Negotiations regarding a potential sale of foodpanda to Grab have fallen through, and concerns about the merger were spelled out in a press release issued by the Competition and Consumer Commission of Singapore (CCCS) on Apr. 1.

CCCS is a statutory board under the Ministry of Trade and Industry that oversees competition matters and consumer protection issues.

CCCS stated that the deal had been on its radar since Jan. 10, 2024.

A loss-making venture

News about a potential deal first surfaced in Sep. 21, according to The Straits Times.

The German food delivery group Delivery Hero was apparently in talks regarding a partial sale of its Asian platform foodpanda, though a potential buyer had not been named then.

Another report by ST on Feb. 2 provided an update on the then ongoing sales talks.

According to the article, Delivery Hero was looking to divest the loss-making foodpanda, with investor concerns about its continued viability in the Southeast Asian region growing.

The article also mentioned Grab as a key potential buyer.

The sale of foodpanda, one of the three main platforms of food delivery here aside from Deliveroo and Grab, would have repercussions on the local food delivery market.

CCCS launches investigation

The CCCS launched an investigation to look into the sales talks on Jan. 10.

The investigation concerned whether any potential transaction regarding the sale of foodpanda would contravene section 54 of the Competition Act 2004.

According to the CCCS guidelines, section 54 concerns mergers that could "result in a substantial lessening of competition".

The CCCS, as it stated in its press release, was particularly concerned that since the local delivery market is "characterised by few large players, high entry barriers and strong network effects", the sale of foodpanda to Grab could lead to the market no longer remaining as open and contestable as it should be.

A heavily skewed market with reduced competition affects consumers as a whole.

A less competitive market can mean higher prices, a reduced need for innovation, and lower product quality.

Talks put on ice

On Feb. 2, 2024, CCCS intervened to put the negotiations on pause.

They issued instructions, called "Interim Measures Directions (IMDs)" to both Grab Holdings Pte. Ltd, and Delivery Hero that would prevent the sale from moving forward till CCCS had completed its investigations.

On Feb. 23, CCCS was informed that the sales talks had been abandoned.

As a result, the IMDs ceased to be in effect.

When does CCCS intervene?

Not all mergers, even major ones, are a concern for CCCS.

Only mergers that unduly or seriously affect market competition and openness are spotlighted.

In fact, according to the press release, merging entities are not required to issue a notification to CCCS but should, all the same, make sure that any potential transaction does not contravene the Competition Act.

According to the press release, CCCS holds to the view that issues of competition when it comes to mergers and acquisitions only arise when:

• The merged entity has/ will have a market share of 40% or more; or

• The merged entity has/ will have a market share of between 20% to 40% and the post-merger combined market share of the three largest firms is 70% or more.

This is why the sale of foodpanda to Grab became a cause of concern.

Top photo via Grab Unsplash