Amazon’s deal with Deliveroo is under a formal investigation by the competition watchdog after the companies failed to address concerns and provide concessions needed to green-light the partnership.
The Competitions and Markets Authority (CMA) announced the tie-up could be bad for customers, retailers and restaurants and follows Amazon’s £440 million investment in Deliveroo through a fundraising round in the company in May.
“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,” said the CMA’s executive director Andrea Gomes da Silva.
Amazon closed its own takeaway delivery service last year and would have a minority stake in Deliveroo if the deal is allowed to proceed. The two companies have already been ordered by the CMA to operate independently because of concerns they had “ceased to be distinct” or would become so under the new arrangements after Amazon’s investment.
The investigation by a panel of CMA members is expected to take at least six months and will probe if the deal between what it calls “two of the strongest players in this market” will create a “relevant merger situation” that may limit competition.
Concerned by Amazon’s influence
The CMA has been looking into the deal since it was announced in late spring and had given both companies a December 18 deadline to offer undertakings to address its concerns, which both companies failed to do.
Gomes da Silva said: “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.”
A spokesman for Amazon said the company’s investment in the takeaway delivery firm would “lead to more pro-consumer innovation by helping Deliveroo continue to build its world-class service and remain competitive in restaurant food delivery”.
Deliveroo said it had been “working closely with the CMA and will continue do so”, adding: “We are confident that we will persuade the CMA of the facts that this minority investment will add to competition, helping restaurants to grow their businesses, creating more work for riders, and increasing choice for customers.”
The CMA will recommend to the government if the deal should be blocked or allowed to go ahead on or before June 11.
Takeaway delivery market worth billions
The global market for takeaway meals is worth around £100 billion, according to Reuters.
Deliveroo has more than 80,000 restaurants signed up in 13 countries around the world and uses 60,000 bike riders to deliver the meals.
Deliveroo have 25,000 restaurants signed up to its UK delivery service compared to 10,000 for Uber Eats and 35,700 for Just Eat, according to the Telegraph.
In the fresh food market, Deliveroo already has a pilot scheme with the Co-op for grocery delivery while Amazon is looking to expand its Pantry and Amazon Fresh services.
The Financial Times report that Amazon achieved £11 billion in UK net online sales in 2018.