Britain’s competition watchdog has provisionally cleared Amazon’s investment in food delivery start-up Deliveroo.
The Competition and Markets Authority said Friday that it had taken the decision due to a “deterioration” in Deliveroo’s financial position caused by the coronavirus outbreak.
“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,” Stuart McIntosh, chair of the CMA’s independent inquiry group, said in a statement.
“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. Faced with that stark outcome, we feel the best course of action is to provisionally clear Amazon’s investment in Deliveroo.”
Amazon was the lead investor in Deliveroo’s $575 million funding round, announced back in May last year. But antitrust regulators froze the e-commerce giant’s stake, citing competition concerns raised by the deal.
Amazon has operated an online takeout business in the past, called Amazon Restaurants, but it shuttered U.K. operations in 2018 and closed down completely the following year. The CMA has argued that Deliveroo’s cash injection from Amazon could reduce competition by removing the possibility of the e-commerce giant re-entering the market.
Both companies disputed the suggestion that Amazon would be hesitant to re-enter the U.K. market alone as a result of the deal. They also pointed out the possibility for other players like U.S. firm DoorDash and Spanish start-up Glovo to enter the British food delivery space.
Online food delivery has seen intensifying competition with a variety of players operating in the space, from GrubHub to Uber Eats. It’s also an industry providing critical services for many people now stuck at home due to the coronavirus pandemic.