Covid competition crunch

With so many businesses fighting for survival during the Covid-19 pandemic, it looks like authorities are already taking a more relaxed view to mergers and acquisitions. The Competition and Markets Authority (CMA) has provisionally approved Amazon’s significant investment in food delivery company Deliveroo, despite concerns at the end of last year that such activity could, according to The Guardian, limit competition in the takeaway and ultra-fast grocery delivery markets. It feared that customers, restaurants and grocers could face higher prices and lower-quality services because of the deal. The CMA says the risk of Deliveroo going under required a rethink of the official position, and since Amazon was the only likely source of funding it made sense to clear the deal.
The need to keep businesses operational is clearly the imperative but it will be critical that any deals made now do not result in poorer outcomes for workers or customers when normality returns. As we reported regularly last year, there had been growing interest in market concentration with some industries dominated by a small, and shrinking, number of large players. Since it is likely that smaller companies may struggle during the current crisis, and with governments likely to prioritise business survival and sustained employment over competition policy, it is possible that a result is increased market concentration.
At the same time, in the financial markets the active verusus passive battle continues to be fought out. Proponents of active management often argue that it’s in time of market disruption that it can avoid simply tracking indexes on the way down. But if active managers can’t demonstrate that value during this crisis then the shift to passive will only accelerate, with more assets shifting to the handful of big index houses.
There’s been a lot of talk about what a post-Covid-19 capitalism might look like. It’s quite possible that even greater market and ownership concentration is part of the story.

Leave a Reply

Your e-mail address will not be published. Required fields are marked *