eBay's $9.2bn Gumtree deal raises competition concerns, says CMA

A $9.2bn (£6.5bn) deal to create the world’s largest classified ads business could reduce consumer choice and increase the fees people are charged for advertising goods online, Britain’s competition watchdog has warned.

Shpock operator Adevinta’s proposed purchase of Gumtree from eBay would combine websites that allow people to buy and sell used or new items such as clothes, electronics and furniture. The eBay marketplace is the largest such platform in the UK.

However the Competition and Markets Authority said it was concerned the merger could lead to a loss of competition between Shpock, Gumtree and eBay’s marketplace, with only Facebook Marketplace remaining as a big 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,” it said.

The CMA said with the sale of the eBay Classifieds Group business, which runs Gumtree and Motors.co.uk, to Norway’s Adevinta, eBay would acquire a 33.3% voting stake in Adevinta and positions on its board, and would be able to influence the business strategy for Gumtree and Shpock.

The deal, agreed in July, would make Adevinta, which was spun off from Norwegian publishing group Schibsted in 2019, the world’s largest classified ads business with annual revenues of $1.8bn. By offering eBay a big stake, Adevinta beat rival bidders including Naspers and Prosus, even though they offered eBay more cash as part of their bids. eBay had come under pressure from activist investors Elliott Management and Starboard Value to divest its classifieds business and cut costs in the face of rising competition from Amazon and Walmart.

Adevinta and eBay have until 23 February 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.

Adevinta said: “While Adevinta and eBay do not agree with the CMA’s reasoning, they will work constructively with the CMA and are confident in finding a suitable resolution.” It added that in 2019, eBay Classifieds Group’s UK business accounted for less than 10% of the division’s revenues while Adevinta’s UK business accounted for just 1% of its revenues.

Gumtree was founded in 2000 by two former City traders, who sold the London jobs and flats website to eBay five years later. Many ads posted on Gumtree are free.

Rocio Concha, the director of policy and advocacy at the consumer group Which?, said: “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.”