Delivery Hero and Glovo, two major EU food delivery companies, have been fined a total of EUR329 million for participating in a cartel in the online food delivery sector by the European Commission. Both companies admitted their involvement in the cartel and agreed to settle the case. This is the first time that the Commission has found a cartel in the labour market. It is also the first time that the Commission has imposed fines for the anti-competitive use of a minority share in a competing business.
Whilst this is a European Commission investigation and decision, the same principles apply across the UK and businesses should take note of the below and avoid similar practices, adopting a strict zero tolerance culture.
Background
The German company Delivery Hero is active in the food delivery business in more than 70 countries worldwide, of which 16 are situated in the EEA. Glovo, headquartered in Spain, is also active in the food delivery business. It is currently present in more than 20 countries around the globe, of which eight are situated in the EEA. Delivery Hero and Glovo are, therefore, two of the largest food delivery companies in Europe. They deliver food (prepared by a restaurant or a professional kitchen), grocery and other retail (non-food) products to customers ordering from an app or a website.
In July 2018, Delivery Hero acquired a minority non-controlling stake in Glovo and progressively increased this stake through subsequent investments. In July 2022, Delivery Hero acquired the majority of Glovo's shares, so acquiring sole control of it, and Glovo became Delivery Hero's subsidiary.
Investigation
On its own initiative, the Commission conducted an inquiry into possible collusion in the food delivery sector. This was launched following a market monitoring exercise, which itself had been prompted by information received from a national competition authority and via the anonymous whistleblower tool. As part of this, in July 2022, the Commission conducted inspections at the premises of companies active in the online ordering and delivery of food, groceries and other consumer goods in two member states, stating that it was investigating possible market-sharing agreements. It conducted further inspections in November 2023, having extended the investigation to cover suspected no-poach agreements and exchanges of commercially sensitive information.
In July 2024, the Commission announced that it has opened a formal investigation into whether Delivery Hero and Glovo have infringed Article 101 of the Treaty on the Functioning of the European Union by participating in a cartel in the sector of online ordering and delivery of food, grocery and other daily consumer goods in the EEA.
Infringement Decision
The Commission has found that, from July 2018 until July 2022, Delivery Hero and Glovo progressively removed competitive constraints between the two companies and replaced competition with multi-layered anti-competitive co-ordination.
In particular, the two companies agreed:
- Not to poach each other's employees. The shareholders' agreement signed at the time Delivery Hero acquired a minority non-controlling stake in Glovo included limited reciprocal no-hire clauses for certain employees. Shortly thereafter this arrangement was expanded to a general agreement not to actively approach each other's employees. The Commission notes that such no-poach agreements result in fewer job opportunities for employees. They are a form of purchasing cartel. In such a cartel, the companies restrict competition for a specific input, in this case the input was labour.
- To exchange commercially sensitive information. Exchanging commercially sensitive information (for example on commercial strategies, prices, capacity, costs and product characteristics), which enabled the companies to align and influence their respective market conduct. The Commission notes that the information exchanged went beyond what was required by Delivery Hero's monitoring of its financial investment in Glovo.
- To allocate geographic markets. In particular, the two companies agreed to divide among themselves the national markets for online food delivery in the EEA, by removing all existing geographic overlaps between them, by avoiding entry into their respective national markets, and by co-ordinating which of them should enter in markets where neither was present yet. Such behaviour can reduce choice and so lead to higher prices for consumers.
The Commission found that these anti-competitive practices were facilitated by Delivery Hero's minority shareholding in Glovo. The relationship created by the minority stake provided the two companies with a channel to co-ordinate their operations and strategies. While it is not in itself illegal to own a stake in a competitor, in this case the minority shareholding enabled anti-competitive contacts between the two rival companies at several levels. It allowed Delivery Hero to obtain access to commercially sensitive information, enabled it to influence decision-making processes in Glovo, and ultimately to align the two companies' respective business strategies. In particular, the Commission notes that the Delivery Hero used its role as a shareholder to convince Glovo to share markets in the EEA both directly, by using or threatening to use its approval rights over specific decisions, and indirectly, by influencing other Glovo shareholders.
Fines
In setting the level of fines, the Commission took into account various elements, including the multifaceted nature of the cartel, the fact that it covered the entire EEA, its overall duration, and the cartel's evolution over time, with periods of lesser cartel intensity.
The Commission imposed fines of EUR329m allocated between Delivery Hero: EUR223m and Glovo: EUR105. The fines include a reduction of 10%, applied in view of the companies' acknowledgment of their participation in the cartel and of their liability in this respect.
The investigation is part of the Commission's efforts to ensure choice and reasonable prices for consumers' grocery shopping. The Commission notes that, in a young and dynamic market such as the online food delivery sector where operators often seek to lead or else quit the market, anti-competitive agreements and restrictive business practices, in particular market allocation cartels, may lead to hidden market consolidation, with potential negative effects on competition. The investigation also contributes to ensuring a fair labour market where employers do not collude to limit the number and quality of opportunities for workers but compete for talent. It was also the first investigation launched by the Commission into no-poach agreements and is the first decision in which the Commission has found a cartel in the labour market.
This is also the first cartel decision where companies have been fined for anti-competitive agreements that have occurred in the context of a minority shareholding by one operator in a competitor. This case shows that horizontal cross-ownership between competitors may raise antitrust risks and should be handled carefully.
The decision demonstrates the Commission’s determined efforts to take action against all forms of cartels. The Commission is clear that consumers should have the benefits of competition when ordering meals or groceries online. It is also worth noting how horizontal minority-ownership between competitors may raise risks if it facilitates anti-competitive conducts.
For further information or guidance on any aspect of Competition law, please do not hesitate to contact one of our team.