You can take the man out of politics, but you can’t take politics out of the man. Two big Competition and Markets Authority decisions of the past week — first to wave through Amazon’s investment in Deliveroo and then Takeaway.com’s takeover of Just Eat — have CMA chair and ex-MP Andrew Tyrie’s fingerprints all over them.
Both were controversial cases for the trust buster to take on. Under previous iterations of the competition watchdog, the deals would probably never have been called in.
The CMA’s recently-found desire to be the biggest, baddest regulator in the fightback against the dominance and spread of big tech was no doubt the main reason why Deliveroo’s funding round got stuck in a year-long regulatory review process. The grounds for blocking it looked flimsy. Would Amazon, which stopped delivering takeaways in 2018, have a sudden change of heart if its deal with Deliveroo was blocked and launch a fierce new competitor? Could Deliveroo, with its sideline in corner shop grocery deliveries, constitute a potential competitor to Amazon Fresh? Really?
But once the CMA had made that case for calling in Deliveroo, it was hard-pressed to waive through the Just Eat takeover, a same-sector deal where the acquirer, Takeaway.com, had also recently quit the market.
Covid-19 gets the CMA off the hook. Phew. It would be a bold but deaf regulator that made trouble for the businesses that have enabled restaurants to keep cooking and home-cooks in lockdown to take a night off. Easy to get dewy-eyed and dub them essential to keeping the home fires burning. By giving the Deliveroo deal the (provisional) green light on the grounds that it would fold if not, the watchdog avoided being spatchcocked on the merits of its arguments. And once Deliveroo’s deal was through, it was hard to hold out on Takeaway’s Just Eat tie-up.
In clearing both, the CMA proves to the government that it will not make political problems over points of principle. That does not mean there are not problems with the Deliveroo decision fudge, though.
The CMA has previously been loath to approve deals on the grounds of the “failing firm” defence used by Deliveroo. Plenty of companies laid low by Covid-19 will argue that if Deliveroo clears that hurdle, they should be allowed to tie-up with rivals too. The CMA can’t let them win that argument and keep its tough guy image. The watchdog must balance its political heart with its legal brain if it is to be credible and consistent. Here, the heart has ruled the head.
De Beers draws warmth from Anglo
The diamond industry is on ice, from beginning to middle to end. The market for diamonds — also known as “ice” because their dazzle is cold and they draw heat from warm objects — has been hit hard by coronavirus. De Beers, which with Alrosa of Russia unearths more than two-thirds of the world’s sparklers, has certainly drawn heat from its owner, Anglo American. On Thursday, it lowered production guidance for the year by a fifth.
Last month De Beers canned its regular sale of diamonds in Botswana because buyers from Israel, India and China could not travel. It is unlikely travel will unfreeze in time for the next auction in a month or so.
The market is suffering from top to bottom. Consumers and merchants from Antwerp to China are in lockdown or emerging from it. So too are the cutters in India, who buff up about 90 per cent of all mined gems. Most producers, whether in Southern Africa or Canada, have been forced to put mines on care and maintenance. The longer the lockdowns last, the harder and more expensive it will be for them to ramp production back up.
The market was already fragile. Supply has been abundant. Post-millennial generations are not wedded to solitaires in the way their elders were. Credit-squeezed diamantaires have been working through their inventories rather than buying new stock.
Big miners such as De Beers have put brakes on production. Nonetheless, prices had fallen a fifth over a year even before Covid-19 hit. Signs of improvement in late 2019 evaporated in March. Alrosa said last week that average prices of its rocks fell 17 per cent quarter on quarter.
Alrosa and De Beers can further cut supply to protect prices and weather the cold. Smaller miners with weak balance sheets — notably heavily indebted Petra, which bought its mines Cullinan and Finch from De Beers a dozen years ago — can’t.
Petra complained this month that cheapskates offered silly prices at its latest auction. Overall rough diamond prices offered were down 27 per cent on the previous sale. It planned to withdraw stones to be sold privately or later. However, £500m-plus in debt robs the group of options. In better times, it and rivals would be mopped up in a wave of consolidation. That is unlikely until lockdown lifts and the market thaws.
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