UK watchdog ‘provisionally’ clears Amazon investment in Deliveroo
Amazon is one step closer to becoming a major investor in Deliveroo, a UK-based food delivery company that operates in multiple markets including France, Spain, Australia and the United Arab Emirates. After months of deliberation, the UK’s Competition and Markets Authority (CMA) has “provisionally” cleared Amazon’s involvement in a funding round worth $575 million. The watchdog was originally concerned that the deal would discourage Amazon from re-entering the UK market (the company shuttered its Amazon Restaurants service in 2018) and reduce customer choice. It also feared that the cash injection would make it difficult for newcomers to compete with Deliveroo or Amazon’s grocery services.
The CMA launched a second, more through investigation into the deal last December. Since then, the coronavirus pandemic has swept across the globe and made it impossible for many cafes and restaurants to operate. That, in turn, has affected companies like Deliveroo, which needs local businesses to drive customer orders and, by extension, revenue. Today, the CMA revealed that the UK lockdown has caused “a significant decline in revenues” that Deliveroo is unable to offset with grocery services.
“As a result, Deliveroo recently informed the CMA that the impact of the coronavirus pandemic on its business meant that it would fail financially and exit the market without the Amazon investment,” the CMA said in a statement today. The watchdog has re-assessed the deal, therefore, and concluded that Deliveroo will go under without outside funding. Alternative investment is “possible,” the organization said, but unlikely given how many companies are struggling financially at the moment.
“The CMA currently considers that the imminent exit of Deliveroo would be worse for competition than allowing the Amazon investment to proceed and has therefore provisionally found that the deal should be cleared,” it added. The CMA’s sudden about-turn is unexpected but somewhat understandable. Deliveroo isn’t immune to the coronavirus outbreak and at least some of its self-employed couriers will have stopped working in order to apply for the government’s furloughed payment scheme.
“Without additional investment, which we currently think is only realistically available from Amazon, it’s clear that Deliveroo would not be able to meet its financial commitments and would have to exit the market,” Stuart McIntosh, chair of the CMA’s independent inquiry group said. “This could mean that some customers are cut off from online food delivery altogether, with others facing higher prices or a reduction in service quality. Faced with that stark outcome, we feel the best course of action is to provisionally clear Amazon’s investment in Deliveroo.”
The watchdog will now consult on its “provisional findings” and make a final decision before June 11th.