CMA provisionally clears Amazon’s £442m Deliveroo investment over coronavirus

A UK watchdog today provisionally cleared Amazon’s massive £442m investment into Deliveroo due to the risk the food delivery firm faces from coronavirus.

The Competition and Markets Authority (CMA) called the situation “wholly unprecedented” but said the cash was “realistically only available from Amazon”.

Deliveroo has seen a significant decline in revenues from the UK coronavirus lockdown. Restaurants and cafes have closed since late March under orders from the government.

Deliveroo has pivoted to grocery deliveries, and last week announced a partnership with Morrisons.

However, supermarket deliveries have failed to make up for the impact of restaurant closures, Deliveroo told the CMA. The takeaway app warned the regulator that it would be forced to exit the market without the Amazon investment.

The CMA said it had reached the conclusion Deliveroo’s collapse would have been “inevitable” without Amazon’s funding.

Stuart McIntosh, chair of the CMA’s independent inquiry group, said: “These wholly unprecedented circumstances have meant reassessing the focus of this investigation, reacting quickly to the impact of the coronavirus and deciding what it would mean for the businesses involved in this transaction and, in turn, for customers.

“Without additional investment, which we currently think is only realistically available from Amazon, it’s clear that Deliveroo would not be able to meet its financial commitments and would have to exit the market.”

That has led it to provisionally approving Amazon’s investment. It will seek views on its decision until 11 May, before making a final decision in June.

The CMA launched a full investigation into the funding in December. That came after the first phase of the probe found that the investment could give Amazon the ability to “exercise material influence over Deliveroo”.

The watchdog also raised concerns that the deal could cause higher prices and lower quality for customers. However, the CMA today said if Deliveroo collapsed, some customers would be unable to access online food delivery.

“This could mean that some customers are cut off from online food delivery altogether, with others facing higher prices or a reduction in service quality,” McIntosh added.

“Faced with that stark outcome, we feel the best course of action is to provisionally clear Amazon’s investment in Deliveroo.”

A Deliveroo spokesperson said: “The unprecedented health crisis we all face has disrupted businesses across the country.

“This investment will help us to overcome immediate and long-term challenges, allow us to continue to improve our service for customers, enable us to develop new innovations and offer people even greater choice.”

News of Deliveroo’s difficulties pulled Just Eat Takeaway’s shares down 2.6 per cent in afternoon trading.

Just Eat Takeaway has seen ortders surge 50 per cent in the ongoing coronavirus lockdown.

Yesterday the CMA took the decision to revoke its ban on Just Eat and Takeaway.com integrating their businesses, though it continues to probe the tie-up.

Takeaway.com won a bidding war against rival Prosus for the FTSE-listed delivery firm earlier this year.

“Based on the evidence it has received in its assessment of the transaction to date, it is appropriate to revoke the initial enforcement order,” the CMA said.