“The CMA has assessed how the deal could enable it to influence Deliveroo’s business strategy.”
The UK’s Competition and Markets Authority (CMA) has given Amazon five working days to address competition concerns that its investment in Deliveroo will create an uncompetitive environment in the emerging markets for online convenience grocery delivery and online restaurant food delivery.
Last May Amazon was the lead investor in a £452 million funding round for the UK-based online food delivery company Deliveroo, resulting in Amazon holding an influential 16 percent minority stake.
Andrea Gomes da Silva, CMA executive director, commented in a notice that: “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 2 businesses.”
“If the deal were to proceed in its current form, there’s a real risk that it could leave customers, restaurants and grocers facing higher prices and lower quality services as these markets develop. This is because the significant competition which could otherwise exist between Amazon and Deliveroo would be reduced.”
Deliveroo was founded in the UK in 2013 and has quickly become a recognisable food delivery brand, with global sales of close to £500 million. Amazon’s reported sales from its online store in 2018 were over £10 billion.
Amazon Deliveroo Investment Raises Two Serious Concerns
The CMA is concerned that the deal could damage competition in the online restaurant food delivery sector. That sector has very few market players; one of which was ‘Amazon Restaurants business’ a food delivery service that was in direct competition with Deliveroo until 2018, when Amazon decided to pull itself out of the market.
After viewing internal business documents belonging to Amazon the CMA has concluded that Amazon is still interested in this sector and would be likely to re-enter. The CMA believes that due to the limited number of operators in the sector an entry by a supplier of Amazons size would ‘significantly’ increased the competition in the market.
A second concern raised by the CMA is that the deal would have a negative effect on the online convenience grocery delivery market, as both companies have established a strong foothold in the market with UK-wide delivery networks.
The CMA notes that: “While there are some differences in the services that Amazon and Deliveroo offer to customers, the CMA found that competition between them could increase in future as the market develops.”
The two companies now have five working days to put forward ‘legally-binding proposals’ to the CMA that deals with its competition concerns.