After a year of beating out established competitors such as Otlob, Spanish delivery startup Glovo bowed out of the Egyptian market at the end of April. The announcement came as a shock for many, as the app had quickly gained popularity and the appearance of their yellow couriers were becoming an everyday occurrence.
In a big announcement yesterday, the Egyptian Competition Authority (ECA) released an official statement and order to Glovo to return to the market, accusing the Spanish startup and recent shareholder Germany’s Delivery Hero for restricting competition in the local market.
Glovo’s Exit and Delivery Hero’s Side
Almost a year after its MENA launch in Cairo, Glovo had received high reviews and popularity.
According to MENABytes, “Glovo within one year of their operations had acquired double-digit market share in Egypt’s highly competitive food delivery market, as 70-80 percent of all its orders in Egypt were food deliveries. [They] had also learned from a source with direct knowledge of the matter that the company was witnessing brilliant growth and had plans to expand its team when the decision to exit Egypt was announced.”
This made the app’s announcement that it would completely leave the market by the end of April a shock for users and couriers alike. At the time, there were between 3k to 5k delivery partners/couriers working on the local app.
In 2018, during their meteoric rise, Delivery Hero bought a 16% stake in the company, making it the company’s largest minority stakeholder.
Delivery Hero currently owns Otlob and Carriage, the newly arrived delivery app that would have been the main competitor against Glovo’s non-food delivery options, alongside many other MENA delivery apps.
ECA Accuses Glovo and Delivery Hero of Underhanded Tactics
The food delivery market in Egypt is extremely intense and lucrative, but also is slowly being eaten by international companies.
In an investigation into Glovo’s sudden exit, the ECA feels that an agreement between Delivery Hero and Glovo, in which Glovo was supposedly asked to leave the Egyptian market by Delivery Hero, was created that violated Article 6 of the Egyptian Competition Laws.
The ECA has accused the two companies of creating a market allocation agreement (an agreement between competitors to divide markets and customers), that would lead to better marketshare for DH’s Otlob and Carriage in exchange for Glovo’s exit.
Translated from a ECA press release,
“In 2018, Delivery Hero acquired 16% of the shares of Glovo which led to the acquisition of some rights by the company, allowing it access to confidential information and the strategy related to its strongest competitor in the Egyptian market, in addition to these rights have been opened the door to the company to influence some of the strategic decisions of Glovo relating to the Egyptian Market…”
“Since Glovo is the largest competitor of trademarks owned by Hero Delivery in the Egyptian market, the company’s exit is a restriction to competition that is in the interest of service users and obscures the opportunities available to them. In addition, the exit of Glovo from the Egyptian market will strengthen the position of the company Hero Delivery in the Egyptian market. A large concentration of market power may lead to practices that limit competition and adversely affect all parties involved in the market concerned, whether users of communication services, drivers or restaurants.”
The ECA is now ordering the two to cease the agreements between them and for the Spanish startup to return to the market and stop its liquidation proceedings. If not, the two companies will have to pay an unknown penalty fine, and DH might see the ECA following them a bit closer for the years to come.