An investigation has found that investment by Amazon in UK food delivery firm Deliveroo has potential negative implications for competition in the UK.
The investigation, conducted by the UK’s Competition and Markets Authority (CMA), examined Amazon’s announcement earlier this year of a substantial investment in Deliveroo, which enabled the multinational online distributor to acquire a minority shareholding. While the investment did not allow Amazon to take full control of Deliveroo’s operations, the CMA raised concern over its potential to exert influence on Deliveroo’s overarching business strategy.
The CMA highlighted two key issues which could arise from the investment:
- By disincentivising Amazon from re-entering the online restaurant food delivery market, in which the company participated until the closure of its Amazon Restaurants arm in 2018, the deal could affect competition across the market – the CMA is of the opinion that Amazon may wish to re-enter the sector at some stage and notes this would stimulate competition; and
- Amazon and Deliveroo are currently in direct competition with each other in the small but growing market for ‘ultrafast’ convenience grocery delivery. The CMA expressed concern that, as the demand for same day grocery deliveries increases, the competition between the two companies may intensify; and this could be distorted by Amazon’s status as a minority shareholder in Deliveroo.
Andrea Gomes da Silva, CMA Executive Director, 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. If the deal were to proceed in its current form, there’s a real risk that it could leave customers, restaurants and grocers facing higher prices and lower quality services as these markets develop. This is because the significant competition which could otherwise exist between Amazon and Deliveroo would be reduced.”
The CMA has given Amazon and Deliveroo five working days to develop proposals to address its concerns.
