The Competition and Markets Authority (CMA) has finally cleared Amazon’s 16% investment in Deliveroo after more than a year of deliberations.
The regulator’s initial investigation into the £440m deal that began last year had raised concerns that it could harm competition by, for example, discouraging Amazon from re-entering the online restaurant food market or further developing its presence in the online convenience grocery delivery market in the UK.
However, after a more in-depth ‘Phase 2’ investigation, the CMA has now cleared the minority investment after concluding that “it will not substantially lessen competition” in the food delivery market.
The decision comes after the CMA provisionally approved the deal in April when Deliveroo argued it could collapse if it did not have the support of Amazon because of a hit to its revenues due to the coronavirus lockdown.
However, shortly after, the CMA reversed the decision, saying Deliveroo had seen a significant turnaround in its financial position after the food delivery market recovered better than expected.
The CMA stated that its final decision to clear the deal on competition grounds was the culmination of analysis of internal documents from Amazon and Deliveroo, a survey of more than 3,000 consumers, and extensive submissions from interested third parties.
The CMA’s assessment focused on how a 16% shareholding held by Amazon would affect its incentives to compete independently with Deliveroo in both restaurant delivery and online convenience grocery delivery in the coming years. The CMA said it found that this level of investment will not substantially impact either market.
However, the regulator warned that any attempt by Amazon to take full control of Deliveroo could trigger a further investigation.
Deliveroo said it was “delighted” by the CMA’s decision, and the fact the process had come to an end.
A spokesperson said: “British born Deliveroo will use the investment to increase choice and value for customers, support for restaurants and will be able to offer more riders the flexible work they value as the company expands.”
Amazon added: “Our investment will benefit both consumers of Deliveroo’s service and its small business restaurant partners. UK businesses like Deliveroo continue to benefit from broad access to investors and supporters.”
Deliveroo has been able to capitalise on increased demand for home deliveries during the pandemic with it agreeing partnerships with a host of grocery retailers including Aldi, M&S, Morrisons, and the Co-op.
Amazon is also expanding its presence in the UK grocery sector with the roll-out of its ‘Fresh’ delivery service across the country and offering free delivery for members of its Prime scheme.
NAM Implications:
- Deliveroo is in the business of small-scale home deliveries…
- …in competition with any provider of similar services.
- The issue for Deliveroo was always achieving large scale coverage.
- This decision gives them a route via the new 16% shareholder.
- Watch this space…
