Wed 06/17/2020 14:12 PM
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Takeaways
 
  • The U.K. Competition and Markets Authority’s decision on whether to review the acquisition of Grubhub Inc. by Just Eat Takeaway.com NV is likely to hinge on whether Grubhub had plans to expand its operations in the United Kingdom.
  • The interventionist approach adopted by the Competition and Markets Authority, or CMA, in recent transactions indicates that the agency could consider intervening in the Grubhub/Just Eat Takeaway deal, despite Grubhub having a limited market presence in the United Kingdom.
  • With the CMA, currently “all bets are off” as to whether the agency will try to intervene in a deal, according to Mark Jephcott, a partner at Herbert Smith Freehills in London.
  • Another London-based competition law practitioner said a briefing note to be submitted by Just Eat Takeaway about the transaction will likely explain either why the companies believe the CMA does not have jurisdiction over the transaction, or, if it does, why the authority should not have concerns about the deal.

The U.K. Competition and Markets Authority’s decision on whether to review the acquisition of Grubhub Inc. by Just Eat Takeaway.com NV is likely to hinge on whether Grubhub had plans to expand its operations in the United Kingdom.

The interventionist approach adopted by the Competition and Markets Authority, or CMA, in recent transactions indicates that the agency could consider intervening in the Grubhub/Just Eat Takeaway deal, despite Grubhub having a limited market presence in the U.K.

Mark Jephcott, a partner at Herbert Smith Freehills in London, told Reorg that recent cases demonstrate that the CMA is taking “a dynamic approach” when asserting jurisdiction and could consider matters such as whether Grubhub may expand its operations or even indirect services in the U.K. With the CMA, currently “all bets are off” as to whether the agency will try to intervene in a deal, Jephcott said.

Jephcott noted several recent transactions investigated by the CMA in which the company being acquired did not have any revenue whatsoever in the U.K., but the CMA nevertheless claimed jurisdiction on the basis of its alternative and “notoriously wide ‘share of supply’ test.” Such transactions include Sabre/Farelogix, Mastercard/Nets and Roche/Spark.

In January, the CMA initiated a probe into Dutch online food delivery company Takeaway.com’s purchase of Just Eat even though Takeaway had exited the British market in 2016. In April, when unconditionally clearing the transaction, the CMA said it believed there was “no realistic prospect that Takeaway would have re-entered the supply of online food platforms in the UK absent the Merger.”

According to Grubhub’s 2019 annual report, from 2017 to 2019, the company “generated a nominal amount of foreign revenues” through its U.K. subsidiary Seamless Europe Ltd. In their merger agreement published on Friday, June 12, Grubhub and Just Eat Takeaway said the latter intended to submit a briefing note to the CMA about their transaction within 10 days. The companies added that Just Eat Takeaway would submit a merger notice to the CMA if requested by the authority or agreed to by the parties.

A London-based competition law practitioner said the briefing note will likely explain either why the companies believe the CMA does not have jurisdiction over the transaction, or, if it does, why the authority should not have concerns about the deal. The note will also likely include information about Grubhub’s expansion plans in the U.K., “otherwise the CMA would ask questions” about them, the practitioner said.

The practitioner also said that Takeaway was taken by surprise when the CMA opened an investigation into its purchase of Just Eat just prior to the companies closing the transaction. Therefore, Just Eat Takeaway “will probably want to be cautious about the U.K, this time,” the practitioner said, adding that the company’s deal with Grubhub is not likely to face any issues with the CMA, subject to whether Grubhub had plans to expand in the U.K.

Another food delivery deal that has come under close scrutiny by the CMA is Amazon’s investment in Deliveroo. The authority provisionally cleared the transaction in April - its first application of the failing firm defense during the coronavirus pandemic - but has since extended the deadline to Aug. 6 for when it must complete its review of the case.

U.K. business owner Hamza Qureshi, who submitted comments to the CMA expressing concerns about the Deliveroo/Amazon deal, told Reorg that he is less worried about the Grubhub/Just Eat Takeaway transaction because of Grubhub’s lack of presence in the U.K. He said his company, Indulge In, uses Just Eat’s services, “which have been positive for our business, thus far.”

Reorg’s previous coverage of this transaction can be found HERE.

--Alex Wilts
 
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