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Post date: August 5 2013

A.G. Schneiderman Announces Settlement With Seamless And Grubhub To Ensure Competition In Online Food Ordering

Seamless And GrubHub Agree To Eliminate Exclusive Arrangements With Manhattan Restaurants, Addressing A.G.’s Concerns With Proposed Merger

NEW YORK –Attorney General Eric T. Schneiderman today announced a settlement with the two leading online food ordering services in Manhattan, addressing concerns that the companies' proposed merger would improperly undermine competition in the online food ordering business. The two companies, Seamless North America, LLC and GrubHub, Inc., have agreed to a package of commitments to ensure that alternative online food ordering platforms can compete with the newly combined business on a level playing field, with equal access to key Manhattan restaurants and business partners.

"New York’s restaurant industry is the best in the world, but its success depends on an environment of free and fair competition," said Attorney General Schneiderman. "With the recent growth in online food ordering, it’s especially important that restaurants – particularly smaller restaurants – have fair and equal access to online platforms to reach new customers and obtain much-needed extra business. This settlement ensures that no single online platform will have a monopoly on access to Manhattan restaurants, and it allows consumers and restaurants the freedom to do business with the website or app of their choice."

The Attorney General’s investigation into the proposed merger revealed that Seamless has a uniquely strong market position in Manhattan, with GrubHub as its key competitor. The investigation also revealed that Seamless had entered into a large number of exclusive agreements with Manhattan-based restaurants that – if enforced by the merged company – would prevent those restaurants from contracting with competing online food ordering platforms. Online food ordering is a vibrant and highly dynamic business, as demonstrated by the recent announcement by Yelp, Inc. that it will enable consumers to order food for delivery or takeout on its website and mobile applications, in a partnership with two smaller competitors of Seamless and GrubHub. But the proposed merger of Seamless and Grub Hub raised the possibility that Seamless would aggressively enforce its exclusivity provisions with Manhattan restaurants and use its strong market position to coerce additional restaurants – or key partners, such as Yelp – to do business with it exclusively. This prospect created a significant risk that the transaction would have anticompetitive effects in Manhattan.

The settlement announced today by Attorney General Schneiderman has three elements:

  • Waiver of existing exclusive rights with restaurants. Within 45 days after the Seamless/GrubHub merger, the new combined company must provide notice to all Manhattan restaurants under an exclusivity obligation that Seamless is waiving the exclusivity provision. This leaves all Manhattan restaurants free to contract with the combined firm's competitors and to participate in any new platforms.
  • Prohibition of future exclusive contracts with restaurants. With limited exceptions, the parties agreed not to enter into new exclusive deals with Manhattan-based restaurants for 18 months.
  • Prohibition of any future exclusive agreement with Yelp.The parties agreed that if the merged company enters into a business relationship with Yelp in the next 18 months relating to online food ordering in Manhattan, that relationship will not be exclusive and will not force Yelp to cease doing business with Seamless/GrubHub's competitors.

These three commitments ensure that competitors of Seamless and GrubHub will be able to compete on a level playing field with the newly merged company and eliminates the possibility that competition would be foreclosed in a significant portion of the Manhattan market. After providing time for competitors and other market players to adjust – and compete in a market free of exclusivity – the prohibitions are scheduled to terminate after 18 months. Attorney General Schneiderman's office will continue to monitor these markets for anticompetitive activity, and Seamless and GrubHub have agreed to notify the A.G.'s office if they enter into any of the practices prohibited by the settlement within six months after termination of the 18 month period.

The A.G.'s investigation was led by Eric J. Stock, Chief of the Antitrust Bureau, Geralyn Trujillo, Acting Deputy Chief of the Antitrust Bureau, and Karla G. Sanchez, Executive Deputy Attorney General for Economic Justice, with the valuable assistance of Assistant Attorneys General Zachary Biesanz, Linda Gargiulo and George Laevsky.

A copy of today’s settlement can be viewed here.