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Regulator objects to $9.2 billion sale of eBay arm in the latest move to protect online competition

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In the latest move from regulators to protect competition in online marketplaces, the U.K.’s Competition and Markets Authority, or CMA, has objected to the sale of a division of eBay to Adevinta, a dominant web classified-ads group.

Adevinta
ADE,
+2.26%

is a Norwegian e-commerce company that operates the classifieds platform Shpock, a direct competitor to Gumtree, which is owned by eBay’s
EBAY,
+0.73%

Classifieds Group. Both platforms are popular in the U.K. and allow users to buy and sell a range of new and used goods, such as furniture and electronics. 

The $9.2 billion proposed acquisition of the eBay division by the Norwegian company, agreed in July 2020, would make Adevinta the world’s largest online classifieds businesses.

The CMA said that the acquisition would see eBay receive $2.5 billion in cash and 540 million shares of Adevinta, totaling a 44% ownership stake of the enlarged company and one-third of its voting rights. 

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This would allow eBay to participate in the management of both businesses and influence strategy for both Shpock and Gumtree, the regulator said.

The CMA said it was concerned that the merger “could lead to a loss of competition between Shpock, Gumtree and eBay’s marketplace, with only Facebook Marketplace remaining as a significant competitor.” In turn, this could reduce consumer choice, lead to higher fees, and hurt innovation, the regulator said.

“There is a realistic chance that without this deal Gumtree and Shpock would have been direct competitors to eBay, which is by far the biggest player in this market,” said Joel Bamford, the CMA’s senior director of mergers.

“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 isn’t restricted, and consumers’ interests are protected,” Bamford said.

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In November, the U.K. government announced that it would set up a Digital Markets Unit within the CMA to oversee pro-competition reforms in the tech sector. The new unit will begin operating in April 2021.

The CMA said that Adevinta and eBay have until Feb. 23 to offer legally-binding solutions to resolve the regulator’s competition concerns. The CMA may then accept the offer or refer the deal to an in-depth investigation.

“Adevinta and eBay will together propose legally binding solutions to resolve the CMA’s competition concerns before the deadline of 23 February 2021,” said the Norwegian company in a statement. “Adevinta and eBay remain excited about the proposed transaction and look forward to closing.” A near-identical statement was released by eBay.

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