The Competition and Market Authority (CMA) has said it has concerns the move could lessen competition.
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The UK competition regulator has warned that Norwegian firm Adevinta’s £6.5 billion merger purchase of Gumtree from Ebay could lead to “higher prices and less choice” for consumers.
In July, Shpock owner Adevinta sealed a deal for Ebay’s classifieds business which also gave the US giant a 33.3% voting stake and a seat at the board of its rival.
The Competition and Market Authority (CMA) has now said that, following an initial investigation, it has concerns that the move “could lead to a loss of competition … with only Facebook Marketplace remaining as a significant competitor”.
It added that the move “could reduce consumer choice, increase fees or lower innovation in the supply of platforms that allow people to buy and sell goods online”.
The CMA said Ebay’s position on the Adevinta board means it will be able to participate in the management of the firm and could enable it to influence the business strategy for both Gumtree and Shpock.
The regulator told the companies that they now have a week to offer solutions to assuage these competition concerns.
Joel Bamford, senior director of mergers at the CMA, said: “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.”
In a joint statement, the two companies said: “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.
“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.”