Gumtree Shpock tie-up could raise fees and reduce choice, warns watchdog

EBay's sale of marketplace platform Gumtree to Shpock owner Adevinta could bring "higher prices and less choice".

Under the terms of the £6.5bn deal, eBay is to get a 33.3% voting stake and a seat on the board of its rival.

The Competition and Market Authority (CMA) is concerned eBay will have influence over both businesses.

"Without this deal, Gumtree and Shpock would have been direct competitors to eBay," said Joel Bamford, senior director of mergers at the CMA.

"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," he added.

The sale was agreed last July when Adevinta beat rival bidders, including Naspers and Prosus, even though they offered eBay more cash as part of their bids.

After reviewing eBay's internal documents at the time when the decision was made to sell, the CMA said there would have been a realistic chance that eBay would sell Gumtree to a different purchaser without retaining its influence.

That would have resulted in Gumtree becoming an independent competitor to eBay's marketplace.

Selling online

Adevinta's Shpock and eBay's Gumtree are both UK online classified advertising platforms.

Both of them allow people to sell items - used or new goods such as clothing, electronics and furniture - to other local people.

Shpock was set up in 2014 as "the boot-sale app" and says it has about 12 million monthly active users.

Gumtree was launched in 2000 by two City traders who sold it to eBay five years later. It says it is now used by 14 million people every month.

Both are free to use, but allow advertisers to pay a fee for more prominent listings.

Meanwhile, the biggest marketplace for people to sell used and new goods to each other is eBay, which charges a fee for listings.

The CMA is concerned the merger could lead to a loss of competition, with only Facebook Marketplace remaining as a significant competitor.

It warns that this could reduce consumer choice, increase fees or lower innovation in the supply of platforms that allow people to buy and sell goods online.

Laws needed

Rocio Concha, director of policy and advocacy at consumer group Which? welcomed the CMA's move, but said it was time for firmer action against digital firms.

"The case illustrates again that many digital markets have a small number of powerful firms and it is essential that the UK develops an effective competition policy for these markets," she said.

"The government needs to swiftly legislate to give the Digital Markets Unit the powers to promote competition for the benefit of consumers, as well as strengthening consumer protection."

"This is the latest in a series of merger probes by the CMA involving large digital companies, where we are thoroughly examining deals to ensure that competition is not restricted and consumers' interests are protected," said Mr Bamford.

The regulator has given the companies a week to offer legally binding solutions to the CMA's competition concerns.

If they fail to come up with solutions, the CMA could refer the deal to an in-depth investigation.