Uber’s deal to buy GrubHub may draw sympathy at DOJ, sources say

If Uber and Grubhub agree to merge, they may have an easier time with regulators in Washington than they’ve had with local officials in New York — but that’s not saying much. The ride-hailing giant hasn’t yet approached antitrust officials at the Department of Justice about its prospects for getting approval to acquire Grubhub, sources …

If Uber and Grubhub agree to merge, they may have an easier time with regulators in Washington than they’ve had with local officials in New York — but that’s not saying much.

The ride-hailing giant hasn’t yet approached antitrust officials at the Department of Justice about its prospects for getting approval to acquire Grubhub, sources close to the situation told The Post. That’s despite the fact that the $6 billion tie-up would create a food-delivery colossus controlling more than half of the market nationwide.

The delay is likely because the merger talks, which first got kindled last year, had fallen apart before the coronavirus arrived in the US, upending the restaurant business and sparking a more urgent need for food-delivery services in some key markets.

“The deal was dead,” a source briefed on the talks told The Post.

Now, the fact that the companies are looking to merge amid rising demand may put them in an awkward position with US authorities.

US Rep. David Cicilline (D-RI), who chairs the House antitrust subcommittee for the tech sector, called Uber’s proposed deal “a new low in pandemic profiteering.” Meanwhile, the New York City Council this week capped delivery fees at 20 percent of the bill during any government-ordered state of emergency.

Nevertheless, an insider said the DOJ’s antitrust enforcers may also be sympathetic on at least one crucial front: While restaurants have long griped that food-delivery apps like Uber Eats and Grubhub prohibit them from raising prices on their platforms to offset their stiff fees, a source close to the DOJ said that’s not likely to be considered as a merger-related issue by the DOJ.

The thinking, according to one source close to the feds, is that both Uber and Grubhub will impose such pricing restrictions on restaurants whether they merge or not.

Likewise, Makan Delrahim, the DOJ’s head of antitrust enforcement, has publicly panned so-called “behavioral remedies” that seek to control corporate conduct rather than forcing divestitures.

That’s despite the fact that a lawsuit filed in Manhattan federal court a month ago alleged that fees from food-delivery apps are spurring higher menu prices at restaurants across the board. Indeed, the broader question of whether delivery apps raise costs for consumers could come back to haunt Uber and Grubhub in any federal probe, experts said.

In New York City, Uber’s share of the food-delivery business would jump from 17 percent to nearly 80 percent with a Grubhub acquisition, according to analytics firm Second Measure.

Nationwide, the combined companies would have 55 percent of the business, while Doordash would be the next-biggest, at 35 percent, according to Wedbush Securities.

The DOJ will review concerns about the combined companies’ market share on a city-by-city basis, and the numbers in other key cities are equally staggering: They’d have a 70 percent share in Boston, 65 percent in Miami and 50 percent in Chicago.

“A great deal will rest on market definition,” said Herbert Hovenkamp, a law professor at the University of Pennsylvania specializing in antitrust issues. A key question, he says, is whether competitors apart from Uber Eats, Grubhub and DoorDash are taken seriously.

“If the government decides the market is limited to these three major players, then this deal is in trouble,” Hovenkamp said, adding, “The optics of this merger do not look good because we are relying more on delivered food,” during the pandemic.

A DOJ spokesman declined to comment.

Follow us on Google News

Filed under