Last month, we reported that eBay’s sale of its eBay Classifieds Group (eCG) to Norway’s Adevinta ASA is under threat from the British government’s Competition and Markets Authority (CMA).
Today, the CMA announced it has found that Adevinta’s anticipated £6.5bn ($9.2 billion) purchase of eCG from eBay could lead to higher prices and less choice for consumers. Therefore, the CMA has referred the merger for a phase 2 investigation unless the parties offer acceptable undertakings to address these competition concerns.
CMA Full Statement
Adevinta and eBay Classified Group (eCG) both operate online classified advertising platforms in the UK. These websites – Adevinta’s Shpock and eCG’s Gumtree – allow people to buy and sell a broad range of used or new goods such as clothing, electronics and furniture. eBay’s marketplace, ebay.co.uk, is the largest platform for people to sell goods to one another in the UK.
With the sale to Adevinta, eBay will acquire a 33.3% voting stake in Adevinta and positions on the Adevinta board. This means that eBay will be able to participate in the management of Adevinta and could enable it to influence the business strategy for both Gumtree and Shpock.
In addition, having reviewed eBay’s internal documents at the time the decision was made to sell eCG to Adevinta, the Competition and Markets Authority (CMA) considers there would have been a realistic chance eBay would have sold Gumtree to a different purchaser without retaining its influence. This would have resulted in Gumtree becoming an independent competitor to eBay’s marketplace.
Following its Phase 1 investigation, the CMA is concerned the merger could lead to a loss of competition between Shpock, Gumtree and eBay’s marketplace, with only Facebook Marketplace remaining as a significant competitor. This could reduce consumer choice, increase fees or lower innovation in the supply of platforms that allow people to buy and sell goods online.
Adevinta and eBay now have until 23 February 2021 to offer legally binding solutions to resolve the CMA’s competition concerns. The CMA then has 5 working days to consider whether to accept the offer instead of referring the deal to an in-depth investigation.
“It is important that people have choice when it comes to selling items they no longer require or searching for a bargain online, and that they can enjoy competitive fees and services.
There is a realistic chance that without this deal Gumtree and Shpock would have been direct competitors to eBay, which is by far the biggest player in this market. This is the latest in a series of merger probes by the CMA involving large digital companies, where we are thoroughly examining deals to ensure that competition is not restricted, and consumers’ interests are protected.”Joel Bamford, Senior Director of Mergers
After the CMA issued its statement, eBay also issued a statement pushing back at the CMA, but also saying that eBay and Adevinta will work to propose potential remedies to avoid further investigation.
eBay Full Statement
eBay Inc. can confirm that the UK Competition and Markets Authority (CMA) has announced it has concerns that the proposed transaction between eBay Inc. and Adevinta ASA could reduce competition in the UK, following its Phase 1 review.
eBay and Adevinta now have the opportunity to propose potential remedies to avoid the transaction being referred to further investigation. While eBay and Adevinta do not agree with the CMA’s reasoning, they will work constructively with the CMA and are confident in finding a suitable resolution.
eBay and Adevinta will together propose legally binding solutions to resolve the CMA’s competition concerns before the deadline of February 23, 2021. The CMA will then have five working days to consider whether to accept the solutions, or to refer the deal to an in-depth investigation. A further update will be provided in early March following this decision.
In 2019, eBay Classified Group’s UK business accounted for less than 10% of its consolidated revenues and Adevinta’s UK business accounted for only 1% of its consolidated revenues.
eBay and Adevinta remain excited about the proposed transaction and look forward to closing.
Big Blow to eBay
This CMA investigation is a big blow to eBay as it may required the two companies to come up with some remedies that would reduce the value of the sale, or in a worst case scenario, cancel the sale.
The only silver lining for eBay is that other parties had shown interest in eCG should the company and Adevinta not be able to complete the sale due to the objections by the CMA.
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