Amazon Can Own Deliveroo Because of Pandemic

Amazon Can Own Deliveroo Because of Pandemic

After the Competition and Markets Authority’s (CMA) worries last May, the CMA has now announced that Amazon can invest in food distribution company Deliveroo.

Last May

Last May, Amazon was a leading investor in a funding round of $575 million for UK-based food delivery company Deliveroo. At the time (17th May), Deliveroo’s founder and CEO, Will Shu, said of the $575M Series G preferred shares funding from Amazon and existing investors T. Rowe Price, Fidelity Management and Research Company, and Greenoaks, “This new investment will help Deliveroo to grow and to offer customers even more choice, tailored to their personal tastes, offer restaurants greater opportunities to grow and expand their businesses, and to create more flexible, well-paid work for riders.”

Amazon Restaurants

Amazon had previously operated its own ‘Amazon Restaurants’ food delivery service in London, but this was closed in December 2018 following strong competition from Deliveroo, Uber Eats, Just Eat, among and others. It was also reported that Amazon had previously tried two times to buy Deliveroo outright.

CMA Concerns

The Competition and Markets Authority’s (CMA), however, had concerns that the investment by Amazon in Deliveroo would be bad for competition and had launched its own investigation. The two main concerns expressed by the CMA were that:

– There were only a small number of companies that acted as the middleman between restaurants and customers and the Amazon/Deliveroo deal could have damaged competition in online restaurant food delivery by discouraging Amazon from re-entering the market in the UK i.e. re-entry by Amazon would have significantly increased competition in online restaurant food delivery in the UK.

– The CMA was concerned that the deal could have damaged competition in the emerging market for online convenience grocery delivery, where the 2 companies already had established market-leading positions.

COVID-19 Change

In the light of what the CMA says has been “a deterioration in Deliveroo’s financial position as a result of coronavirus (COVID-19)”, the CMA has now put aside its original concerns and provisionally cleared Amazon’s investment in Deliveroo. There will, however, be a three-week consultation period and a final decision will not be made until 11th June after all relevant feedback about the investment has been gathered (all submissions will need to be made by Monday 11th May 2020).

The CMA appears to have concluded that only Amazon would be able to provide the kind of funding that Deliveroo needs to meet its financial commitments in the extraordinary global circumstances caused by the pandemic.

Stuart McIntosh, Chair of the CMA’s independent inquiry group, said of that “some customers are cut off from online food delivery altogether, with others facing higher prices or a reduction in service quality. Faced with that stark outcome, we feel the best course of action is to provisionally clear Amazon’s investment in Deliveroo.”

What Does This Mean For Your Business?

For Deliveroo this is, of course, a great outcome at a crucial moment. The outcome also shows how the pandemic has had a dramatic effect on all aspects of business, including the decisions made regulators against a changed backdrop. The decision may also, as the CMA pointed out, be good news for customers, particularly those who are more “cut off” from their normal food supplies.

This decision is unlikely to be welcomed, however, by competitors such as Uber and Just Eat who saw-off Amazon’s move into the food delivery market in London last time.