Amazon’s proposed tie-up with Deliveroo poses “a real risk” of harming competition in the UK’s food delivery market, according to the Competition and Markets Authority (CMA).
Today the CMA, which has been carrying out a Phase One investigation into the deal since October, has now given the two companies five working days to offer legally-binding proposals on how to address competition concerns before it would consider launching a more in-depth investigation.
Deliveroo saw Amazon lead a $575 million (£450 million) funding round in May in which it is set to acquire an undisclosed minority stake in the UK food delivery giant.
Although Amazon would not take full control of Deliveroo, the CMA says that the deal would make it far less likely the online retail giant would attempt to re-enter the UK’s online food delivery market, having scrapped its Amazon Restaurant offering in December 2018.
This poses a competition risk in the UK due to the relatively small size of the online food delivery market, as “the significant competition which could otherwise exist between Amazon and Deliveroo would be reduced.”
The CMA’s executive director Andrea Gomes da Silva explained: “Millions of people in the UK use online food platforms for takeaways, and more than ever are making use of similar services for the same-day delivery of groceries.
“There are relatively few players in these markets, so we’re concerned that Amazon having this kind of influence over Deliveroo could dampen the emerging competition between the two businesses.
“If the deal were to proceed in its current form, there’s a real risk that it could leave customers, restaurants and grocers facing higher prices and lower quality services as these markets develop.”
While Amazon says it is still interested in re-entering the market, Deliveroo 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”.