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Delivery Hero and Glovo have been targeted for antitrust inspections in the European Union.

The European Commission announced today that it has carried out unannounced inspections of a number of online food, grocery and consumer goods delivery businesses in two Member States citing concerns over potential breaches of EU competition laws against forming cartels and other restrictive business practices.

The Commission has concerns that the companies concerned may have violatedArticle 101 of the Treaty on the Functioning of the European Union, which prohibits cartels and restrictive business practices, it writes in a 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 that have been inspected and declined to provide more details when asked but Reuters reported that Berlin-based Delivery Hero was one of the inspected companies.

Delivery Hero confirmed this to us when reached for comment, sending this statement:

Delivery Hero confirms that the European Commission conducted an inspection at its offices in Berlin. The fact that the Commission carries out such an inspection does not mean that the Commission has concluded that there has been an actual infringement of competition law nor does it prejudge the outcome of the investigation itself. Delivery Hero is committed to cooperating fully with the Commission.

We have also confirmed that Barcelona-based Glovo, which since the end of 2021 has been majority owned by Delivery Hero was also approached by the Commission.

As part of its investigation, we can confirm that the European Commission has approached Glovo, a Glovo spokewoman told us. We are confident that Glovo meets all antitrust and compliance requirements, as defined by the law and the initial investigation does not prejudge the outcome of the investigation itself. We are always collaborating with authorities and are actively cooperating with the European Commission authorities to aid their investigation.

The Commission PR about the raids specifies that companies in two Member States were inspected presumably a reference to Germany and Spain, given those are the home markets of Delivery Hero and Glovo respectively.

Wereached out to a number of other delivery players in those markets to ask if they were also paid a visit.

At the time of writing, Berlin-based Gorillas had confirmed it was not targeted. Regarding this issue, we can confirm that Gorillas has not been targeted by the raids organized by the European Commission, a spokesperson told us.

We also understand that UberEats was not involved in the Commission action.

Berlin-based Flink also told us it was not raided nor sent any requests related to the investigation.

The timing of the inspection is interesting given that the on-demand delivery space is facing particularly challenging operational conditions.

The global economic downturn has made it harder for startups to raise, generally, but the high losses/burn rates of some of these delivery/q-commerce platforms which tend to prioritize growth over profitability in a bid to dominate markets and squeeze out competition over the longer run make them look particularly vulnerable to the end of fundraising good times.

So while quick commerce exploded rapidly in the wake of a pandemic-triggered surge in demand for app-based shopping and delivery, theres likely been a similarly rapid cooling from investors on the sector in recent months as rising interest rates and soaring inflation cause funds to reconsider pouring yet more capital into a scramble for convenience that 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 abandoned its solo run and thrown its lot in with the German rival. (The acquisition was announced on December 31 after 11 p.m. CET which doesnt exactly suggest they were keen to trumpet the news.)

Delivery Heros shares, meanwhile, have taken a battering in recent months plunging almost 60% in Q1, per Bloomberg, whose April news report quoted HSBC analyst, Andrew Porteous, writing: The Glovo deal continues to baffle us and pointing out that Delivery Hero expected Glovo to post a loss of 330 million in 2022, which suggests the acquisition has beefed up its operational challenges, raising questions about wheres the upside?

As well as lots of consolidation, the on-demand delivery space has been characterized by rapid revisions to operational footprints with players typically firing up ops across multiple markets as they scramble for scale, before often, equally quickly pulling out again if they judge the level of expenditure has got too high vs. potential gain.

Startups in the space often talk about wanting to be either the number one or two player in a given market which has led to a patchwork of brands operating piecemeal across Europe, rather than uniform competition between all operators. But in such a high-cash-burn environment dominating the market is not really a nice to have rather its a necessity. And the relative footprints of on-demand delivery players can, at times, appear like coordinated agreements to carve up different markets even if its the burn rate ultimately dictating where they each operate.

Given all these pressures and the wider downturn turning the screw on the sector, the Commission sniffing around Delivery Hero and Glovo now looks interesting.

Although the EU is emphasizing that the inspections it has carried out so far are a preliminary step into suspected anticompetitive practices and the two companies are not facing any formal objections at this stage.

The fact that the Commission carries out such inspections does not mean that the companies are guilty of anti-competitive behaviour nor does it prejudge the outcome of the investigation itself, the Commission adds.

There is no deadline for the EU to complete the inquiries. And it remains to be seen whether any formal charges get delivered.

Its PR points out that the Commission offers a leniency program under which it may offer companies that have been involved in a secret cartel immunity from fines or significant reductions in fines in return for reporting the conduct and cooperating with an investigation. While individuals are also encouraged to report cartel or other anti-competitive behaviour on an anonymous basis via its whistleblower tool.

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Delivery Hero and Glovo targeted for EU antitrust inspection - TechCrunch