy in takeaway food delivery services

Just Eat is about to be eaten. The Competition and Markets Authority (CMA) has approved Takeaway.com’s £6.2bn takeover, says James Cook in The Daily Telegraph. The CMA’s decision comes months after it announced a “surprise” investigation into whether the deal would have reduced competition by discouraging Takeaway.com, which is based in The Netherlands, from re-entering the British market independently. However, the watchdog has now decided that it was “unlikely” Takeaway.com would have resumed operations in the UK after pulling out in 2016 following hefty losses. The deal follows a “bidding war” between Takeaway.com and Prosus, the investment arm of technology group Naspers, for Just Eat.

The merger reflects a wider trend in online food delivery, says Ingrid Lunden on techcrunch.com. While such technology platforms have proved popular, their growth has come at a price. “Heavy competition” between several firms and the economics of on-demand services have meant that all of them need “large sums of cash” to grow and survive while they “slowly inch towards profitability”. So those who don’t manage to raise enough cash “fall by the wayside” or end up “swallowed up in larger consolidation plays for economy of scale”.

Amazon rescues Deliveroo

The Just Eat-Takeaway.com merger isn’t the only food delivery deal to be approved during the current crisis, says Hugo Miller on Bloomberg. Earlier this month, the CMA gave a green light to Amazon’s purchase of a $575m stake in Deliveroo because the British firm required a cash injection from the US tech giant to avoid bankruptcy. Deliveroo had suffered particularly badly because most of the restaurants it delivered for had “been forced to shut” owing to the coronavirus outbreak. The CMA has said that it is trying to speed up decisions in order to “give businesses greater certainty”.

I’m glad to see the CMA ditching its “overly aggressive” stance of opposing digital takeovers, says Jim Armitage in the Evening Standard. Most British consumers “had never even heard of Takeaway.com”, so it was always a stretch for the CMA to argue that its takeover of Just Eat could hamper competition simply because there was an outside chance that the Dutch company “might one day try to relaunch its own UK service”. Such arguments were even weaker in the case of Deliveroo and Amazon, since the latter company hadn’t ever entered the market. 

Yet there is something troubling about CMA’s decision to approve Amazon’s purchase on the grounds that it was necessary to keep Deliveroo afloat, says Cat Rutter Pooley in the Financial Times. Plenty of companies “laid low by Covid-19” will argue that if Deliveroo clears that hurdle, they “should be allowed to tie-up with rivals too”. If the CMA want to keep its “tough guy” image, it must resist such arguments.