The competition regulator of the United Kingdom has warned of a possible reduction in consumer choice and an increase in the fees charged form people for online advertising of goods because of a $9.2bn deal that will create the largest classified ads business of the world.
A combination of websites that are used by people for buying and selling used or new items ranging from clothes to electronics to furniture will be created by the proposed acquisition of Gumtree from eBay by Shpock operator Adevinta.
The online market place operated by eBay is the largest such online platform in the UK.
There can potentially be a loss of competition between Shpock, Gumtree and eBay’s marketplace because of the proposed merger, the Competition and Markets Authority said expressing concerns over the deal. The only big competitor that would remain is the Facebook Marketplace.
“This could reduce consumer choice, increase fees or lower innovation in the supply of platforms that allow people to buy and sell goods online,” the regulator said.
A 33.3 per cent voting stake in Adevinta and positions on its board would be acquired by eBay by the sale of the eBay Classifieds Group business, which runs Gumtree and Motors.co.uk, to Norway’s Adevinta, the CMA said. The resultant combination will have enough market clout to influence the business strategy for Gumtree and Shpock.
The largest classified ads business of the world with annual revenues of $1.8bn will belong to Adevinta because of the deal which was agreed in July. Adevinta was spun off from Norwegian publishing group Schibsted in 2019.
Rival bidders including Naspers and Prosus were beaten to the deal as Adevinta offered eBay a big stake. The rivals had offered more cash to eBay in their bids. There was pressure on eBay by activist investors Elliott Management and Starboard Value to divest its classifieds business and cut costs in order to counter the fast growing competition to the business from Amazon and Walmart.
The two companies have until 23 February to provide CMA with legally binding solutions to ally the regulator’s concerns of competition hampering form the deal. Following that, there will remain five more working days for the CMA to review the offer and the deal and decide on whether to accept the offer or to refer the proposed acquisition to more deeper investigation.
“While Adevinta and eBay do not agree with the CMA’s reasoning, they will work constructively with the CMA and are confident in finding a suitable resolution,” Adevinta said. Less than 10 per cent of the division’s revenues were accounted for eBay Classifieds Group’s UK business in 2019, it added. On the other hand, just 1 per cent of the revenues of Adevinta were made up by its revenues from the UK.
(Adapted from TheGuardian.com)