Illustration: Eniola Odetunde/Axios
Democratic politicians are coming out in strong opposition to a merger that doesn't yet exist.
Driving the news: Sen. Amy Klobuchar (D-Minn.) tweeted Sunday: "If Uber takes over Grubhub it isn’t good for competition and it isn’t good for you." That followed an even more bombastic statement from Rep. David Cicilline (D-R.I.), chair of the House Judiciary's antitrust subcommittee, who called the possible deal "a new low in pandemic profiteering."
The state of play: The two sides hadn't agreed on price as of yesterday, per multiple sources, let alone the dozen or so other items that would have to be subsequently decided.
- Grubhub rejected a reported offer of 1.9 Uber shares per Grubhub share.
- Uber stock soared upon initial reports of a possible deal — at one point adding creating around $5.2 billion in extra value. Grubhub's calculation is that markets typically discount deal rumors by around 20%, which means Uber's offer was too low.
What dealmakers aren’t discussing is the Democratic opposition.
- One source close to the deal hadn’t even seen the Klobuchar tweet when I rang yesterday afternoon ("Can you read it to me?").
- Uber never offered to buy Lyft because of antitrust concerns, but that would have been consolidating two major players into one. In this case, Uber-Grubhub would barely have more market share than DoorDash.
- Congress can make lots of noise, but it can’t actually sue to block a merger. That’s up to an Executive Branch department like the DOJ or FTC. As one source familiar with Uber texted me: “Might as well take a shot on goal while Trump is still in office.”
- Cicilline could hold hearings into the merger, but Klobuchar would need buy-in from Sen. Mike Lee (R-Utah), who chairs the Senate Judiciary Committee’s antitrust subcommittee.
But, again, there is no deal yet to oppose (or support), which means it's more about political posturing than policymaking. It's also remarkable to hear the sound and fury over Uber/Grubhub, and not a political peep over Facebook's agreement to buy Giphy.
- Deal or no deal, most everyone agrees that the prices for meal delivery must rise, as Uber Eats, Grubhub, Doordash, and Postmates are all unprofitable.
- There is a legit debate over who should bear those increased costs – as many restaurants argue they already are being charged past their margin breaking point – but consolidation alone won’t be the reason for higher fees.
- Unprofitability could work its way into an antitrust defense, kind of like what Amazon used in the U.K. to defend its investment in struggling food delivery company Deliveroo.
Update: An earlier version of this story misstated the reported price that Grubhub rejected.