Online takeaway ordering firm Just Eat faces a potential full-blown investigation into its takeover of rival Hungryhouse amid concerns the deal could curb competition.
The Competition and Markets Authority (CMA) said its initial probe into the acquisition - worth up to £240m - found the two firms were close competitors because of the service they offer and their reach across the UK.
It said other rivals offering delivery services, such as Deliveroo, UberEATS and Amazon Restaurants, provided little direct competition because they target different types of restaurant and did not have the same scale of service.
“The CMA is therefore concerned that the loss of competition resulting from the Just Eat/Hungryhouse merger may result in worse terms for restaurants using either of the two companies,” the CMA said.
It will now refer the deal to an in-depth competition investigation, unless Just Eat can address the concerns.
Just Eat has until May 17 to put forward proposals.
The CMA also said on Wednesday it was poised to refer Capita’s takeover of Vodafone’s paging services business for a full-scale inquiry, unless the two companies can address competition concerns.
It said the acquisition, announced in February, could lead to a “substantial lessening of competition” and see customers face price hikes for paging services and reduce quality of coverage.
Just Eat said it “looks forward to co-operating with the CMA and is committed to demonstrating to the CMA that the market is, and will remain, competitive following completion of the proposed transaction”.
The group announced its takeover of Hungryhouse last December.
Both firms offer online takeaway ordering services, which allow restaurants to offer customers the convenience of choosing from a large range of takeaway providers in one place.
The likes of Deliveroo and UberEATS, which entered the market more recently, tend to offer a takeaway service to dine-in restaurants without their own delivery capability.
Just Eat agreed to pay £200m to Delivery Hero for Hungryhouse and will shell out another £40m, depending on performance.
The deal came as part of an acquisition spree by Just Eat as it looks to expand, with the group also announcing the acquisition of Canadian firm SkipTheDishes alongside the Hungryhouse takeover.
London-based Just Eat has more than 16.6 million customers and offers deliveries from 63,900 takeaway restaurants in more than 10 countries.
It said earlier this month that sales rose 46 per cent to £118.9m in the three months to March 31, with UK orders rising 17 per cent to 24 million.
But the firm is experiencing management upheaval, with chief executive David Buttress forced to step down in February due to “urgent family matters” and chairman and interim boss John Hughes also taking a leave of absence in order to undergo treatment for a medical condition.