Amazon’s slice of Deliveroo is proving hard to swallow, thanks to a stunning intervention from the competition regulator.
The US online retailer’s investment in Deliveroo, the UK headquartered takeaway start-up, has been the subject of an investigation by the Competition and Markets Authority since June.
On Wednesday, the regulator demanded the companies come up with remedies within five days over two issues with the deal or face a full investigation.
The CMA’s announcement came as a shock. Amazon’s minority stake in Deliveroo stems from a $575m (£436m) deal announced in May this year, and the US e-commerce giant currently has no presence in the UK restaurant food delivery market.
A note from analyst firm Jefferies said the announcement “smacks of ‘not on my watch’ interventionism.” The CMA’s aggressive move, analysts say, represents Britain’s regulator getting tough on big tech deals.
“This is a remarkable decision,” says Clive Black, an analyst at Shore Capital. “It is hugely significant if it's setting a precedent.”
The key concerns of the CMA are focused on whether the deal could damage competition in the restaurant food and grocery delivery markets.
Andrea Gomes da Silva, executive director of the CMA, said: “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.”
The move by the CMA to push Amazon comes as it makes moves under Lord Andrew Tyrie, a former Conservative MP and chair of the Treasury Select Committee, to bear down on US technology giants.
“The bottom line is acquisitions made by big tech players are highly likely to get looked at in detail because of the nature of the acquirer,” says Simon Pritchard, a competition lawyer at the firm Linklaters.
The UK’s restaurant food delivery sector represents is worth £8.1bn and is set to grow to £10bn by 2020. Deliveroo, which had nearly £500m in sales in 2018, is a key player, competing with US giant Uber Eats and London listed Just Eat.
Founded in 2013 by former banker Will Shu, Deliveroo has emerged as one of the UK’s brightest technology start-ups. It has raised $1.5bn in investment and is valued at around $3.8bn. But its future, at least in part, rests on a major investment from the Seattle-based retail behemoth founded by Jeff Bezos - an investment that could be scuppered by the CMA.