The Competition and Markets Authority (CMA) has revised the provisional findings of its investigation into Amazon Inc’s (NASDAQ:AMZN) investment in takeaway firm Deliveroo, around two weeks after extending the deadline for the probe to August 6.
Amazon led a £452mln funding round into Deliveroo last year, which attracted the attention of the regulator as it said the deal, which would pitch Deliveroo and Amazon against other players in the market such as Uber Technologies Inc (NYSE:UBER) and Just Eat Takeaway.com NV (LON:JET), could damage competition by discouraging Amazon from developing its presence in online grocery and from re-entering the online restaurant food market.
The CMA provisionally cleared the investment in April, saying that coronavirus was damaging Deliveroo’s revenues and the otherwise successful firm would go bust without Amazon’s cash injection.
However, on Wednesday the watchdog said after gathering further evidence into Deliveroo’s finances it had concluded that the firm “would no longer be likely to exit the market in the absence of this transaction”, and as such its decision would need to be based “specifically on the impact of the transaction on competition between the two businesses”.
Despite this change in criteria, the CMA said the investment should be cleared anyway as it is “not expected to damage competition in either restaurant delivery or online convenience grocery delivery”.
The regulator said the decision was contingent on Amazon’s 16% stake in Deliveroo based on its investment on the funding round, and that any further cash injections could trigger another investigation.
“The impact of the coronavirus pandemic, while initially extremely challenging, has not been as severe for Deliveroo as was anticipated when we reached our initial provisional findings in April”, said Stuart McIntosh, chair of the CMA’s inquiry.
“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.
“This minority investment is good news for UK customers and restaurants, and for the British economy. 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", said a Deliveroo spokesperson.
"As the British economy recovers from the damage caused by [coronavirus], a stable regulatory environment is critical. We therefore urge the CMA to conclude their review as swiftly as possible”, they added.