iFood and Rappi Bid Farewell to Uber Eats in Brazil

The U.S. app’s competitors on its imminent withdrawal from meal delivery, and the segment’s state of play

In Brazil, Uber Eats will only deliver meals until March 7, but the U.S. company will maintain other delivery services
January 07, 2022 | 03:04 PM

São Paulo — Uber Eat’s (UBER) two main competitors in the meal delivery market in Brazil, local app iFood and Colombia’s Rappi, have commented on the current situation in the online retail segment in the country following the announcement of the U.S. company’s decision to discontinue its restaurant delivery service in Brazil from March 7.

Rappi said it “regrets the exit of Uber Eats from the restaurant delivery industry in the country”, while iFood said: “The online delivery industry is constantly evolving with the frequent entry of new competitors and the emergence of new business models,” in reference to analysts saying that Uber Eats’ departure mainly favors the Brazilian app, which is the market leader in the country.

Read More: Uber Eats Downsizes in Brazil; Remittances to Mexico Hit a Record $51.6B

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Behind the scenes, the hegemony of iFood’s commercial policy had bothered both Rappi and Uber, which appealed to Brazil’s antitrust commission CADE, bemoaning exclusivity contracts signed by iFood with restaurants, which they claimed put them at a disadvantage in the market.

“Rappi is following the market news and regrets the exit of Uber Eats from the restaurant delivery sector in the country,” Rappi told Bloomberg Línea.

“Rappi believes in a fair market, with free competition, where there are opportunities for all players to fulfill their role and win their space. In line with this vision, the company filed a claim with CADE in 2020, seeking support from the competition authority to ensure a healthy market environment.”

“The lawsuit is still in progress, and CADE issued an injunction prohibiting the dominant player from entering into new exclusivity contracts that were undermining competition. However, the injunction did not cover the contracts already in place at the time,” a spokesperson for the Colombian app said.

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Rappi said it considered CADE’s judgment against the signing of new exclusivity contracts with restaurants to be a positive step.

“The decision brought an undeniably positive impact to the market. Nevertheless, in the face of relevant changes such as that, Rappi places its full confidence and expectation in CADE’s competitive assessment in favor of the market as a whole in order to ensure the efficacy and effectiveness of its decisions in the face of events such as the exit of the second-largest player in terms of market share,” Rappi’s spokesperson said.

“The company reiterates its commitment to the Brazilian market where it has been operating since 2017, and continues to work to expand its operations in the country,” they added.

Read More: Rappi’s CEO: “Rappitenderos Earn More than Two Minimum Wages in Latam”

For its part, iFood said it does not comment on the business decisions of other companies.

“With respect to the meal delivery market, iFood clarifies that the online delivery industry is constantly evolving with the frequent entry of new competitors and the emergence of new business models,” the company said in a statement.

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“This intense competition favors restaurants, delivery companies and consumers, and promotes more innovation for the entire segment. iFood’s commercial policies are in strict compliance with the competition legislation and it continues to cooperate with the authorities,” the statement added.

Delivery Drivers

The business environment for food delivery apps is becoming more challenging in Brazil.

On January 5, President Jair Bolsonaro signed into law legislation that makes it mandatory for app companies to contract accident insurance for the benefit of their delivery drivers, in a bid to increase protection for such workers during the Covid-19 pandemic. The new law also requires companies to provide personal protection items, such as a mask and sanitizing gel, and to ensure financial assistance to workers in the event of coronavirus infection.

But Bruno Régis, a lawyer and labor law specialist at law firm Urbano Vitalino Advogados, warned about the impacts of the new law, which could raise prices for delivery services to consumers.

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“The mandatory taking out of insurance and the payment of financial assistance in the event of contagion from Covid-19 will probably increase the operating costs of delivery app companies, and which will pass those extra costs on to the users,” he told Bloomberg Línea.

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Despite the new rules, Régis said the law does not include provisions for making delivery drivers employees, as the law is part of the Public Health Emergency decree, issued in response to the pandemic, and they are not measures that, at least for the time being, will be incorporated permanently into the contracts of drivers working for delivery apps.

Also Read: Why Beef Consumption in Brazil is the Lowest in 28 Years