Ebay’s $9.2 billion sale of Gumtree could be placed under an in-depth investigation by the UK’s competition watchdog over concerns it could reduce competition.
The Competition and Markets Authority (CMA) has said Ebay’s multi-billion-dollar sale of Gumtree to Adevinta could “reduce consumer choice, increase fees or lower innovation in the supply of platforms that allow people to buy and sell goods online”.
The deal would see the formation of the largest classified ads business on earth, spanning 20 countries and achieving revenues of around $1.8 billion last year, including an operating profit of $600 million.
Adevinta agreed to purchase Ebay’s classified ads business last July beating rivals including Naspers and Prosus despite them offering more cash.
Instead Adevinta agreed to sell a significant stake of its business to Ebay, making it the Norwegian company’s largest shareholder with an overall 44 per cent share.
The CMA sees this as a problem as it would give Ebay significant voting sway over Adevinta, which also owns rival Shpock, leaving only Facebook Marketplace as a realistic competitor.
It has now asked the pair to propose legally binding solutions to resolve its competition concerns by February 23.
Then it will have five days to decide whether to greenlight the deal or launch an in-depth investigation.
“While eBay and Adevinta do not agree with the CMA’s reasoning, they will work constructively with the CMA and are confident in finding a suitable resolution,” the pair said in a statement.