In a market that is becoming increasingly reliant on delivered food, there is an all-out war brewing between consumers, businesses, and lawmakers and the food delivery services that we love to hate (but can’t seem to help ourselves from using). Earlier in the month, states started to issue commission caps against delivery apps in an effort to protect struggling restaurants. Now it looks as if some delivery apps are considering consolidating power — as the Wall Street Journal reports that Uber Eats is looking to purchase GrubHub, a move that would see Uber own a majority of the market and has some analysts worried will create a domino effect, causing DoorDash and Postmates to merge. A series of mergers could virtually eliminate competition in the delivery food app space, which might be a bad thing for the hungry consumer as a lack of competition means a lack of choices, which usually leads to higher prices.
The latest power grab has lawmakers, city officials, and antitrust experts worried, as both companies have a history of being less than charitable to their employees and the businesses they rely on to operate. According to Ars Technica, Uber has a history of denying their drivers a fair living wage, and Grubhub has a history of “exploiting local restaurants through deception tactics and extortionate fees,” in the words of David Cicilline, a congressman who sits on the chair of the House Antitrust Subcommittee and characterized Uber’s move as “a new low in pandemic profiteering.”
According to Forbes, analysts at the investment firm Wedbush Securities estimate that a merger between Uber Eats and Grubhub would see Uber controlling 55% of the total meal delivery market, and, according to data collected by analytics firm Second Measure, would result in a market share growth of 80% in certain markets, like New York City.
“Should Uber buy Grubhub, a big ripple effect will happen,” warns managing director at Wedbush, Daniel Ives. “It would potentially be a catalyst to DoorDash and Postmates to have to get married as well.”
Consolidating food delivery apps will give companies more leverage to further exert their influence and power over independent restaurants, especially when it comes to fees — already a source of contention between cities and apps. In cities where commission caps have been proposed or capped, Uber has retaliated by either ending service, like in San Francisco where the company suspended all deliveries to the low-income Treasure Island area in response to a 15% cap, or by passing on the charges to the consumer, like in Jersey City where the company began to add a $3 surcharge after a 10 percent commission cap.
As other cities entertain the idea of implementing commission caps to further protect businesses, the idea of merging will only become more enticing to the delivery apps — who seem to want to avoid both regulation and competition at all costs.