Amazon’s investment in Deliveroo gets provisional green light by competition watchdog

By BigHospitality

- Last updated on GMT

Amazon’s investment in Deliveroo gets provisional green light by competition watchdog

Related tags: Coronavirus, Restaurant, delivery

Amazon’s $575m investment in Deliveroo has provisionally been given the green light by the Competition and Markets Authority (CMA) after it concluded that the ingoing Coronavirus pandemic was ‘having a significant negative impact’ on the delivery company’s business.

The CMA had previously halted the deal​, saying that it believed consumers would have less choice as a result of the tie up and that it would discourage 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 now says that in light of a deterioration in Deliveroo’s financial position as a result of Coronavirus, it has provisionally cleared Amazon’s investment in Deliveroo.

The CMA’s investigation found that Deliveroo now accounts for a significant share of the online restaurant platform market in the UK. As a developing business, it is, however, particularly reliant on continued investment to be able to support its operations, it concluded.

It added that the ongoing lockdown in the UK had 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.

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.

“These wholly unprecedented circumstances have meant reassessing the focus of this investigation, reacting quickly to the impact of the coronavirus and deciding what it would mean for the businesses involved in this transaction and, in turn, for customers,” says Stuart McIntosh, chair of the CMA’s independent inquiry group.

“Without additional investment, which we currently think is only realistically available from Amazon, it’s clear that Deliveroo would not be able to meet its financial commitments and would have to exit the market.

“This could mean that some customers are cut off from online food delivery altogether, with others facing higher prices or a reduction in service quality.

“Faced with that stark outcome, we feel the best course of action is to provisionally clear Amazon’s investment in Deliveroo.”

The CMA is now asking for views on its provisional findings by 11 May 2020 and will then assess all evidence provided before making a final decision.

The deadline for its final report is 11 June.

Related topics: Business & Legislation

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