Great question! And a great example of why the central question in any antitrust issue is defining the market.
Define it narrowly enough, and Firm A buying Firm B might create a monopoly - the regulator cannot approve that.
Define it broadly, and Firm A buying Firm B takes the market from 21 firms to 20 - the regulator is unlikely to stand in the way.
(In practice the market definition question in the US will often happen in front of a judge and the two sides are the merging parties vs. the regulator (FTC or DOJ).)
In this case, is the relevant market “restaurant delivery service via an app” ?
In that case five firms is (likely) moderately concentrated at last. (If you have the market shares of the five firms, you can compute an index called the HHI to get a rough sense of how much more concentrated the market will be before and after a merger.)
However… “app based food delivery” doesn’t seem like a credible market to me. The firms are unlikely to have pricing power either over restaurants or customers.
Candidate competing markets:
- going to the restaurant directly
- making food at home
- delivery provided by the restaurant
Any one of the five firms currently in the market who wanted to buy another would argue to include all three as the “relevant market” in which case their share (both before and after) is tiny.
The regulator will argue for a narrower definition.
When you see commentary on this website about “X is a monopolist” or strong claims like that (which are made frequently!), almost never is there any appeal to a market definition!
Fortunately judges get better input than HN commentators.
Define it narrowly enough, and Firm A buying Firm B might create a monopoly - the regulator cannot approve that.
Define it broadly, and Firm A buying Firm B takes the market from 21 firms to 20 - the regulator is unlikely to stand in the way.
(In practice the market definition question in the US will often happen in front of a judge and the two sides are the merging parties vs. the regulator (FTC or DOJ).)
In this case, is the relevant market “restaurant delivery service via an app” ?
In that case five firms is (likely) moderately concentrated at last. (If you have the market shares of the five firms, you can compute an index called the HHI to get a rough sense of how much more concentrated the market will be before and after a merger.)
However… “app based food delivery” doesn’t seem like a credible market to me. The firms are unlikely to have pricing power either over restaurants or customers.
Candidate competing markets:
- going to the restaurant directly
- making food at home
- delivery provided by the restaurant
Any one of the five firms currently in the market who wanted to buy another would argue to include all three as the “relevant market” in which case their share (both before and after) is tiny.
The regulator will argue for a narrower definition.
When you see commentary on this website about “X is a monopolist” or strong claims like that (which are made frequently!), almost never is there any appeal to a market definition!
Fortunately judges get better input than HN commentators.