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CMA raised its concerns after its Phase 1 investigation of the planned acquisition, stating that the merger could lead to a loss of competition between Shpock, Gumtree and eBay’s marketplace.
The UK Competition and Market Authority (CMA) has raised concerns over the deal between Adevinta ASA (OSLO: ADE) and eBay Inc ( NASDAQ: EBAY). A statement from Adevinta on February 16 revealed that their $9.2 billion planned acquisition of eCG, eBay’s classified ad business hangs in the balance after the CMA raised a red flag about the deal.
The British CMA stated that the anticipated deal between eBay and Adevinta could lead to higher prices and limited choice for consumers. Both Adevinta and eBay Classified Group (eCG) operate online classified advertising platforms in the UK. eCG’s Gumtree and Adevinta’s Shpock allows consumers to buy and sell a wide range of both new and used goods including electronics, clothing and furniture.
The proposed $9.2 billion deal was announced in July last year and would create the world’s largest classifieds group if it had been finalized as eBay’s marketplace, is already the largest platform for people to sell and buy goods in the UK and doubles as arguably the largest buy-and-sell platform in the United States and other parts of the world.
CMA raised its concerns after its Phase 1 investigation of the planned acquisition, stating that the merger could lead to a loss of competition between Shpock, Gumtree and eBay’s marketplace. They added that the merger could reduce consumer choice, increase fees or lower innovation in the supply of platforms that allow people to buy and sell goods online as only Facebook Marketplace will remain a significant competitor.
The proposed acquisition will see eBay acquire a 33.3% voting stake in Adevinta after it sells its eCG to the Norwegian company. eBay will also acquire positions on the Adevinta board and will be able to participate in the management of Adevinta as well as influence the strategy for both Gumtree and Shpock.
CMA also revealed that there was a realistic chance eBay would have sold Gumtree to a different buyer without retaining its influence after having reviewed its internal documents at the time the decision was made to sell to Adevinta.
Joel Bamford, Senior Director of Mergers at CMA speaking after the announcement stated that “It is important that people have choices 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,” he added.
The two firms now have until 23 February 2021 to offer legally binding solutions to resolve the competition concerns from CMA. The CMA afterward has 5 working days to consider accepting the solutions or refer the deal to an additional investigation.