Monday, July 6, 2020, 4:04 p.m. DST
WASHINGTON (Reuters) – Uber Technologies Inc's plan to buy Postmates Inc could pose problems in Miami and Los Angeles, where the two dominate the food delivery market, cartel experts said, saying that it is difficult to set up an asset sale , to solve the problem .
Uber, number 3 in restaurant food delivery, said Monday that it would buy Postmates No. 4 for $ 2.65 billion after its plan to buy Grubhub Inc failed.
With the deal, Doordash remains the industry leader with 45% of sales in May, Uber Eats becomes number 2 with 30% and Grubhub number 3 with 23%, according to the research company Second Measure.
According to the research company released in June, the combined company's market share would increase to 78% in Miami, 50% in Los Angeles and 43% in Phoenix. Enforcers are likely to look at the effects of the agreement on cities, as the effects of less competition, possibly higher delivery fees or lower driver pay are more likely to be felt in cities than at national level.
Antitrust authorities typically require corporate assets to be sold like a factory to ensure that industry competitors can compete. However, it is not clear what can be done to remove the lost competition from this business, as the most obvious benefits are restaurants and drivers businesses, which are often gig workers, cartel experts said.
The difficult task for the executors would be to allow the companies to band together, but leave the rival room to grow in the cities where the worst concentration occurs, said Chris Sagers, who works at the Cleveland-Marshall College of Law informed.
Geoffrey Manne, president of the International Center for Law and Economics, argued that the deal should be easily approved by the antitrust authorities, saying that if the big companies raise their prices, new companies could easily enter the market.
The deal is reviewed by the Department of Justice or the Federal Trade Commission to ensure that it complies with antitrust law.
Antitrust authorities can also investigate the impact of the business on drivers, whose daily salary could decrease if the number of companies competing for their services is reduced.
"Agencies haven't paid much attention to the work in the past," said Henry Su, formerly at the FTC and now at Constantine Cannon LLP. "This can be a good test case to look at the driver side. At least you cannot ignore that this is a problem."
(Reporting by Diane Bartz; editor of Aurora Ellis)