Germany-based Delivery Hero and Spanish majority-owned subsidiary Glovo are under investigation for potential anti-competitive practices by European Union regulators.
The European Commission announced that both companies were the target of “unannounced inspections” i.e., raids.
“The commission has concerns that the companies concerned may have violated Article 101 of the Treaty on the Functioning of the European Union, which prohibits cartels and restrictive business practices,” read the release.
Article 101 is relatively broad, but the raids were focused on concerns around an “alleged agreement or concerted practice to share national markets.” In plain language, the rule doesn’t allow companies to restrict competition by coordinating service between markets.
Delivery Hero just announced two days ago that it had completed the acquisition of Glovo, another food delivery provider.
If the company is found to have violated Article 101, the penalty could be massive. Under the commission rules, the company could be forced to pay up to 10 percent of “global turnover” a.k.a. revenue. Whether that would only cover European revenue or global revenues, the numbers are massive. With reported 2022 revenue of EUR 6.6 billion ($6.7 billion), fines could reach EUR 660 million (670 million).
According to Reuters, Germany’s cartel office confirmed it had assisted the EU Commission with a review of multiple online delivery providers. Just Eat Takeaway, Uber, Deliveroo, Bolt, Wolt, Gorillas and Flink were not involved, according to spokespeople responding to Reuters.
Delivery Hero and Glovo confirmed that they had been the target of inspections.
“Delivery Hero confirms that the European Commission conducted an inspection at its offices in Berlin,” read a company statement. “The fact that the commission carries out such an inspection does not mean that the commission has concluded that there has been an actual infringement of competition law nor does it prejudge the outcome of the investigation itself.”
A Glovo spokesperson provided a similar statement, saying “We can confirm that the European Commission has approached Glovo,” but that “we are confident that Glovo meets all antitrust and compliance requirements.”
The investigation comes at a time when both companies—and all delivery platforms around the world—struggle to find ways to operate profitably under the specter of economic difficulties.
With a total of EUR 34.5 billion in gross sales and the EUR 6.6 billion in revenue, the company’s profit margin was still negative 2.2 percent. Its stock took a beating when it announced those 2022 numbers.
In its latest earnings announcement in April, Delivery Hero projected a negative 1 percent to 1.2 percent profit margin and claimed to be on track toward a long-term margin of 5 to 8 percent.