The deal for purchasing a stake in the British food delivery company Deliveroo by the United State based e-commerce giant Amazon will face an in-depth investigation by competition regulators in the United Kingdom.
The Competition and Markets Authority (CMA) had said this month that the Amazon-Deliveroo deal could harm British consumers. However despite the comment there has been no undertakings in response to its concerns by either Amazon or Deliveroo.
A funding round worth $575m for Deliveroo in May month was lead by Amazon which gave the e-commerce giant a 10 per cent stake in the British company.
Analysts said that the interest of Amazon in Deliveroo was to strengthen the London-based platform to be able to rival some of the other players in the market that with deep pockets such as as Uber Eats owned by the taxi hailing company Uber, and Just Eat the delivery platform that is listed at the FTSE 100 and is currently at the centre of an acquisition war.
However, a cloud over whether the Amazon investment can go ahead will be cast by the decision of the CMA to refer the transaction to a full investigation. The regulator can either demand specific assurances from the companies or could decide to block the investment altogether.
Higher prices and lower-quality services could be the outcome for customers, restaurants and grocers because of the deal, the CMA said. The regulator had given the two companies five days starting December 11 to file responses and changes. None of the companies did so.
The investigation in the deal will be concluded by 11 June, 2020, the CMA said.
Among the major concerns of the CMA from the deal was that it would significantly reduce competition in the incipient ultra-fast grocery delivery market of the UK.
This is not the first attempt by Amazon to set foot into the food delivery market. Its service called Amazon Restaurants was launched in 2016 was was partly available in London as an added service along with its Prime subscription. But the company closed it down two years later.
“Deliveroo has been working closely with the CMA and will continue to do so. We are confident that we will persuade the CMA of the facts that this minority investment will add to competition, helping restaurants to grow their businesses, creating more work for riders, and increasing choice for customers. Deliveroo is a British company operating right across the country and this investment will be particularly beneficial to the UK economy,” said a spokesperson for Deliveroo.
“A homegrown UK business like Deliveroo should have broad access to investors and supporters. Amazon believes that this investment funding will lead to more pro-consumer innovation by helping Deliveroo continue to build its world-class service and remain competitive in the restaurant food delivery space by creating more highly skilled jobs, innovating in the restaurant food delivery sector, and developing new products for customers,” said an Amazon spokesperson.
(Adapted from TheGuardian.com)