Amazon's Deliveroo investment attracts competition scrutiny

A regulator has the power to block Amazon's investment if it judges that competition in the food delivery sector may be hurt.

By James Sillars, business reporter

Friday 5 July 2019 10:47, UK

LONDON, ENGLAND - FEBRUARY 16: A Deliveroo rider cycles through central London on February 16, 2018 in London, England. Millions of part-time and flexible workers in the so-called gig economy are to receive new rights including sick and holiday pay under a new government reform. (Photo by Jack Taylor/Getty Images)
Image: Deliveroo uses about 15,000 riders to deliver meals in the UK
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An investment in food delivery app Deliveroo by Amazon, worth hundreds of millions of pounds, could be blocked by the competition regulator.

The Competition and Markets Authority (CMA) said it was looking into any potential breaches of competition rules arising from a fund-raising - first revealed by Sky News - in May.

UK-based Deliveroo then sought £450m from investors to fund its expansion plans as it battles rivals, including Uber Eats and Just Eat, for market share in the fast-growing restaurant delivery sector.

Asda and Sainsburys
Image: A proposed tie-up between Asda and Sainsbury's was blocked by the CMA earlier this year

The exact sum of Amazon's investment, which gave it a stake in Deliveroo for the first time, was not disclosed.

Existing investors T Rowe Price, Fidelity Management and Research Company, and Greenoaks also took part.

The company said the latest funding - valuing Deliveroo at around £3bn - would enable investment in its London-based tech team, expansion to reach new customers and development of its delivery-only super kitchens, Editions.

But the CMA said it had "reasonable grounds for suspecting that it is or may be the case" that the deal could "result in Amazon and Deliveroo ceasing to be distinct".

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Its so-called phase one investigation means any merger plans the pair may have must be placed on hold.

There is widespread speculation Amazon is interested in buying Deliveroo after its own foray in the sector, Amazon Restaurants UK, was shut down amid tough competition.

The CMA has the ultimate power to block the deal - as it did when Sainsbury's and Asda sought a tie-up - if it determines consumers could have less choice.

The US company said on Friday its investment would allow more UK consumers to benefit from food deliveries through Deliveroo's expansion plans.

Deliveroo said of the investigation: "Deliveroo and Amazon have been working closely with regulators to obtain regulatory approvals.

"There are a number of major companies within the restaurant food delivery sector and this investment will enable Deliveroo to expand, innovate and, we believe, will enhance competition.

"This investment will help create jobs, help restaurants to grow their businesses and will improve choice for consumers."