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Amazon’s 16% bite of Deliveroo finally clears UK competition probe

It's official: Days after Amazon CEO Jeff Bezos was peppered with awkward questions by US lawmakers concerned about the market power of his ecommerce empire, the UK's competition regulator has confirmed it's happy for the tech giant to take a 16% bite out of local on-demand food delivery app, Deliveroo.

The CMA had been investigating the planned stake for some 15 months, completing phase one of its scrutiny in December. At the time it decided it had enough concerns to move to a phase 2 probe — chewing over whether or not the stake might discourage Amazon from re-entering the online restaurant food market and “further developing its presence within the online convenience grocery delivery market in the UK”, as it put it.

Soon after the regulator started in on this work COVID-19 struck Europe — impacting investigation as it had a marked impact on Deliveroo's business. Initially the impact of the coronavirus looked negative, with Deliveroo claiming it would have gone out of business without Amazon's stake. The CMA concurred with this analysis, treating it as a “failing firm” and reasoning that Deliveroo's exit from the market would have been worse for competition — thereby provisionally clearing the Amazon stake in April.

Then again in June the regulator provisionally cleared the deal — although it now no longer considered Deliveroo failing, being as, from April 2020, it found a sharper than expected recovery in the restaurant food delivery market, as well as a shift in the restaurant ‘mix’ (“towards smaller, independent restaurants and away from large fast food chains”) — both of which resulted in money being poured into Deliveroo's coffers. Yet then — with the startup's finances experiencing “rapid and significant turnaround” — the regulator felt it necessary to complete a “substantive assessment” to of the risks to competition.

Now it's finally concluded that Amazon's 16% stake does not cross the competitive risk threshold. So Bezos can crack out the bubble — assuming he knows what the heck Deliveroo is of course.

The CMA said its decision to clear the deal on competition grounds is “the culmination of extensive analysis of internal documents from Amazon and Deliveroo, a survey of more than 3,000 consumers, and extensive submissions from interested third parties”.

It said the assessment looked at how a 16% shareholding by Amazon would “affect its incentives to compete independently with Deliveroo in both restaurant delivery and online convenience grocery delivery in the coming years”.

“The CMA ultimately found that this level of investment will not substantially lessen competition in either market. However, if Amazon were to acquire a greater level of control over Deliveroo — through, for example, acquiring a controlling interest in the company — this could trigger a further investigation by the CMA,” it added.

Commenting further in a statement, Stuart McIntosh, inquiry chair, said: “Taking account of the higher legal standard that applies at Phase 2, the Group has concluded that the transaction will not result in a substantial lessening of competition in either restaurant delivery or convenience grocery delivery.”

McIntosh was also at pains to emphasize that the decision reflects the scale of the investment and Amazon ‘s “incentives to compete in both markets” — reiterating the warning that should Amazon try to increase its share of Deliveroo a fresh investigation may be triggered. 

The announcement that Amazon was leading a $575 million Series G investment in the UK food delivery app business dates back to May 2019.

The move signalled a second act for the ecommerce behemoth in the UK food delivery market, after it launched an on-demand food delivery offer with London restaurants for Prime members back in 2016. However it went on to shutter the effort a couple of years later — having faced fierce competition from the likes of Deliveroo and Uber Eats.

Responding to the CMA's clearance of the Amazon stake, Deliveroo emphasized that “none of the five ‘Theories of Harm’ on which the CMA based its investigation have been substantiated”.

A company spokesperson also emailed this statement:

We are delighted that the CMA has concluded its 15 month investigation and that the Amazon minority investment can now go ahead.

This is fantastic news for UK customers and restaurants, and for the British economy. British born Deliveroo will use the investment to increase choice and value for customers, support for restaurants and will be able to offer more riders the flexible work they value as the company expands.

Deliveroo is excited that Amazon, the most customer-obsessed and innovative company in the world, has shown such a huge vote of confidence in Deliveroo and chosen to invest in the company’s future.

The company offered some updated business metrics, saying there are now 100,000 restaurants on its platform globally, with 30,000 joining this year alone — which it claimed points to “the extent to which the Covid crisis has seen restaurants turn to delivery as a vital source of revenue”.

“75,000 of the restaurants who work with Deliveroo globally are small, independent restaurants who have been hit hardest by the pandemic,” it added.

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