Grocers urge CMA to block Amazon-Deliveroo deal

A number of the UK’s grocers are understood to have voiced concerns to the Competition and Markets Authority (CMA) and have urged them to veto the move amid long-term competition concerns.

Businesses have questioned how the CMA came to its conclusion that Deliveroo would go bust if it did not secure additional funding and challenged the regulator’s view that only Amazon would be in a position to offer such a cash injection.

Some grocers are also concerned about the influence Amazon would have on Deliveroo if the deal went through. Under the terms of the proposed investment, Amazon would take a seat on the Deliveroo board.

Sources close to CMA’s probe into the deal, which began in December, insist it has been a “rigorous, thorough process” and Deliveroo’s ‘failing firm defence’, which was supported by evidence from the company’s financial advisers, would not have been considered “lightly” by the regulator.

But one grocery source argued the CMA’s provisional decision in April to approve the tie-up was “unduly influenced” by the shape of the retail landscape during the early weeks of the coronavirus crisis – a time when many of the restaurants that sell through the Deliveroo platform were closed. Many of those outlets have since reopened for takeaway orders.

They also suggested that the regulator failed to recognise the “positive impact” the crisis has had on Deliveroo. In the past month, it has struck a new pilot with Aldi, launched a short-term partnership with Marks & Spencer to help it serve customers during the pandemic and extended its tie-up with Majestic Wine – all of which broaden its reach into the on-demand grocery sector.

One industry expert suggested Amazon’s financial backing would allow Deliveroo to operate convenience grocery deliveries for such partners at a loss and force mainstream food retailers to offer cheaper or even free home deliveries “uneconomically” in a desperate bid to compete.

The source said it could result in the on-demand grocery convenience market becoming “another Amazon dominated environment” in the future. The CMA provisionally concluded that Amazon could choose to make a move into this market “regardless” of whether or not it had a stake in Deliveroo.

Another industry insider insisted there was “plenty of desire in the market to support businesses that have a long-term future” and insisted “they don’t all have to go to Amazon” for investment. The CMA suggested in April that raising funds would be much tougher during the coronavirus crisis and in the global recession that will follow the health emergency.

The calls for the CMA to rethink its findings come less than a week after Mike Coupe called the watchdog’s decision “downright bizarre” during his final interview as Sainsbury’s boss.

Last month, one of Deliveroo’s UK rivals, Just Eat – itself the subject of a £6bn merger with Takeaway.com in April – said it was “concerned by the very sudden U-turn” by the CMA over the deal.

At the time it launched its in-depth investigation last year, the CMA raised fears that the tie-up would result in Amazon and Deliveroo “ceasing to be distinct” entities.

But it provisionally rubber-stamped the deal in April, having ruled that Deliveroo could exit the market without additional funding and suggested Amazon was the only business that could provide the level of financial support the online food delivery platform required.

A Deliveroo spokeswoman said: “The CMA has conducted a very thorough investigation and provisionally concluded that the investment from Amazon should go ahead. Third parties obviously have their own opinions, but they do not have access to very important information and data that led the CMA to make its provisional findings.

“Deliveroo has always been clear that this investment will be good for competition, good for restaurants and good for consumers. This investment will help us to overcome immediate and long-term challenges caused by the outbreak of Covid-19, allow us to continue to improve our service for customers and enable us to develop new innovations and offer people even greater choice.”

The CMA is due to release its final verdict by June 11.