Britain’s competition regulator is saying that Amazon.com Inc.’s (NASDAQ: AMZN) purchase of a stake in online food delivery group Deliveroo requires an in-depth investigation due to “serious competition concerns.” The Competition and Markets Authority (CMA) announced it was proceeding with a “phase two” in-depth investigation to determine how the deal could hurt competition. The CMA’s initial probe found that the investment, in its current form, could harm competition in a couple of ways.
Deliveroo has grown rapidly since being founded in 2013 by former banker Will Shu. It is now one of Europe’s fastest-growing start-ups, operating in over 500 cities in 14 countries. It now has global sales of close to 500 million pounds ($642 million) and is thought to be valued at around $4 billion. Deliveroo has become a major player in the food delivery space competing with the likes of Just Eat, Takeaway.com, and Uber Eats.
Amazon led a $575 million fundraising in Deliveroo in May. While the exact value of Amazon’s stake hasn’t been disclosed, reports have said the company invested $500 million. The regulator noted in its announcement that while Amazon’s stake would not make it a majority shareholder, the deal would still allow it to have influence over Deliveroo’s business strategy.
The CMA is concerned the deal could damage competition in online restaurant food delivery by discouraging Amazon from re-entering a market it exited last year. Amazon decided earlier this year to shut down a service called Amazon Restaurants, but the CMA said that evidence from “internal business documents” showed Amazon still has a “strong, continued interest” in the food delivery space. The regulator is also concerned the deal could damage competition in the emerging market for online convenience grocery delivery.
CMA Executive Director Andrea Gomes da Silva said, “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.” The two companies now have five working days to present legally binding proposals that addressed the CMA’s concerns. The regulator would then have five working days to consider whether to accept their offer or refer the case for an in-depth probe.