The Competition and Markets Authority (CMA), which is responsible for regulating competition in the UK, has announced an extension of two months to make a final decision on a deal between Amazon and Deliveroo that would see Amazon purchasing a minority stake in the food delivery group.
In a statement released yesterday, the inquiry group chair Stuart McIntosh said: “In taking this decision, the Inquiry Group had regard to the need to take full account of representations received from the Parties and third parties in response to the provisional findings and to reflect the impact of [Covid-19] coronavirus in its assessment.
“The Inquiry Group considers that completion of its investigation and the publication of its final report will not be possible within the original reference period.”
This delay follows the CMA in April provisionally clearing the acquisition.
A timeline of the acquisition
In May last year, Amazon invested $575m into the Deliveroo startup through a fundraiser, which took the funds raised by Deliveroo to $1.35bn. Deliveroo then became the UK’s largest unicorn tech startup worth over $4bn due to this investment.
In December 2019, the CMA gave the two companies the deadline of 18 December to address concerns that the merger could increase delivery prices. At the end of December, however, the UK watchdog said that Amazon and Deliveroo had failed to efficiently address the concerns and therefore launched an investigation into the merger.
CMA executive director Andrea 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.”
In April, the CMA provisionally cleared the acquisition. This decision came as a result of the Covid-19 coronavirus lockdown seeing restaurants closed, with the CMA saying that Deliveroo would be likely to exit the market due to the pandemic unless it receives additional funding.
Competitors’ response to the acquisition
In May, Deliveroo competitor Just Eat Takeaway (JETA), which yesterday announced that it is buying former-competitor Grubhub for £5.7bn, responded to the CMA’s decision to provisionally give the acquisition the go-ahead.
A statement provided by the CMA last month said: “JETA believes that the theory of harm laid down in [the issue statement] was a distinct possibility prior to the Covid-19 crisis.
“Given the strategic nature of the investment of Amazon and its position in the UK market, JETA believes that the transaction will remove incentives for Amazon to enter or, at the very least, will ensure it has limited incentives to compete effectively as an independent competitor.
“JETA, like other parties who have been following developments in this case, is therefore concerned by the very sudden U-turn in the CMA’s decision-making. Whilst JETA does not question the very serious and perturbing nature of the Covid-19 crisis, it does not believe that this creates a ‘carte blanche’ to assume permanent, irreversible negative impact on businesses, particularly those who are in the business of delivering food to people at home in circumstances that align with social distancing rules.”
JETA went on to say that the CMA must ask itself whether Deliveroo is providing it with accurate information about the impact of Covid-19 and, if so, whether it took sufficient steps in mitigating any negative effects caused by the pandemic.