The Competition & Markets Authority has provisionally cleared Amazon’s investment in Deliveroo for a second time – but for different reasons.
The CMA had provisionally cleared the deal in April after being told the food courier company could go bust without it. The authority determined the “imminent exit” of Deliveroo would be worse for competition than allowing the Amazon investment – part of a £450m fundraising round – to proceed.
Since then the CMA has continued to gather evidence on the deal – struck in May last year and halted two months later – finding “considerable improvement in its financial position, reflecting, in part, changes which were not foreseeable during the early stages of the pandemic”.
With the reasoning for its original clearance no longer valid, the authority has now based its provisional decision “specifically on the impact of the transaction on competition” in particular on how Amazon’s 16% shareholding affects its incentives to compete with Deliveroo.
Analysis of “large volumes of internal documents” from the two companies, a survey of 3,000 consumers and submissions from rivals have convinced the CMA that competition in neither restaurant delivery nor online convenience grocery delivery will be damaged as a result of the deal.
Stuart McIntosh, inquiry chair, said the pandemic “while initially extremely challenging, has not been as severe for Deliveroo as was anticipated”.
“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,” he added.
The authority indicated that were Amazon to acquire a greater level of control over Deliveroo than its 16% shareholding, further investigation would likely be triggered.
Deliveroo welcomed the provisional clearance.
“As we have argued for the past year, since the beginning of the CMA’s investigation, the minority investment will enable British-born, British-bred Deliveroo to compete against well-capitalised overseas rivals and continue to innovate for customers, riders and restaurants,” a spokeswoman said. “As the British economy recovers from the damage caused by Covid-19, a stable regulatory environment is critical.”
Deliveroo noted that the authority’s stated new focus on Amazon’s minority shareholding was “a fact that was known from the outset, in June 2019”.
“After more than a year of investigation, Deliveroo urges against further delay in reaching a final resolution. We urge the CMA to conclude their review as swiftly as possible,” the spokeswoman added.
Amazon said it was “committed” to its investment.
“Our investment will benefit both consumers of Deliveroo’s service and its small business restaurant partners. UK businesses like Deliveroo continue to benefit from broad access to investors and supporters,” a spokesman said.
The CMA is now seeking views on the provisional findings by 10 July before making a final decision. The statutory deadline for the CMA’s final report is 6 August.
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