Amazon will be allowed to purchase a 16 per cent stake in Deliveroo as the UK’s competition watchdog approves the deal for a second time.
The Competition and Markets Authority (CMA) has given its provisional approval for the ecommerce giant to acquire a minor stake in Deliveroo following a major reassessment of the tie-up.
The CMA had already given its provisional approval for the deal to go ahead in April, citing concerns that Deliveroo could collapse without investment from Amazon after taking a major hit from coronavirus restaurant closures.
Following major criticism of this rationale from rival firm Just Eat Takeaway and fast food giant Domino’s Pizza, the CMA said that it no longer believes Deliveroo could go under without investment, but that it still does not believe the deal poses any major competition threats.
“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,” head of the CMA’s inquiry Stuart McIntosh said.
“The updated evidence no longer shows that Deliveroo would exit the market in the absence of this transaction. This has required us to re-evaluate our initial provisional findings.
“We’ve carefully considered how this investment could affect competition between the two businesses in future. 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.”
It added that it could still change its mind if Amazon pushed to take a larger stake in the company, and is due to reach a final decision on August 6.
In response to the decision, Deliveroo said: “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.
“As the British economy recovers from the damage caused by Covid-19, a stable regulatory environment is critical. We therefore urge the CMA to conclude their review as swiftly as possible.”