Just Eat's £200m buyout of rival Hungry House faces a full second-stage competition investigation that will drag on until November.
It could result in the deal being blocked or in conditions being imposed for it to go ahead, such as hiving off some parts of the business to reduce the impact on competition.
Speculation that the Competitions and Markets Authority (CMA) might call for a second, more comprehensive investigation surfaced earlier this month, following concerns from the preliminary inquiry to which all deals are subjected.
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At the time, Sky News said Just Eat could avoid the escalation if it proposed measures to address the issues raised.
But the BBC reports today that the CMA has confirmed it is taking the investigation further.
Concerns around the deal focus on Just Eat and Hungry House being the only two companies operating in their specific sector of the market, which would give a combined entity an effective monopoly.
Both firms deliver food from thousands of takeaway restaurants that do not offer the service - Just Eat serves 16 million customers from 60,000 outlets.
Other companies in the food delivery sector, such as UberEats, Deliveroo and Amazon Restaurants, "tend to offer a higher-end service, working with more expensive restaurants in bigger cities", the Financial Times said, and do not represent direct competition.
The acquisition of Hungry House from its German parent was expected to add £15m to Just Eat's revenues. According to the FT, the deal would be worth £200m to £240m.
Just Eat's £200m Hungryhouse deal to be investigated
11 May
Just Eat's plans to gobble up its largest UK rival, the German-owned Hungryhouse, have hit a snag in the form of a formal competition investigation.
"The Competition and Markets Authority (CMA) is investigating the potential of the proposed merger to curb competition in the takeaway food industry," says Sky News.
Just Eat provides drivers and an online platform that enables delivery orders from 16 million takeaway customers and 60,000 restaurants in more than 10 countries.
The online takeaway giant operates a similar model and Sky says the acquisition was expected to "add up to £15m to... earnings". The deal would be worth between £200m and £240m, according to the Financial Times.
The problem is that the other companies in the food delivery sector, such as UberEats and Deliveroo, "tend to offer a higher-end service, working with more expensive restaurants in bigger cities".
As such the regulator reckons they do not represent "direct competition". In its segment of the market, the combined Just Eat business would have an effective monopoly.
Sky says the firm could avoid a full-blown second stage review that would take months – and lead to parts of Just Eat's business being excluded from the deal – if it proposes its own measures to address the concerns.
The company has responded by saying it is "committed to demonstrating to the CMA that the market is, and will remain, competitive following completion of the proposed transaction".
It adds: "In the meantime, Just Eat will continue to operate its business as usual."
