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The Spoon

Daily news and analysis about the food tech revolution

antitrust

Amazon Has 5 Days to Save Its Controversial Investment in UK Food Delivery Service Deliveroo

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. 

Call for Grubhub Antitrust Investigation Suggests Deep Scrutiny of Third-Party Delivery Is On the Way

DoorDash may have knocked Grubhub out of the top spot overall for U.S. market share of third-party food delivery, but in NYC, the latter is still king. And a growing number of parties are starting to take issue with that. Case in point: Grubhub took another blow at the end of last week when a New York City council member called for an antitrust investigation into the company.

In a letter dated July 2 and obtained by the New York Post, Mark Gjonaj, head of the City Council’s Committee on Small Business, asked New York Attorney General Letitia James to open the investigation and revisit the 2013 settlement agreement that allowed Grubhub to purchase Seamless.

“While I am not accusing any entity of committing unlawful acts, I do believe that Grubhub’s outsized market share and heavy-handed tactics could lead to artificially reduced competition which in turn may drive up the commissions paid by struggling locally owned restaurants,” Gjonaj wrote.

Currently, Grubhub controls 69 percent of the food delivery market in NYC, according to Gregory Frank, an antitrust lawyer who testified at the June oversight hearing in NYC that addressed concerns over the commission fee Grubhub and other third-party delivery services charge restaurants.

The call for an antitrust investigation comes on the heels of a report that Grubhub has been buying website domains by the thousands and creating so-called shadow sites without those restaurants’ knowledge. At the same time the New York State Liquor Authority is creating new rules that could cap the fees Grubhub can charge its participating restaurants to 10 percent. Currently, those fees range anywhere from 15 to 30 percent. Grubhub has denied those accusations.

Grubhub isn’t the only player in the third-party delivery space currently under scrutiny. Earlier this month, the UK government’s Competition and Markets Authority put the brakes on Amazon’s minority investment in Deliveroo while it investigates potential breaches of competition rules.

Third-party food delivery apps were recently predicted to have 44 million U.S. users by 2020. More lawmakers are stepping in to regulate the market, combined with others questioning the economics of third-party food delivery, and still others urging brands to pull their delivery programs back in house suggest the honeymoon period for third-party is over. Massive players like Grubhub aren’t going anywhere anytime soon, but they’ll likely be operating under far more scrutiny from government bodies and civilians alike going forward.