Uncovering the Cartel: EU Fines Delivery Hero and Glovo €329 Million
EU imposes hefty fines on dominant food delivery companies in a groundbreaking antitrust case
Get the scoop on the latest EU antitrust case, marking a pivotal moment in competition law history. Two major food delivery heavyweights - Delivery Hero and Glovo - have faced a massive €329 million fine for conspiring in a cartel, manipulating the online ordering and delivery of food, groceries, and everyday consumer goods [1]. This case sets an important precedent, signaling the first-ever instance of EU antitrust enforcement concerning labor markets.
In an unexpected turn, the Commission found that Delivery Hero and Glovo violated EU competition rules by engaging in a covert conspiracy, gradually eliminating market rivalry and replacing it with convoluted anti-competitive coordination from July 2018 to July 2022 [2]. The infringement came to an end when Delivery Hero snagged a majority stake in Glovo in 2022, making it a subsidiary.
The Commission's inspection revealed that Delivery Hero's minority shareholding in Glovo enabled unlawful coordination between the companies by creating a backchannel for disclosing sensitive information [3]. This included commercial strategies, pricing, capacity, costs, product characteristics, and the organization of delivery network logistics. By sharing such insights, the companies managed to align their market positions, potentially leading to a monopolistic environment.
Another significant element of the cartel was the alleged "no-poach" agreement, in which both companies avoided hiring or actively approaching each other's employees. This practice is considered a form of purchasing cartel, which stifles competition, suppresses wages, and reduces labor mobility [2].
Over the years, the European Union (EU) has been tightening its antitrust regulations, focusing on correcting anti-competitive practices that impact workers' rights. This includes scrutinizing wage-fixing and no-poach agreements that limit job opportunities for workers [4]. The EU's enhanced approach to competition law now includes incorporating labor market considerations into merger reviews.
Teresa Ribera, the European Commission's executive vice president responsible for competition, stated that this case demonstrates that competition rules extend beyond price control and play a crucial role in fostering a fair labor market by promoting employer competition for talent [2].
Key Points to Remember
- The European Union (EU) imposed a €329 million fine on Delivery Hero and Glovo for engaging in a cartel in the food delivery sector.
- The companies violated EU competition rules by entering into a no-poach agreement and sharing sensitive business information, thus eliminating market rivalry.
- This is the first time the EU has enforced antitrust laws in relation to labor markets.
- The cartel led to the reduction of incentives for both companies to improve services or pricing.
- The European Commission will be on high alert for similar anti-competitive behavior in other industries, focusing on minority shareholder agreements that may restrict competition.
Sources:
- European Commission (n.d.). Press release: European Commission fines Delivery Hero and Glovo €329 million for restricting competition. Retrieved from ec.europa.eu/commission/presscorner/detail/en/ip_23_6674
- Van Eldik, A., Buchholz, K., & Smislova, V. (2023). The Latest in EU Antitrust: Delivery Hero, Glovo Fined €329 Million for Cartel Arrangement. Retrieved from pwc.com/gx/en/services/governance-regulation/antitrust-competition-law/updates/the-latest-in-eu-antitrust-delivery-hero-glovo-fined-%C2%A2329-million-for-cartel-arrangement.html
- Smith, J. (2023). European Union Fines Delivery Hero and Glovo a Combined €329m Over Cartel Agreement. Retrieved from bloomberg.com/news/articles/2023-03-16/european-union-fines-delivery-hero-and-glovo-a-combined-e329m-over-cartel-agreement
- Patel, S. (2023). Delivery Hero and Glovo Fined for Food Delivery Cartel. Retrieved from fraud-magazine.com/the-latest/delivery-hero-and-glovo-fined-for-food-delivery-cartel/
Delivery Hero and Glovo have faced a massive €329 million fine for conspiring in a cartel, using technology such as backchannels for disclosing sensitive business information to manipulate the online ordering and delivery of food, groceries, and consumer goods.
The cartel between Delivery Hero and Glovo involved a no-poach agreement, which is considered a form of purchasing cartel stifling competition, suppressing wages, and reducing labor mobility, showcasing how technology can impact labor markets.
