Amazon deal with Deliveroo under scrutiny by competition watchdog

Attempts by Amazon to eat into the UK food delivery sector suffered a blow on Friday when the competition watchdog revealed it was launching an inquiry into a deal with Deliveroo.

The Competition and Markets Authority said it would look into the details of the tech giant’s purchase of a significant stake in the food delivery platform two months ago.

Ahead of a decision to launch a so-called Phase One investigation, Deliveroo and Amazon must put on hold any merger plans and continue operating independently.

We’ve issued an initial enforcement order on Amazon and Deliveroo. This requires the companies to continue to work separately whilst we investigate.

Find out more: https://t.co/tvRHjmfPFm pic.twitter.com/8cYWuYtSrP

— Competition & Markets Authority (@CMAgovUK) July 5, 2019

The enforcement notice says the CMA “has reasonable grounds for suspecting that it is or may be the case” that the deal could “result in Amazon and Deliveroo ceasing to be distinct”.

It added that, during the investigation, “the Deliveroo business is carried on separately from the Amazon business and the Deliveroo business’s separate sales or brand identity is maintained … (and) no substantive changes are made to the organisational structure of, or the management responsibilities within, the Deliveroo business or the Amazon business”.

Both sides and interested parties can now write to the CMA with their views on the deal.

A spokesman for Deliveroo said: “Deliveroo and Amazon have been working closely with regulators to obtain regulatory approvals.

“There are a number of major companies within the restaurant food delivery sector and this investment will enable Deliveroo to expand, innovate and, we believe, will enhance competition.

“This investment will help create jobs, help restaurants to grow their businesses and will improve choice for consumers.”

It is understood that both Amazon and Deliveroo have already been working with regulators, informing them of the investment once it was agreed.

A spokesman for Amazon said: “We believe this minority investment will enable Deliveroo to expand its services, benefiting consumers through increased choice and creating new jobs as more restaurants gain access to the service.”

The exact amount Amazon spent on its stake is not known, but the company was the biggest investor in Deliveroo’s latest fundraising round, which brought in £450 million.

It valued the food delivery firm at around £3 billion, making it one of the UK’s most successful tech start-ups of recent years.

Previously, Deliveroo had been in discussions with Uber Eats, but these ended and Amazon made its approach.

Bosses at Amazon have already tried to take on the two established rivals in the UK with the company’s Amazon Restaurants service. But it was quietly closed down due to tough competition.

Analysts had previously suggested the move could be seen as a step towards a takeover by Amazon.

The CMA has the power to block any deal between Amazon and Deliveroo if officials deem it would create an unfair advantage and reduce choice for consumers.

Its most recent high-profile ruling saw the watchdog block the attempted merger of Sainsbury’s and Asda, although it had previously waved through Tesco’s takeover of wholesale retailer Booker.