Just Eat’s (LON:JE) proposed takeover of Hungry House is being investigated by competition authorities over fears that the acquisition “raises clear competition issues”.
“Following its initial investigation into the merger, the Competition and Markets Authority has found that the companies are close competitors because of the similarity of their service and their broad geographical coverage,” said the regulator in a statement.
The Competition and Markets Authority have already carried out phase one of the investigation, where they sought comments from parties to understand how such a deal could affect the wider market.
Phase one ended on March 24 and now the authorities will enter phase two, to identify different ways the merger will be able to go ahead.
Head of EU and competition at law firm DWF, Howard Cartlidge, said that the takeover “raises clear competition issues”.
“With Deliveroo and UberEats being the only obvious competitors, a ‘phase two’ investigation would normally be inevitable,” he continued.
“This is an early, but important, opportunity for the Competition and Markets Authority to keep the market open and lay down some ground rules for how it will approach app-based businesses in the future,”
Just Eat headquarters are in London but the delivery group operates internationally with 18.2 million online users and 71,000 takeaway restaurants. Hungryhouse is also based in London and offers customers a choice of more than 10,000 restaurants in the UK.
Just Eat have had a positive start to 2017, with sales up by 46 percent to £118.9 million in the first three months of the year. Just Eat’s orders hit 24 million when it was under review and was up 17 percent compared to the same quarter last year.
Shares dropped 1.6 percent to 555p in early trading.
Rival Deliveroo announced plans last month to provide kitchen space for pop-up delivery restaurants.