Cartels are prevalent themes in movies, a cartel is an association of suppliers or manufacturers with the purpose of maintaining incredibly high prices and restricting competition. Cartels are bad, really bad.
Recently, the European Commission has ordered Germany’s Delivery Hero and its subsidiary, Glovo, to pay a combined $376 million on Monday for their participation and operation of a cartel as the run-up to their merger in 2022. This cartel has restricted competition in the European Economic Area.
“It is the first time that the commission is fining companies for a no-poach agreement,” stated Teresa Ribera, executive vice-president of the European Commission for a Clean, Just and Competitive Transition, during a news conference in Brussels. “This is also the first decision that shows how companies can misuse a small stake in a rival company for anti-competitive reasons, and importantly, today’s decision shows once again that competition rules matter to citizens’ daily lives.”
The Commission also said that between July 2018 and July 2022, the two companies engaged in coordinated practices, including a no-poach agreement not to hire each other’s employees, which is preventing competition. They also reiterated that these no-poach deals act as purchasing cartels, preventing competition also for labor, wages, and mobility.
Their actions also included the exchange of commercially sensitive information and the allocation of geographic markets. They added how these actions limited consumer choice, suppressed competition, and harmed job opportunities.
In business, a lack of competition is extremely detrimental since this stifles innovation, reduces consumer choices, and leads to higher prices, so potentially, no resources to keep producing products, which is why they become low in quality.
Not only are the companies preventing competition, but they are also dividing national markets in the European Economic Area, avoiding overlap and limiting competition in several nations.
“I could say that today’s decision shows our determination to take action against all forms of cartels. It also shows our willingness to have an active role in this consumer-facing sector,” Ribera said.
Delivery Hero was fined $254 million, while Glovo was asked to pay around $120 million. The investigation was launched following those unannounced inspections in 2022 and 2023, which a market monitoring exercise has triggered, thanks to whistleblowers and national authorities.
Delivery Hero is a global food delivery marketplace and quick commerce platform that connects you with restaurants, supermarkets, and other retailers. They handle both online food ordering and grocery deliveries. They may also deliver other goods from time to time.
With Delivery Hero, the processes are connecting consumers with restaurants, online ordering, order processing, delivery network, quick commerce, payment processing, and delivery tracking.
One of their subsidiaries is Glovo, an on-demand delivery app that also connects consumers with a wide range of local businesses, such as restaurants, shops, pharmacies, and so much more. How it works is that customers order items via the app, which couriers pick up and delivery to the customers’ locations.