January 27, 2020

Breakingviews: UK belatedly bares antitrust teeth over tech M&A

by Breakingviews.

Critics will say that Britain’s antitrust boss Andrew Tyrie is tilting at windmills. The former Conservative politician, who now chairs the Competition and Markets Authority, is having a pop at food-delivery M&A, even though the deals in question bear none of the typical warning signs of monopolistic behaviour. Yet diligence is no bad thing, and makes a welcome change from the CMA’s past naivety.

The UK’s competition watchdog said on Friday it was considering whether to launch a probe into Takeaway.com’s 6.2 billion pound acquisition of London-based Just Eat. It’s not the first time the CMA has bared its teeth at dealmaking in the sector. Tyrie’s body in December decided that web giant Amazon’s purchase of a minority stake in Deliveroo warranted a full investigation, which typically last many months.

Neither deal is an obvious candidate for regulatory scrutiny. Netherlands-based Takeaway.com hasn’t operated in Britain since 2016, when it sold local assets to Just Eat after making heavy losses. Amazon ferries books and all manner of goods to customers’ doorsteps, but doesn’t deliver hot meals like Deliveroo. In other words, the relatively fierce levels of competition in British food-delivery won’t immediately suffer as a result of either transaction. Uber Technologies’ food delivery unit and Deliveroo will probably continue offering generous incentives for diners to order in using their apps, hoping to catch UK market leader Just Eat.

That might once have been reason enough to wave through such deals. But under Tyrie, the CMA is taking a more forward-thinking approach. Its economists appear to be concerned about hypothetical future competition that might no longer appear as a result of corporate M&A. Absent a deal, would Takeaway.com or Amazon have entered the UK market and pushed down prices for food delivery? It sounds like paranoia. But antitrust wonks are right to concern themselves with such thought experiments in technology-driven markets, which tend to have “winner-takes-all” characteristics.

Regardless, it’s preferable to the supine posture the CMA historically adopted to such deals. In 2012 it concluded, based on market shares back then, that Facebook’s Instagram purchase probably wouldn’t substantially reduce social media competition. They’re now the top two most popular social networks in Britain, according to YouGov, cementing the $630 billion behemoth’s dominance. It’s only sensible that antitrust wonks are finally erring on the side of caution.


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