Amazon Hit By Regulatory Probe Over Deliveroo Stake

The UK’s competition watchdog has checked Amazon’s bid to buy a minority stake in London-based food delivery firm Deliveroo, saying the move could lead to higher prices and lower-quality service for consumers.

The Competition and Markets Authority (CMA) has been reviewing the £440 million funding deal since it was announced in May, and earlier this month it gave Amazon and Deliveroo five days to address competition concerns.

On Friday the CMA said Amazon had failed to offer any undertakings to allay “initial concerns that their investment in Deliveroo could be bad for customers, restaurants and grocers”.

Amazon was lead investor in the funding round, which reportedly gave it a 16 percent stake in Deliveroo.

Competition concern

The delivery company is facing stiff competition from the likes of Uber Eats and FTSE 100-listed Just Eat.

The CMA has the power to block the investment entirely or to demand specific remedies from the companies.

The regulator said it would begin a more in-depth investigation that would conclude by 11 June 2020.

One of the CMA’s main concerns relates to the emerging market for speedy grocery deliveries, an area were Deliveroo currently competes with Amazon.

Amazon previously launched a short-lived foray into the UK food delivery market in 2016, with Amazon Restaurants, a service made available to some Londoners through the Amazon Prime subscription service.

It ended the venture in December 2018.

Emerging market

The CMA indicated it was concerned that a tie-up between Amazon and Deliveroo could jeopardise any future Amazon effort to set up an independent food delivery service in the UK, leading to more competition and potentially lower prices and better services.

“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 the CMA’s 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.”

She said the deal presented a “real risk” that customers, restaurants and grocers would end up with higher prices and lower-quality services.

Amazon said in a statement the deal would mean more innovation and would boost Deliveroo’s competitiveness.

Deliveroo said the deal would mean more competition.

“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,” the company said.

Amazon and Uber are both said to have previously made approaches to acquire Deliveroo outright.