CMA clears Amazon-Deliveroo tie-up despite financial turnaround

The Competition and Markets Authority (CMA) originally provisionally cleared Amazon’s 16% investment in Deliveroo in April, basing its findings on the app’s testimony that, should the investment be blocked, it would have collapsed owing to the effects of the coronavirus on restaurants.

At the time the CMA said: “The imminent exit of Deliveroo would have been worse for competition than allowing the Amazon investment to proceed.”

However, Deliveroo’s financial situation has shown “considerable improvement” since the original finding which has led the CMA to conclude that it “would no longer be likely to exit the market in the absence of the transaction”.

Small stake unlikely to cause negative impact

Despite this turnaround, and calls from UK grocers and other delivery apps such as Just Eat to reverse the original finding, the CMA provisionally passed the merger saying the 16% stake being taken by Amazon “is not expected to damage competition in either restaurant delivery or online convenience grocery delivery”.

In its findings, the CMA said that its decision reflected the 16% shareholding being acquired by Amazon now, but should that be increased the watchdog could “trigger a further investigation”.

CMA inquiry chair Stuart McIntosh said: “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.”

A Deliveroo spokeswoman 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 its review as swiftly as possible.”