The sieve of the 'Rider Law' and the pressure of investors take Deliveroo out of Spain

Deliveroo, the food delivery company, has announced today that it is considering leaving Spain. Although it denies any kind of relationship, the company makes the announcement at the precise moment in which it must adapt to the Rider Law and distribute orders with contracted couriers.

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What has Deliveroo announced?

The company has declared that it plans to leave Spain, where it competes with Glovo, Uber, Stuart or Just Eat, among others because it has as a principle of its corporate strategy to operate only in the markets where it is either number 1 or number 2. "Spain represents less than 2% of Deliveroo's GTV (gross transaction value) in the first half of 2021. The company has come to the conclusion that achieving and maintaining a top-tier market position in Spain would require a very high level of investment with a very uncertain long-term potential return that could affect the economic viability of the market for the company".

How many riders work for Deliveroo?

3,500, according to data from the company itself, which would have to hire them as of August 12.

What does What does the Rider Law have to do with the company's plans?

Apparently, taking Deliveroo's statement into account, nothing. But in the context of the market for home delivery companies, next August represents a milestone in the time they have been operating in Spain. As of next month, the vacatio legis established by the Rider Law ends so that companies assume one of its main novelties, which is to provide service with contracted delivery drivers. Until now, the vast majority of these companies have based the home delivery business on self-employed workers, a model that the new regulation blocks.

Why?

From the outset At the moment, the work model of the rider fleets has been in question. Companies have defended it as an evolution of traditional models, a circumstance typical of digital businesses, which are characterized by being ultra-light in terms of structure. Being registered as a freelancer, a mobile app and a means of transport were enough to register as a delivery person and receive orders. This is how since 2015 the business took off throughout Spain. In 2017, the first rulings that established that the delivery men were hidden employees as self-employed reached the courts. After a four-year legal journey, the Supreme Court confirmed the previous rulings, facilitating the birth of the Rider Law.

And what do the new regulations oblige them to do?

Since there is an employment relationship between the platform and the riders, the distribution is made with salaried workers. It does not force companies to hire them directly. They can distribute with workers from a subcontracted company, as Just Eat does.

Is this an example of a regulation that harms entrepreneurship?

Deliveroo has not pointed it out that way, although the relationship between the new legal obligations and the announcement to leave Spain is there. On the other hand, companies that based their entire delivery system on autonomous riders, such as Glovo, have announced this week the hiring of 2,000 riders to adapt to the new norm. And it must be taken into account that the requirement to distribute with employees is something that the employers endorsed in the social dialogue that preceded the approval of the law. In fact, beyond delivery, there are thousands of companies in the logistics sector that have gone digital and, in compliance with the law, demanded legislation that allows them to compete in a balanced way with digital platforms.

¿ And what could be the difference in the case of Deliveroo?

In addition to its own business strategy, there is a relevant factor, which is that Deliveroo is a listed company and must publicly account for its decisions and risks which assumes Glovo, for example, is financed based on financing rounds in which it attracts new resources. Like many digital companies that are not listed, obtaining profits or not has until now been something secondary because the growth of the business justified the investment, as was the case with Uber. Deliveroo opened in the London park in April, being valued at 8,893 million euros), far from the 10,000 million it estimated and even more than the current 6,700 million.

What is the point of the company consulting the decision to workers?

This is an initiative that is part of the Deliveroo announcement and that is surprising, in the sense that the company is listed on the stock market and leaving one of the largest European markets is a strategic decision that is the responsibility of the board of directors and shareholders rather than the workforce and suppliers. The fact is that it leaves the future of the company in Spain up in the air by indicating that it is launching a consultative process between employees and riders on the cessation of its operations in Spain."Deliveroo anticipates that the collective consultation process will start at the beginning of September and the company will work with all interested parties and prepare all the necessary documentation for this." The company does not specify if the consultation that will be carried out in September includes the working conditions in which Deliveroo will work if they remain in Spain. For now, the company appears to be postponing the decision to work with contracted riders already taken by its rival, Glovo.

But is the consultation binding?

Questioned on this point, Deliveroo indicates that the opinion of its workers and riders when it comes to staying or leaving is not. "It's a procedure that we have to do", they respond in the company

Is the home delivery business in a bad moment?

From the point of view of labor regulations , the moment is critical in the sense that companies must assume more costs than up to now. From an activity point of view, the pandemic has even been beneficial for business. Deliveroo precisely released a survey last March in which it indicated that Spaniards resorted to ordering food at home more intensely than before the pandemic, since 23% claimed to have increased their orders by more than 30%. During the months of confinement, 45% ordered food at home between one and two times a week, especially on Saturdays and Fridays. The study indicated that restaurants had found in the business a way to alleviate the damage caused by the restrictions of mobility and capacity. Part of these changes in consumption have become habits.

And if he leaves?

The Spanish market will lose one of the largest home delivery companies in the world, if well the business is still there, in the hands of its rivals. The departure from Spain would include legal compensation for the company's employees and, surprisingly, for the same riders over whom the company has denied having any employment relationship. "In the event that the company decides to cease its operations after the conclusion of the consultation process, which will last approximately one month, the company will ensure that riders and employees are provided with an adequate compensation package that meets all local laws and regulations".

The Trust Project