Amazon’s investment in Deliveroo — and its stake in UK restaurant food delivery — remains in doubt after British regulators said this week that the deal could mean higher prices and lower quality services for customers. Amazon and Deliveroo have five days to submit proposals that counter these concerns, which were raised by UK competition watchdog the Competition and Markets Authority (CMA). Failure to do so would mean a an in-depth investigation of the deal that could take six months, according to an article published in The Guardian.
Amazon first announced the investment in Deliveroo in May 2019, when it was meant to be part part of a larger $575 million funding round. Though the investment would form a minority stake, about 16 percent, the CMA flagged it in July, saying it presented “reasonable grounds” to suspect that Amazon and Deliveroo would “cease to be distinct.” Deliveroo was then prohibited from any activity that would lead to Amazon’s integration with the restaurant food delivery service, including changes to senior management or big contracts.
In a statement released Wednesday, the CMA said the investment could “damage competition in online restaurant food delivery by discouraging Amazon from re-entering the market in the UK.” Amazon previously ran its own restaurant delivery service in the UK but shuttered that business after just two years. As regulators have stressed, the Deliveroo investment would give Amazon a path back into the market and immediate access to Deliveroo’s existing customer base. That in turn would undercut competition from other food delivery services in the UK such as Uber Eats and Just Eat.
“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.” Andrea Gomes da Silva, executive director of the CMA, said in the statement.
There is also the concern that the deal would damage competition in the UK grocery delivery sector. Amazon and Deliveroo are both two of the strongest players in this area right now. A major investment like this could reduce the competition.
According to The Guardian article, Amazon could be forced to sell its stake in Deliveroo, as previous companies have had to do in similar cases over the years.