Klobuchar pushes antitrust regulators to scrutinize potential Uber deal for Grubhub

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Sen. Amy Klobuchar delivered a letter Wednesday to the country’s top antitrust officials – Assistant Attorney General Makan Delrahim and Federal Trade Commission Chairman Joseph Simons – urging scrutiny of Uber’s potential acquisition of Grubhub. 

Uber, which has a market capitalization of $59 billion, has made an offer to buy food delivery company Grubhub,  which has a market capitalization of $5.3 billion, CNBC has reported. It is unclear whether the two will come to an agreement on price.

The talks come as the coronavirus pandemic has crushed Uber’s ride-sharing business but grown demand for food delivery. Uber said earlier this month it will lay off 3,700 people, or about 14% of its 26,900 employees.

The spotlight from Klobuchar and other lawmakers is likely an unwelcome backdrop to deal discussions. Such scrutiny can result in CEOs testifying before Congress. Both companies have already drawn negative public attention on issues ranging from restaurant fee policy to worker treatment. 

“As our country grapples with the many health and safety challenges brought about by the coronavirus (COVID-19) pandemic, many consumers have turned to food delivery apps to order meals online, and many restaurants have come to rely on the business they get through these apps to stay afloat,” wrote Klobuchar, D-Minn., along with fellow Democratic Sens. Patrick Leahy of Vermont,  Richard Blumenthal of Connecticut and Cory Booker of New Jersey. 

“A merger of Uber Eats and Grubhub would combine two of the three largest food delivery application providers and raise serious competition issues in many markets around the country,” they said.

“We urge the Department of Justice and the Federal Trade Commission to closely monitor the negotiations of this potential transaction and to initiate an investigation if the parties reach an agreement to merge.”

The senators said that it is “particularly troubling that this merger is being contemplated during a pandemic, when consumer demand has increased and when restaurants are more desperate for revenue than ever.” They said they “have been hearing about the exorbitant fees” that online delivery app companies have been charging to restaurants. 

Representatives for Uber, Grubhub, the DOJ and the FTC didn’t immediately respond to a request for comment on the lawmakers’ letter.

Klobuchar, a former presidential candidate, has been mentioned as a potential running mate for apparent Democratic nominee Joe Biden.

In their letter, Klobuchar, Leahy and Blumenthal argue that Uber Eats, Grubhub, and Doordash account for 20%, 28%, and 42% of online app-based food delivery sales across the nation, respectively. Merging Uber Eats and Grubhub would create significant anticompetitive effects, particularly at the local level, the Democrats argue. In New York City, for example, they said Uber Eats and Grubhub would have a hold on 79% of the market. 

“These market shares are staggering,” they wrote, “particularly in light of the leverage that these online delivery companies already wield over restaurants, delivery workers, and consumers, especially during this pandemic.”

The senators are part of a broader chorus of lawmakers calling for tough antitrust scrutiny amid the pandemic, worried that the crisis will allow already powerful players to amass even more share, as small competition fall by the wayside. 

Sen. Elizabeth Warren, D-Mass. and fellow progressive Rep. Alexandria Ocasio-Cortez, D-N.Y., have proposed “The Pandemic Anti-Monopoly Act” to “stop large corporations from exploiting the coronavirus pandemic to engage in harmful mergers. 

Rep. David Cicilline, D-R.I. has said he wants in language in the next relief package banning most mergers during the pandemic, though such language did not make its way in the $3 trillion relief package that Democrats passed last Friday.

The Justice Department and a bipartisan coalition of state attorneys general are working on an antitrust lawsuit against Google as part of an investigation that started prior to the pandemic. 

Still, the DOJ’s Delrahim told CNBC that some transactions may be “very necessary” now — to ensure that companies have liquidity and to keep workers employed.

He said his department will not review transactions with its “head in the sand.”

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