WASHINGTON (Reuters) – Uber Technologies Inc’s plan to buy Postmates Inc could pose problems in Miami and Los Angeles where the two dominate the food delivery market, according to antitrust experts who said it would be difficult to set up an asset sale to resolve the issue.
Uber, the No. 3 in restaurant food delivery, said on Monday it would buy No. 4 Postmates for $2.65 billion after its plan to buy Grubhub Inc fell apart.
With the deal, Doordash remains the industry leader at 45% of sales for May, Uber Eats becomes No. 2 at 30% and Grubhub would be No. 3 at 23%, according to research firm Second Measure.
The merged company would see its market share jump to 78% in Miami, 50% in Los Angeles and 43% in Phoenix, according to data published by the research firm in June. Enforcers will likely look at the deal’s impact on cities because the effect of less competition perhaps higher delivery fees or less pay to drivers — is likely to be felt most in cities rather than nationally.
Normally antitrust enforcers require company assets to be sold like a factory to ensure that industry rivals can compete. But it’s not clear what could be done to redress lost competition from this deal since the most obvious assets are deals with restaurants and drivers who are often gig workers, antitrust experts said.
The difficult task facing enforcers would be to allow the companies to combine but to leave space for rivals to grow in the cities where the worst concentration occurs, said Chris Sagers, who teaches at the Cleveland-Marshall College of Law.
Geoffrey Manne, president of the International Center for Law and Economics, argued the deal should easily win antitrust approval, saying that if the big companies raise their rates new firms could easily enter the market.
The deal will be reviewed by the Justice Department or Federal Trade Commission to ensure that it complies with antitrust law.
Antitrust enforcers may also look at the effect of the deal on drivers, whose daily pay could fall if the number of companies competing for their services is reduced.
“Historically, the agencies have not paid much attention to labor,” said Henry Su, formerly with the FTC and now with Constantine Cannon LLP. “This may be a good test case to look at the driver side of things. At a minimum, you can’t ignore that this is an issue.”