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CMA To Officially Investigate Amazon-Deliveroo Deal

Published on January 4, 2020

The Competition and Markets Authority (CMA) will launch an official investigation into Amazon’s purchase of a share in UK food delivery service Deliveroo after it was announced that the two companies had failed to come up with enough justification for the sale to go ahead.

Concerns Raised

Earlier in December, after the CMA voiced concerns over the sale reducing competition within the UK based food delivery sector, the authority gave the companies a week to provide sufficient evidence that the sale would boost competition, rather than hinder it.

The CMA now believes that its concerns about limitations for other competitors were justified and will commence an investigation in the New Year.

CMA Statement

In a statement released by the authority, representatives said they had found just concerns that the sale of a significant share in Deliveroo to the e-commerce giant Amazon would not only hurt competition in the market, but could also hurt customers, restaurants and grocers across the UK.

The £440m deal, which has been controversial since it was first made public in the summer of 2020, could now face up to six months of intense scrutiny from the CMA, who may rule that the deal would do more damage than good.

The primary reason the CMA have scrutinized this deal so closely is perhaps because they’re acutely aware that Amazon could launch their own delivery service in the UK market, rather than buy a share in an already established company.

This would stimulate competition within the market and could ultimately generate lower prices for better quality goods for consumers.

Latest Amazon Attempt On Food Market

Amazon has tried this venture once before with Prime Restaurants but failed to make a splash within the UK’s market. Currently, Deliveroo sits as one of the market leaders, alongside Just Eat and Uber Eats.

It operates in most of the major cities across the UK and several in Europe and is looking to continue expanding, should the deal with Amazon be successful.

However, Deliveroo may not be on the market for very long. Uber Eats have reportedly been in talks with top executives at Deliveroo to buy the company outright, something Amazon attempted to do just a few years ago.

CMA launches investigation into Amazon-Deliveroo tie-up

Amazon’s attempt purchase a stake in the delivery giant Deliveroo is being investigated by competition authorities who forcibly placed the deal on hold in July.

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The Competition and Markets Authority (CMA) announced today that it has officially launched a Phase One investigation into the deal.

Should officials determine during this phase that the deal would significantly reduce competition in the takeaway delivery sector, a second in-depth Phase 2 investigation will follow in December.

In May the ecommerce giant led a $575 million (£450 million) funding round for Deliveroo which saw it acquire an undisclosed minority stake in the business.

Then in July the CMA issued an initial enforcement order regarding the purchase, forcing the two companies in question to remain independent of one another until the it determines whether to launch a formal investigation into the tie-up.

Despite the CMA’s decision to launch an investigation, Amazon denies the deal will reduce competition or raise prices for consumers.

Amazon’s investment comes after it scrapped its own delivery rival Amazon Restaurant in the UK last December, suggesting it is planning to subsidise its failed service by using the well established Deliveroo.

Deliveroo, which now operates in 14 countries after being launched in the UK in 2020, said it will use the funds to expand its technology team at its London headquarters, and develop new tool to “offer riders flexible and well-paid work”.

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