The European Commission (EC) has launched a formal antitrust investigation to determine whether German online food takeaway company Delivery Hero and its Spanish business unit Glovo violated EU competition rules by forming a cartel in the food, grocery and consumer goods delivery sector.

Delivery Hero and Glovo are two of the biggest food ordering and delivery companies in Europe. In July 2022, the former became the majority shareholder of the Spanish company. Before acquiring sole control, Delivery Hero held a minority share.

The EC has expressed concern over the plausibility of the companies allocating geographic markets and sharing commercially sensitive information relating to commercial strategies, prices, capacity, costs and product characteristics before the takeover. This might have hurt prices and the choices consumers make.

The EC also notes that the two businesses may have agreed not to poach each other’s employees and that Delivery Hero’s minority share in Glovo could have facilitated these practices.

A Glovo spokesperson tells Food Ingredients First: “The investigation relates to alleged anti-competitive practices regarding allocation of geographic markets, sharing of commercially sensitive information and no-poach agreements prior to Delivery Hero taking full ownership of Glovo in 2022.”

“The investigation does not mean that the European Commission has concluded an actual infringement of competition law, nor does it prejudge the outcome. Glovo will fully cooperate with the European Commission and is committed to meeting all compliance and regulatory requirements. Glovo cannot provide any further comment at this time.”

Delivery Hero has also promised full cooperation with EU authorities in a statement, announcing plans to set aside more than €400 million (US$433 million) to cover potential fines in the investigation. The company says it is on track to meet its financial goals for 2024, with increased profitability in 2025.

If proven, the companies’ conduct might violate EU competition rules prohibiting cartels and restrictive business practices, as enshrined in Article 101 of the Treaty on the Functioning of the European unio (TFEU) and Article 53 of the EEA Agreement.

Consumer and labor protection
The Commission notes that the investigation is part of its more significant effort to ensure that the online food and grocery delivery sector offers users choice and fair prices.

It states that anti-competitive agreements and restrictive business practices, including the formation of cartels through market allocation, can lead to hidden market consolidation, which can negatively impact competition.

Additionally, the EC wants to ensure a free labor market in which employers do not collude to restrict the number and quality of job opportunities for job seekers but compete for talent.

“online food delivery is a fast-growing sector, wher we must protect competition. If /confirm/ied, such conduct may amount to a breach of EU competition rules, with potential negative effects on prices and choice for consumers and opportunities for workers,” says Margrethe Vestager, executive vice president in charge of competition policy, EC.

The Commission has announced that it will conduct a thorough investigation “as a matter of priority.”

It maintains that the launch of a formal investigation does not prejudge its outcome.

The Commission conducted unannounced inspections at the offices of Delivery Hero and Glovo in June 2022 and November 2023 as part of its investigation.