The UK’s competition watchdog, the Competition and Markets Authority (CMA), has referred Amazon’s planned deal to buy a minority shareholding in restaurant food delivery firm Deliveroo for an in-depth investigation.
The CMA announced a merger inquiry into the deal in October and has now decided to move it on to a second phase after it warned that the tie-up could result in a “substantial lessening of competition” based on the information available to it.
Amazon reported net UK sales from its online store of nearly £11bn in 2018, while its business already has a variety of food delivery options through Amazon Prime, Prime Now, Amazon Fresh and Whole Foods Market.
Meanwhile, Deliveroo has grown to global sales of nearly £500m and operates in over 100 towns and cities across the UK.
Amazon’s proposed deal would allow it to participate in the management of Deliveroo, although it would not have full control of Deliveroo’s business strategy.
Ahead of its decision to move to a phase two investigation, the CMA’s executive director Andrea Gomes da Silva said: “Millions of people in the UK use online food platforms for takeaways, and more than ever are making use of similar services for the same-day delivery of groceries.
“There are relatively few players in these markets, so we’re concerned that Amazon having this kind of influence over Deliveroo could dampen the emerging competition between the two businesses.
“If the deal were to proceed in its current form, there’s a real risk that it could leave customers, restaurants and grocers facing higher prices and lower quality services as these markets develop. This is because the significant competition which could otherwise exist between Amazon and Deliveroo would be reduced.”
Responding to news of the investigation, an Amazon spokesperson said: “A homegrown UK business like Deliveroo should have broad access to investors and supporters. Amazon believes that this investment funding will lead to more pro-consumer innovation by helping Deliveroo continue to build its world-class service and remain competitive in the restaurant food delivery space by creating more highly-skilled jobs, innovating in the restaurant food delivery sector, and developing new products for customers.”
A Deliveroo spokesperson said: “Deliveroo has been working closely with the CMA and will continue to do so. We are confident that we will persuade the CMA of the facts that this minority investment will add to competition, helping restaurants to grow their businesses, creating more work for riders, and increasing choice for customers. Deliveroo is a British company operating right across the country and this investment will be particularly beneficial to the UK economy.”