CMA provisionally clears Amazon investment in Deliveroo

(Sharecast News) - The Competition and Markets Authority said on Friday that it has provisionally cleared Amazon's investment in Deliveroo "in light of a deterioration in Deliveroo's financial position as a result of coronavirus", after the takeaway delivery company said it was at risk of collapse without it.
The competition watchdog was originally concerned that the deal could damage competition by discouraging Amazon from re-entering the online restaurant food market and further developing its presence within the online convenience grocery delivery market in the UK.

However, it has become clear in recent weeks that the Covid-19 pandemic is having "a significant negative impact" on Deliveroo's business, it said. It pointed out that the UK lockdown has resulted in the closure of a large number of the key restaurants available through Deliveroo, and a significant decline in revenues.

"While Deliveroo has sought to expand its supply of convenience groceries during the crisis, these sales are limited and have not made up for losses in its restaurants business," the CMA said. "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 has provisionally concluded that Deliveroo's exit from the market would be inevitable without access to significant additional funding, which only Amazon would be willing and able to provide.

"While securing additional funding from other sources may have been possible before the coronavirus outbreak, the pandemic has severely limited the availability of finance for early-stage businesses such as Deliveroo," it said. "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."

A spokesperon for Deliveroo said: "The unprecedented health crisis we all face has disrupted businesses across the country. This investment will help us to overcome immediate and long-term challenges, allow us to continue to improve our service for customers, enable us to develop new innovations and offer people even greater choice."

Amazon announced last May that it was the lead investor in a $575m funding round in Deliveroo. The CMA warned at the time there was a "real risk" that customers, restaurants and grocers could be left paying higher prices as a result, with lower quality services.