business Tech

Senators Demand FTC, DOJ Scrutinize Potential Merger of Uber and Grubhub

Bydls

May 21, 2020

Four U.S. senators are pressuring the Federal Trade Commission and the Department of Justice to “closely monitor the negotiations” between Uber and food delivery giant Grubhub Seamless to merge their parasitic services into one market-dominating giant.

Advertisement

In a letter to the two agencies dated Wednesday, U.S. Senators Amy Klobuchar, Patrick Leahy, Richard Blumenthal, and Cory Booker warned DOJ antitrust chief Makan Delrahim and FTC Chairman Joseph Simons that “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.” The senators noted that Uber Eats is estimated to control 20 percent of the U.S. app-based food delivery market, while Grubhub controls 28 percent and DoorDash 42 percent.

If Uber successfully buys up Grubhub, that would leave Uber and DoorDash splitting about 90 percent of the national market—and Uber’s influence would be even greater in many cities across the country.

Advertisement

In Atlanta, Boston, Chicago, Miami, and New York alone, statistics cited by the senators showed, Uber would blow far past 50 percent market share, which the FTC websites states courts have generally upheld as the minimum threshold to define a monopoly. (In New York, that percentage would be a jaw-dropping 79 percent.) The letter noted that restaurants have raised alarm over exorbitant fees that in some cases exceed 30 percent of the actual price of the food delivered, as well as called out Uber for pressing forward for a deal under the cover of the coronavirus pandemic.

“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,” the senators wrote. “Even after COVID-19 is behind us, combining Uber Eats and Grubhub would create an effective duopoly that would likely threaten competition and consumer welfare.”

The Uber-Grubhub deal is reportedly still in the negotiation stages, with Uber rejecting a counter-offer from the latter company it deemed too high and currently attempting to set a lower price. There is no certainty it will happen, though reports earlier this year indicated that Grubhub was exploring a potential sale amid increasing competition and plunging stock value.

Buying up Grubhub would be great news for Uber. Before the pandemic, Grubhub was unique among the four companies (alongside Uber, DoorDash, and Postmates) that currently control an estimated 95 percent of app-based food deliveries in that it made a profit. The combined market share of the two companies would massively bulk up Uber Eats, an operation that has seen massive growth but struggles to make money.

Uber Eats, which has become increasingly important to its parent company’s ambitions as it hit walls in its core tax business, hemorrhaged $461 million before interest, taxes, depreciation and amortization in Q4 2019. Despite a strong Q1 2020 during the pandemic that saw over 50 percent increases in bookings, Uber Eats still had a net $313 million loss compared to the same period the year before. This situation persists despite the app companies relying on predatory practices like signing up restaurants without their consent, seeding the internet with phone numbers for restaurants that redirect to app lines, and awful treatment of their labor forces of poorly-compensated contract delivery drivers.

However, the deal is likely to invite further scrutiny from regulators. Food delivery apps are already facing pushback in other areas, such as a class action lawsuit in California demanding enforcement of a law designed to make Uber classify drivers as employees and caps on food-delivery fees in New York, Los Angeles, and potentially other regions that could outlive the pandemic.

“Uber is a notoriously predatory company that has long denied its drivers a living wage,” Representative David Cicilline, who chairs the House antitrust subcommittee, told NPR in a statement earlier this month. “Its attempt to acquire Grubhub — which has a history of exploiting local restaurants through deceptive tactics and extortionate fees — marks a new low in pandemic profiteering.”