On 30 April 2019, Egyptians were surprised by the sudden exit of on-demand delivery service “Glovo”. The reasons behind such exit were unknown until the Egyptian Competition Authority (the “ECA”) published a press release on 28 May 2019, in which it clarified the matter. It stated that following the exit of Glovo, ECA suspected an anti-competitive practice and therefore initiated an investigation. The result of the investigation found that there had been a horizontal agreement between Glovo and Delivery Hero. The subject of the agreement was the use of geographical market allocation in such a way that guaranteed the non-competition of Glovo with two brands owned by Delivery Hero in Egypt, namely Otlob and Carriage.
ECA’s Decision
On 21 May 2019, the ECA found that Glovo and Delivery Hero had violated Article 6 paragraphs (b) and (d) of the Egyptian Competition Law (the “ECL”) and obliged both Glovo and Delivery Hero to immediately cease the concluded agreements and restore the initial situation prior to these agreements. In addition, the decision obliged Glovo not to proceed with any liquidation proceeding and resume its activity in Egypt. ECA had further formally informed Glovo and Delivery Hero on 22 May 2019 with its decision and obliged them to communicate the measures they intend to take to implement the ECA’s decision within a maximum period of 30 days.
What’s new?
According to the press release published by the ECA, Delivery Hero had acquired 16% of Glovo’s shares, which allowed Delivery Hero to access the commercially sensitive information of Glovo, in addition to influencing its strategic business decisions. Unlike the EU Competition rules where concentrations are considered a threat on the competitive environment, the ECA introduced a new aspect of shareholding that might trigger an ECL violation. Notwithstanding the fact that the acquisition of 16% of shares shall not be considered a violation of the ECL, the ECA’s intervention this time was unique: the ECA’s investigation focused instead on the consequences of the anti-competitive act.
The ECA’s published press release on 28 May 2019 stated that: “Although the acquisition of minority shareholding in itself does not constitute per se infringement to the ECL, the exercise of the rights conferred to Delivery Hero in such a way as to lead to a Market Allocation Agreement contravenes Article 6 of the ECL”.
Glove’s Reaction
On 25 June 2019, the ECA announced that it had received a formal notification from Glovo and Delivery Hero where both ensured that they would comply with the ECA’s decision and the provisions of the ECL. The announcement stated that Glovo and Delivery Hero had committed themselves before the ECA to the following measures: (i) to restore Glovo’s activity in Egypt, (ii) for Delivery Hero not to use its shareholder rights to influence Glovo’s strategic decisions in Egypt, (iii) not to exchange confidential information between both companies, and (iv) for each company to operate independently in Egypt.
Market Reaction
Many voices in the market were astonished by the sudden exit of Glovo from the Egyptian market, especially after it had established a strong reputation and succeeded in securing a double digit market share in less than a year.
After the efforts of the ECA to stabilize the on-demand delivery market, some commentators have praised the intervention of the ECA as a positive step for protecting consumers against anti-competitive behavior and for preserving work opportunities for Glovo’s employees.
