UK competition regulator could stall eBay's £6.5bn sale of Gumtree

Lucy Harley-McKeown
·3-min read
ANKARA, TURKEY - JULY 29: The logo of
The deal was announced in July last year, and had been expected to close in Q1 2021. Photo: Mustafa Murat Kaynak/Anadolu Agency via Getty Images

The UK Competition and Markets Authority (CMA) has raised the alarm over the anticipated £6.5bn ($9.2bn) purchase of Gumtree from eBay (EBAY), as it says it "could lead to higher prices and less choice for consumers."

The regulator said that Adevinta (ADE.OL), the purchaser, and eBay both operate online classified advertising platforms in the UK.

These websites – Adevinta’s Shpock and Gumtree – allow people to buy and sell a broad range of used or new goods such as clothing, electronics and furniture. eBay’s marketplace, ebay.co.uk, is the largest platform for people to sell goods to one another in the UK.

With the sale to Adevinta, eBay will acquire a 33.3% voting stake in Adevinta and positions on the Adevinta board. This means that eBay will be able to participate in the management of Adevinta and could enable it to influence the business strategy for both Gumtree and Shpock.

In addition, having reviewed eBay’s internal documents at the time the decision was made to sell to Adevinta, the CMA considers there would have been a realistic chance eBay would have sold Gumtree to a different purchaser without retaining its influence. This would have resulted in Gumtree becoming an independent competitor to eBay’s marketplace.

Following its Phase 1 investigation, the CMA is concerned the merger could lead to a loss of competition between Shpock, Gumtree and eBay’s marketplace, with only Facebook Marketplace remaining as a significant competitor.

This could reduce consumer choice, increase fees or lower innovation in the supply of platforms that allow people to buy and sell goods online.

Adevinta stock, which is listed in Oslo, opened around 1% lower following the news on Tuesday morning.

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Joel Bamford, senior director of mergers, 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."

The deal was announced in July last year, and had been expected to close in Q1 2021.

In a joint statement on Tuesday morning the pair said: "Adevinta and eBay now have the opportunity to propose potential remedies to avoid the transaction being referred to further investigation.

"While Adevinta and eBay do not agree with the CMA’s reasoning, they will work constructively with the CMA and are confident in finding a suitable resolution.

"Adevinta and eBay remain excited about the proposed transaction and look forward to closing."

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The pair now have until 23 February 2021 to offer legally binding solutions to resolve the CMA’s competition concerns. The CMA then has five working days to consider whether to accept the offer instead of referring the deal to an in-depth investigation.

Watch: Adevinta to buy eBay classifieds unit for $9.2bn