The UK’s competition watchdog said on Wednesday that it had provisionally cleared Amazon’s (AMZN) investment in food delivery firm Deliveroo, noting that the deal was “not likely” to hamper competition in the sector.
The Competition and Markets Authority (CMA) had in April already provisionally cleared the investment in light of the coronavirus pandemic’s impact on Deliveroo’s financial situation.
But it said on Wednesday that it had now provisionally concluded that the deal would also not significantly lessen competition in either the restaurant delivery or online convenience grocery delivery sectors.
Confirming for the first time that Amazon is taking a 16% stake in the company, the CMA said that “the investment should not have a negative impact on customers.”
Amazon was the lead investor in a $575m (£462m) funding round announced by Deliveroo in May last year.
Citing the “wholly unprecedented circumstances” of the coronavirus crisis, the CMA said in April that it feared Deliveroo would have to exit the market if the Amazon investment was delayed any further.
While the regulator approved the deal on that basis, it said on Wednesday that there had been a “considerable improvement” in Deliveroo’s financial position since its April ruling, and that Deliveroo would not be forced to exit the market if the investment was blocked.
Noting that it had conducted a detailed analysis of the deal, the CMA said it was satisfied that there would be no adverse impact as a result of the transaction.
The watchdog had previously signalled that it had “reasonable grounds for suspecting” that the two companies were planning on a merger that could violate UK competition rules.
Both Amazon (AMZN) and Deliveroo maintained that the minority investment in the delivery company would benefit the sector.
The CMA noted that its provisional ruling reflected the size of the 16% stake that Amazon is acquiring, and said that a further investigation could be triggered if the e-commerce giant was to take a larger stake in the company or push for a full acquisition.
In earlier releases about the probe, the regulator had suggested that “large volumes” of internal documents and interviews with senior management indicated that, if Amazon hadn’t invested in Deliveroo, it would have made “an alternative investment” in another company.
Amazon acquiring or investing in a smaller rival could have allowed that rival to compete with the current players in the UK’s food delivery market, which is dominated by Deliveroo, Just Eat and Uber Eats.
The protracted probe prompted early Deliveroo backers Index Ventures and Accel to lambast the regulator, saying the investigation was jeopardising investment in UK startups.
The Coalition for a Digital Economy (Coadec), an industry advocacy group, similarly called the CMA’s “eleventh-hour interventions” a massive barrier for UK companies looking to scale.
“Looking closely at the size of the shareholding and how it will affect Amazon’s incentives, as well as the competition that the businesses will continue to face in food delivery and convenience groceries, we’ve found that the investment should not have a negative impact on customers,” said Stuart McIntosh of the CMA on Wednesday.