Uber Falls Flat on First Bid for Grubhub

Recently, Uber and Grubhub have been in merger negotiations. However, a merger between the gig economy powerhouses will have to wait. According to MarketWatch, Uber’s deal included 1.9 shares of its stock for each of Grubhub’s. Grubhub subsequently rejected the proposal as far too low.

As a result of social distancing guidelines, ridesharing has taken a steep market hit, while delivery services have overall benefited.. Both sides are eager to get a deal done, with Uber shedding parts of its delivery service, Uber Eats, and Grubhub looking to for a competition boost in an already crowded market. Both companies estimate a merger agreement would bring in $300 million in cost savings.

While the two sides continue negotiations, some policymakers have criticized the potential merger as bad for consumers. Senator Amy Klobuchar (D-MN), a senior member on the Senate Antitrust Committee tweeted recently:

“If Uber takes over Grubhub it isn’t good for competition and it isn’t good for you. When big companies corner the market it usually means more for them and less for you, especially in a pandemic. That’s why I’m challenging the Trump antitrust enforcers to do something about it.”

Delivery services like Grubhub, Postmates, DoorDash, and UberEats have faced backlash from restaurants as well. Business Insider reported that Jersey City imposed a 10 percent cap on delivery fees. Uber responded by adding a three-dollar surcharge to orders. New York City passed a similar measure to temporarily cap commissions to 15 percent for delivery, down from the usual 30 percent that the third-party delivery apps charge.

Last year, restaurant groups in New York City pushed for legislation to permanently cap commissions at 10 percent, but now with the pandemic shutting down indoor seating, restaurants have relied on delivery and takeout to make ends meet.

“Restaurants are having a hard enough time competing in New York City as it is between skyrocketing property taxes and labor costs,” said Andrew Rigie, executive director of the NYC Hospitality Alliance. “They can’t survive if they’re also being exploited by companies like Grubhub, Seamless and others. Hopefully, this package of legislation will help level the playing field and give some basic rights to restaurants.”

The ripple effects of such a merger are unknown, and although delivery service stocks have climbed in recent months, the industry remains mostly unprofitable. Mandeep Singh, a Bloomberg Intelligence senior industry analyst, says that a deal “would help consolidate the U.S. online food delivery market and reduce cash burn.”

Still, the companies would need final approval to move forward with any future agreement, and with the pandemic causing mass layoffs and market uncertainty, a merger may sdraw additional scrutiny by both regulators and policymakers alike.

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