The UK’s competition regulator has finally approved Amazon’s minority investment in Deliveroo after more than a year of deliberations, but warned that any attempt to take full control of the London-based food delivery company “could trigger a further investigation”.
Stuart McIntosh, inquiry chair at the CMA, said the agency cleared the minority investment after concluding it would “not result in a substantial lessening of competition in either restaurant delivery or convenience grocery delivery”.
“Our decision reflects the scale of Amazon’s investment in Deliveroo . . . and its incentives to compete in both markets,” he said, but added that if Amazon “were to increase its shareholding in Deliveroo, that could trigger a further investigation by the CMA”.
Amazon will own 16 per cent of Deliveroo as part of a $575m funding round, including other investors, that was first announced in May 2019.
The approval comes as Amazon made another long-awaited move, saying on Tuesday it planned to launch in Sweden, which could provide a springboard for further expansion into the Nordics.
Despite a reputation for being tech-savvy and home to more billion-dollar start-ups per capita than anywhere outside Silicon Valley, Sweden and the Nordics have proved resistant to the big US ecommerce websites such as Amazon and Ebay, perhaps in part due to their relatively sparse population and large countries.
Deliveroo said it plans to use the new funds from Amazon to open more “delivery-only” kitchens and help restaurants manage the impact of Covid-19 on their businesses.
“This is fantastic news for UK customers and restaurants, and for the British economy,” said Deliveroo.
While the hospitality business has been hit particularly hard by the pandemic, diners have turned to food delivery apps in record numbers during coronavirus lockdowns around the world, accelerating growth at Uber, Delivery Hero and Just Eat Takeaway.
That has spurred dealmaking around the world, with Uber buying rival Postmates and Just Eat Takeaway entering the US with the acquisition of Grubhub.
However, when lockdown measures first came into force around the world, many restaurants had to close. That included chains such as McDonald’s and Wagamama that account for a large portion of order volumes among UK delivery apps.
The initial impact on Deliveroo’s business was so severe that the CMA in April granted preliminary approval of Amazon’s investment on the grounds the UK start-up was a “failing firm”.
But in June the CMA made a U-turn, finding that Deliveroo was no longer at risk of going under but provisionally waving the deal through anyway, after deciding it would not reduce competition. The agency had previously suggested that Amazon’s investment could prevent it from re-entering the UK food delivery market, which it had left in late 2018.
Deliveroo on Tuesday pointed to a recovery in trading, saying that 100,000 restaurants around the world now use its platform to reach consumers, up from 80,000 18 months ago.
However, its rate of growth has slowed sharply. It said in February last year that the number of restaurants signing up to Deliveroo had increased 60 per cent in the previous five months.
Several UK technology investors have been critical of the CMA’s 15-month investigation, saying that it could deter other investment in the sector from Big Tech companies.
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