Amazon’s plan to expand its presence in the fast-growing food delivery market by acquiring a stake in Deliveroo has been dealt a blow after the CMA raised concerns that the deal could reduce competition in the sector and lead to higher prices for consumers.
Earlier this year, Amazon announced a substantial investment in Deliveroo, which would give it a minority shareholding along with certain other rights, allowing it to participate in the management of the company.
While the online giant would not take full control of Deliveroo’s £500m business, the CMA stated that it had assessed how the deal could enable it to influence the UK-based firm’s business strategy. The competition watchdog has also considered the possible effects this influence could have on competition in markets where the two companies compete at present – or could compete in the future.
The CMA’s initial investigation has found that the investment could harm competition in two ways.
Firstly, it raised concerns that the deal could damage competition in the UK online restaurant food delivery by discouraging Amazon from re-entering a market it exited last year.
Secondly, the CMA is concerned the deal could damage competition in the emerging market for online convenience grocery delivery, where Amazon and Deliveroo have already established market-leading positions.
“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,” said CMA Executive Director Andrea Gomes da Silva.
“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.”
The two companies now have five working days to offer legally-binding proposals to the CMA to address the competition concerns it has identified. The regulator will then have five working days to consider whether to accept the offer instead of referring the case to an in-depth investigation.
In a statement, Deliveroo said it was confident it could persuade the CMA that Amazon’s investment would “add to competition, helping restaurants to grow their businesses, creating more work for riders, and increasing choice for customers”.
Amazon added that the investment would help Deliveroo develop new products and remain competitive.
