Amazon investment gets go-ahead to save Deliveroo from collapse
The regulator had previously raised concerns over the £400m deal, but now says without the cash injection the UK firm would fail.
Amazon’s multi-million pound investment in Deliveroo has been cleared by the competition watchdog, after the food delivery firm warned it would go bust because of the coronavirus lockdown.
The Competition and Markets Authority (CMA) said the COVID-19 outbreak had had “a significant negative impact” on the UK takeaway courier’s business after several major restaurant chains, including Nando’s, KFC and Pret, closed their doors.
The regulator had previously raised serious concerns that the £400m deal with the online retail giant may threaten competition and posed the “real risk” it could leave customers and businesses facing higher prices and poorer services.
But amid the continuing coronavirus restrictions, the CMA has now said the “imminent exit of Deliveroo would be worse for competition than allowing the Amazon investment to proceed”.
As a result, and following discussions with Deliveroo, it had given the provisional go-ahead to the tie-up. The CMA said: “The ongoing lockdown in the UK has resulted in the closure of a large number of the key restaurants available through Deliveroo, and a significant decline in revenues. “While Deliveroo has sought to expand its supply of convenience groceries during the crisis, these sales are limited and have not made up for losses in its restaurants business.
“As a result, Deliveroo recently informed the CMA that the impact of the coronavirus pandemic on its business meant that it would fail financially and exit the market without the Amazon investment.”
Stuart McIntosh, chair of the CMA’s independent inquiry group which was investigating the deal, highlighted the “wholly unprecedented circumstances”.
He said: “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.
“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.”
Deliveroo said it would use the deal and extra cash to help with short and long-term challenges, particularly as it looks for new ways of working during the current outbreak.
Since the lockdown, the company has launched partnerships with Morrisons and Co-op, along with other independent retailers to help turn corner shops and newsagents into delivery businesses.
A Deliveroo spokesman said: “We are delighted the CMA has found that Amazon can invest in Deliveroo.
“This investment is a key part of Deliveroo’s plan to provide an even better service to customers, riders and restaurants, and, as we’re a British company, this will be a boost to the UK economy.
“The unprecedented health crisis we all face has disrupted businesses across the country.”