Watchdog warns Amazon's Deliveroo investment raises 'serious concerns'

Daniel Fowler
December 14, 2019

Deliveroo is a UK-based online food delivery company that was founded back in 2013.

The two companies have five days to come up with proposals to counter concerns raised by the Competition and Markets Authority or potentially face an in-depth investigation that could take six months.

The CMA's initial probe found that the investment, in its current form, could harm competition in two ways.

The CMA fears the deal could discourage Amazon from re-entering the restaurant food delivery sector - having previously launched and closed its Amazon Restaurants business a year ago.

While Amazon has stressed it has only a minority stake in Deliveroo, the CMA said it was concerned that competition could be damaged because Amazon might be discouraged from re-entering the food delivery market, which it exited previous year.

Amazon is attempting to acquire a significant minority shareholding in Deliveroo which would give it rights in Deliveroo's decision making.

It also had concerns the deal could damage competition in the fast-growing convenience grocery delivery market, where the two firms were already strong players.

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"Millions of people in the United Kingdom use online food platforms for takeaways, and more than ever are making use of similar services for the same-day delivery of groceries", says Andrea Gomes da Silva, executive director of the CMA. "Currently, there are only a small number of companies that act as the middle-man between restaurants and customers, and Amazon offered this service in competition with Deliveroo until 2018, when it exited the market", the CMA notes.

But the competition watchdog warned there was a "real risk" that customers, restaurants and grocers could be left paying higher prices as a result, with lower quality services.

United Kingdom regulator is not the only thing Deliveroo has to worry about.

"Millions of people in the United Kingdom use online food platforms for takeaways, and more than ever are making use of similar services for the same-day delivery of groceries".

The CMA concluded that this was not in the interests of both parties unless Amazon's shareholding in Deliveroo becomes a majority holding in the future.

It announced a formal "phase 1" investigation in October, and on Wednesday confirmed it was proceeding with a "phase two" in-depth investigation.The CMA is anxious the deal may damage competition in two ways.The deal could prevent Amazon from re-entering the online food delivery market. The CMA would then have 5 working days to consider whether to accept the offer instead of referring the case to an in-depth investigation.

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