Ebay’s sale of Gumtree sparks concern by CMA

The Competitions and Markets Authority (CMA) has raised concerns that Adevinta’s anticipated £6.5bn purchase of Gumtree from Ebay could lead to higher prices and less choice for consumers.

Adevinta’s Shpock and Ebay Classified Group’s (eCG) Gumtree, both operate online classified advertising platforms in the UK which allow people to buy and sell a broad range of used or new goods such as clothing, electronics and furniture.

As part of the deal, Ebay will receive £1.8bn of cash and 540 million shares of Adevinta, representing 44% ownership of the pro forma company and a 33.3% voting stake in the company as positions on the board.

The CMA said this could result in Ebay being able to participate in the management of Adevinta and 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 ECG to Adevinta, the CMA stated 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 revealed its concern that 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.

The CMA expressed that Adevinta and Ebay 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.

Joel Bamford, senior director of Mergers, CMA, 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.”