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Potential Grubhub-Uber Deal Draws Fire Over Possible Food Delivery 'Duopoly'

By Rhian Hunt - May 22, 2020 at 11:12AM

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Several senators want the Department of Justice to monitor the deal with Uber.

With talks apparently continuing between Grubhub (GRUB) and Uber Technologies (UBER 0.71%) over Uber's possible acquisition of the food delivery service, four senators sent a letter to the Department of Justice (DOJ) and the Federal Trade Commission (FTC) asking them to watch the deal carefully. The senators, all Democrats, allege the deal could damage the market's competitiveness and they want a full investigation if Uber actually agrees to buy Grubhub.

Senator Amy Klobuchar heads the group, which also includes Cory Booker, Patrick Leahy, and Richard Blumenthal. The letter says 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." 

A chess board with two pieces on top of wooden blocks spelling out "M & A"

Image source: Getty Images.

The communication also provides figures on the market control Uber would allegedly achieve if it makes the acquisition. Together, it asserts, Uber Eats and Grubhub would command 48% of the U.S. food delivery market, with DoorDash staking a claim to 42%, and just 10% left for other competing delivery services. It also provided details of the hypothetical Uber/Grubhub hybrid's hold over major city deliveries:

City Market Share
Atlanta 51%
Boston 68%
Chicago 60%
Miami 65%
New York 79%

The letter expresses concern over "the exorbitant fees that these online delivery app companies charge to restaurants, which are then forced to pass these excessive costs on to consumers." It also says that even following recovery from the pandemic, the deal "would create an effective duopoly" potentially leading to "higher fees, reduced services quality, fewer choices, and less innovation."

CNBC reports Grubhub and Uber are "quite close" to inking a deal, with Grubhub significantly lowering its asking price.

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.

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Stocks Mentioned

GrubHub Inc. Stock Quote
GrubHub Inc.
GRUB
Uber Technologies, Inc. Stock Quote
Uber Technologies, Inc.
UBER
$32.47 (0.71%) $0.23

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