Just Eat: Minority shareholdings and merger control

The decision of the United Kingdom Competition and Markets Authority (CMA) of April 23, 2020 authorizing Takeaway’s takeover of Just Eat without commitments, was published last May. After an investigation spanning almost three months, the CMA concluded that, since it was unlikely that Takeaway would have operated in the United Kingdom again without the transaction, it did not pose competition problems.

That transaction had also been notified in Spain on September 5, 2019 and approved in phase one without commitments by the Spanish National Commission for Markets and Competition (“CNMC”) within a matter of weeks (case C/1061/19- Takeaway/Just Eat).

A significant feature of this case in Spain is the fact that there was another takeover bid launched by MIH in 2019 competing to acquire Just Eat.

Although Just Eat was finally acquired by Takeaway, both transactions, which included minority shareholdings in Just Eat competitors, were analyzed by the CNMC. MIH’s takeover would have been subject to commitments if approved by the CNMC (case C/1072/19 – MIH Food Delivery Holdings/Just Eat) as opposed to Takeaway’s transaction where the CNMC determined commitments were not necessary.

Takeaway/Just Eat transaction

Takeaway is an online food delivery platform that does not operate in Spain and is owned 15% by Delivery Hero, another platform not present in Spain. The latter, in turn, has approximately a 16% stake in Glovo, one of Just Eat’s main competitors in Spain.

Transaction organization chart

The CNMC approved Takeaway’s takeover of Just Eat in phase one despite Delivery Hero holding a minority shareholdings in Glovo. This was due to the fact that stake of Delivery Hero in the resulting entity would, in turn, also be minority and not grant it control. As such, the CNMC clarifies in its decision that this does not mean it could not pose competition problems, but it should be analyzed from the perspective of the agreements between companies in any case.

MIH/Just Eat transaction

MIH holds a minority shareholdings of between 15% and 25% in Delivery Hero, which, as stated, does not operate in Spain. However, unlike the Takeaway transaction, here the CNMC concluded that MIH’s takeover of Just Eat would be subject to some commitments.

Transaction organization chart

In its decision, the CNMC acknowledged that MIH held a minority, non-controlling shareholdings in Delivery Hero. However, the minority shareholdings of Delivery Hero in Glovo could grant MIH certain influence over it, allowing it (i) to access non-public sensitive commercial information (in particular, current disaggregated information on amounts, prices, and margins), and (ii) to know and decide its future business plans, its expansion strategy, and plans for going into or exiting specific geographic areas.

This, in addition to the fact that MIH was going to directly control Just Eat, entailed a threat to competition that had to be cut off.On the one hand, MIH had power to influence commercial policy of Just Eat directly and, on the other, to influence the policy of Glovo indirectly. This meant an incentive to prevent or reduce the  business expansion of the latter. The transaction also created a structural link through MIH between competitors promoting coordination between them.

To resolve this, some conduct commitments were agreed. Specifically, mechanisms were established to prevent MIH from accessing sensitive commercial information of Delivery Hero or Glovo, or the possibility of influencing the commercial strategy developed by Glovo in markets where it competes or could compete with Just Eat in Spain. Delivery Hero (and therefore Glovo) was also prohibited from accessing commercially sensitive information of Just Eat.

Although MIH’s takeover of Just Eat did not come to fruition, it is interesting to compare these two cases where corporate structure has played an important role when analyzing the minority shareholdings in competitors of the acquired entity, to the point that only one of them has required that commitments be approved.

Background in which the minority shareholdings were analyzed in the framework of merger control

This is not the first time the CNMC has analyzed and approved merger transactions involving minority shareholdings in competitors.

For example, in March 2013, the CNMC had the opportunity to analyze two different transactions in which minority shareholdings in competitors were also analyzed.

On the one hand, it approved Caixabank’s takeover of Banco de Valencia (case C/0488/12, Caixabank/Banco de Valencia) in phase one with commitments.

In that case, the analysis focused on the possible obstacles to maintaining effective competition arising from the co-existence of directors appointed by Caixabank in two companies working in water management (Aguas de Valencia and AGBAR). In resolving it, Caixabank agreed not to simultaneously have directors on the boards, in executive positions, or on the executive committee in both companies (AGBAR and Aguas de Valencia) to avoid possible coordination between competitors in comprehensive water management.

The CNMC also approved the takeover of Hojiblanca’s extra virgin olive oil packaging and distribution business by Deoleo (case C-0478/12 DEOLEO/HOJIBLANCA).

In this transaction, Hojiblanca remained in the market, producing and selling white-label and other own-brand olive oil and producing and selling oil in bulk. The agreements reached included Hojiblanca’s receiving a stake lower than 10% in Deoleo. Although this did not grant it control, it did allow Hojiblanca to appoint a member to its board of directors.

The transaction was subject to some commitments to restrict the exchange of information of Deoleo and Hojiblanca within the same board of directors. Access to certain information on Deoleo’s activities was prevented and, at the same time, no board member of Deoleo could request commercial information of Hojiblanca.

It seems that the CNMC tends to carefully analyze the possible anti-competitive effects of holding minority shareholdings in competitors in merger control cases. Therefore, it is an additional aspect that, undoubtedly, must be taken into account when analyzing future mergers.