Just Eat's merger with Hungryhouse could be off the table as CMA refers it for an in-depth investigation

 
Rebecca Smith
Just Eat has been trialling robot deliveries as part of its innovation plans
Just Eat has been trialling robot deliveries as part of its innovation plans (Source: Just Eat)

Has Just Eat bitten off more than it can chew with its proposed takeover of Hungryhouse?

Well, the Competition Markets Authority (CMA) will be the judge of that. It has referred the tie-up between the online takeaway firms for an in-depth merger investigation.

The competition watchdog said earlier this month it would do so over concerns that the merger could lead to worse terms for restaurants than if they had a choice of either company.

Read more: Just Eat's Hungryhouse takeover facing in-depth competition probe

However, initially Just Eat was given the opportunity to serve up potential ways of tackling the concerns, but the CMA said it has not done so.

So, off to the next stage we go. The merger will now be referred for an in-depth, aka phase two, investigation by an independent group of CMA panel members.

The deadline for the final decision is 2 November 2017.

Just Eat said earlier this month when the CMA first announced it intended to commence an in-depth investigation that it was "committed to demonstrating to the CMA that the market is, and will remain, competitive following completion of the proposed transaction".

Just Eat coughed up £200m for Hungryhouse last December, buying it from Delivery Hero.

When the deal was announced, Just Eat boss David Buttress said: "While we have significantly expanded internationally in recent years, we have remained focused on building a high-growth, sustainably profitable business domestically. Through this transaction, we would extend our market presence in the UK and sustain high levels of growth given the considerable opportunity in this market."

It is also planning Canadian expansion with the takeover of SkipTheDishes for 110m Canadian dollars (£66.1m).

What are the CMA's concerns?
The watchdog found that Just Eat and Hungryhouse are close competitors because of the similarity of their service and their broad geographical coverage.

The CMA said it believes more recent entrants to this market offering delivery services – such as Deliveroo, UberEATS and Amazon Restaurants – represent less direct competition to the companies as these tend to target different types of restaurant (primarily dine-in restaurants without their own delivery services). These recent entrants also offer less extensive geographic coverage than Just Eat and Hungryhouse.

Read more: Just Eat chairman takes leave of absence for medical reasons