One of the biggest e-commerce deals of this year is being investigated over claims of it hampering competition in the luxury fashion sector.
It’s said that Britain's Competitions and Markets Authority (CMA), a government-backed watchdog, is looking into the €1.3 billion merger between Italian group Yoox and the UK’s Net-A-Porter on the basis of a similarity in offering.
With both holding a strong position in the online fashion world, it’s understandable that a partnership between the two could make a serious dent in the sides of their competitors. Indeed, representatives from the CMA have declared their intention to look into a “substantial lessening of competition” as a result of the two operating in Britain.
Following the deal's completion in March, an inquiry is now open to comments and input from “any interested parties” with a view to ramping up the investigation phase on September 7.
A fair deal?
Under the terms of the deal, Swiss group Richemont retained 50% of its shares in Net-A-Porter but is now restricted to 25% of the voting rights in future discussions regarding the new group.
Interestingly, Yoox founder Federico Marchetti was named as the chief executive of Yoox Net-A-Porter despite his firm managing €524 million in revenue during 2014, far less than Net-A-Porter’s own estimate of €700 million.
At the same time, the luxury retail market had growth of its own to report - valued at $270 billion globally by Alpen Capital.
A link-up between the two parties has been tipped to generate savings of around €60 million per year, while reports back in March suggested the two companies would be looking to attract new investment in the region of €200 million to aid their expansion.
The new group was given a taste of things to come straight after its news was announced, as shares in Yoox rose 4% in the hours after a deal was made public.
It will now be up to the team at Yoox Net-A-Porter to walk a difficult line as they look to thwart any claims from the CMA of it preventing a reasonable amount of competition while at the same time showcasing its early success to would-be investors.
Open to all
The CMA, whose details are accessed via gov.uk - the hub for all groups associated and or funded by the UK government - has been kept fairly busy of late with cases involving mergers.
The group is currently looking into joint partnerships between BT Group and EE in the telecoms sector, as well as other cases involving healthcare groups Oasis Dental Care and Total Orthodontics and, more recently, construction firms Joseph Ash and W Corbett & Co.
Given that Net-A-Porter sells in most of the big EU retail nations, such as the UK, France and Germany, there is every chance the case could be passed onto the European Commission for analysis. But for the moment, the initial collecting of evidence is to be performed in the UK.
Those wanting to get in touch with the CMA in relation to the claims brought against Yoox Net-A-Porter have until July 24 to do so.
Update (14/7): Yoox has since been in touch with PerformanceIN to issue the following statement.
"It is normal practice for the UK Competition and Markets Authority (“CMA”) to make an announcement, which is in a standard form, on the day that a merger is formally notified to the CMA. The merger between YOOX Group and The Net-A-Porter Group has already been approved by antitrust authorities in the US, Germany and Austria."