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As food delivery companies gobble up their competitors around the world with mounting haste, the firms’ customers risk being left with scant choice when it comes to ordering nosh online. Regulators need to take notice.
Last week, Germany’s Delivery Hero SE agreed to buy Woowa Brothers Corp. in a deal valuing the South Korean company at $4 billion. The acquisition is a coup for Delivery Hero Chief Executive Officer Niklas Oestberg. The shares in his firm jumped as much as 23% after the announcement to their highest since its 2017 initial public offering.
It’s just the latest in a series of efforts to consolidate the online food delivery industry. Much of the capital for Woowa deal is funded by Delivery Hero’s own 930 million-euro divestment of its German operations to Takeaway.com, which created a monopoly in that market. In the US, DoorDash bought Square Inc.’s Caviar app for $410m in August.
While few food delivery companies are profitable right now, they have one thing in their favour: the market remains relatively small. That means that it’s easier to push through takeovers which could give them a monopolistic position. It depends what regulators decide is the scope of the relevant market. In a conference call with analysts, Oestberg sought to deflect antitrust concerns by pointing to the overall size of South Korea’s food service market of 85 billion won. Delivery Hero and Woowa had combined gross order volumes in Asia as a whole of just 5.2 billion euros last year. On that basis, their market share looks like a drop in the ocean. Oestberg also argued that lots of Koreans still order takeaways by telephone rather than online or through an app.
The Woowa takeover will, give Delivery Hero near total control of South Korea’s online food delivery market, a move that’s patently not in the interest of country’s consumers.
Should regulators approve the deal, the combined company will have far more scope to take a bigger cut from restaurants and charge consumers more for delivery, while controlling the market will let it use data to predict purchasing patterns and anticipate customer demand more efficiently.
The size of the deal means it will trigger an investigation by Korea Fair Trade Commission. That body would do well to follow the lead of Britain’s Competition and Markets Authority, which is erring on side of caution by pushing back against Amazon.com Inc.’s plan to invest in Deliveroo — it’s concerned the two could fuse their networks of couriers. Otherwise, we risk world’s food delivery companies divvying up spoils market by market before dinner has even been served.
—Bloomberg
Alex Webb is a Bloomberg Opinion columnist covering Europe’s technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco