The European Commission announced a formal investigation into Berlin-based food delivery giant Delivery Hero and its Spanish subsidiary, Glovo, on Tuesday, citing cartel concerns. The Commission will launch an in-depth probe into agreements between the online delivery firms to establish whether any anticompetitive activity has taken place.

"The Commission is concerned that, before the takeover, Delivery Hero and Glovo may have allocated geographic markets and shared commercially sensitive information (e.g., on commercial strategies, prices, capacity, costs, product characteristics)," the Commission wrote in a press release. "The Commission is also concerned that the companies may have agreed not to poach each other's employees. These practices could have been facilitated by Delivery Hero's minority share in Glovo."

The move follows unannounced raids conducted on the two companies' local offices in July 2022 and November 2023.

From July 2018, Delivery Hero held a minority share in Glovo — going on to acquire sole control in July 2022, per the Commission, which noted that this is the first investigation it has undertaken into anti-competitive agreements "that may have occurred in the context of a minority shareholding by one operator in a competitor."

Delivery Hero and Glovo were contacted for a response to the investigation.

A Glovo spokesperson confirmed the Commission investigation, adding: "The investigation does not mean that the European Commission has concluded on an actual infringement of competition law nor does it prejudge the outcome. Glovo will fully cooperate with the European Commission and is committed to meeting all compliance and regulatory requirements."

Delivery Hero has also published a similar response statement, which is online here.

Earlier this month, the German delivery giant warned investors it could ultimately face an antitrust fine of up to €400 million over the EU antitrust issue.

The online food delivery space has always been fiercely competitive, with thin margins demanding strategic positioning and a race to secure the top (or second) position in the market to have a chance of building a viable business.

Add to that, after a brief surge in usage of food delivery apps during the 2020-2021 coronavirus pandemic, the sector has been undergoing a tough period of correction, with bouts of consolidation, market exits, layoffs and startups getting shut down.

This report was updated with a link to Delivery Hero's statement.

This article originally appeared on TechCrunch at https://techcrunch.com/2024/07/23/delivery-hero-and-glovo-probed-in-eu-over-food-delivery-cartel-concerns/