Deliver-coup d’état?: The CMA start an investigation into Amazon’s takeover of Deliveroo

November 4, 2019

2 min read

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What's going on here?

The UK’s Competition and Markets Authority (CMA) has commenced an investigation into the potential effects of Amazon’s intended investment in Deliveroo.

What does this mean?

The CMA’s purpose is to promote competition amongst businesses; safeguarding consumers and small-medium enterprises against monopolistic activity. 

Concern regarding Amazon’s investment was raised when it was revealed that the conglomerate was the lead investor in Deliveroo’s most recent funding round which raised £452 million. Suspicion that Amazon would initiate a merger with the startup once the transaction was complete prompted this inquiry. 

By launching a formal investigation, the CMA has effectively stonewalled this investment for the time being. The regulatory body’s main aim is to establish whether such a transaction will create a situation in which there is a significant lessening of competition within any commercial market in the UK.

What's the big picture effect?

The outcome of this inquiry will have great ramifications for a number of industries; the most pertinent being the food and beverage, and delivery sectors.

Should the CMA decide that the merger would indeed cause substantial impediments to competition in the relevant industries, there are several routes that the regulatory body may choose from. The simplest solution would be to prevent the merger from happening altogether. Other possibilities include a ruling that Amazon or Deliveroo divest parts of their respective businesses so as to guard against anti-competitive activities.

However, if the opposite ruling is reached, Amazon will be allowed to invest in Deliveroo as originally intended. A merger would give the corporation access to Deliveroo’s network of restaurants, couriers and customer base across 200 cities. Arguably, this might give the company the edge to succeed in the food delivery business, given the failure of Amazon Restaurants in the UK. Competitors would have to adapt drastically to overcome the logistics infrastructure and technology that Amazon currently wields.        

Regardless of the result, the CMA’s reaction to Amazon’s investment reflects a wariness of the corporation’s growing consortium of investments. Furthermore, it is indicative of Amazon’s continued growth and expansion into a plethora of industries; from video streaming services (Twitch) to home security solutions (Ring). 

The competition authority has until the 11th December to finalise the first phase decision of this merger inquiry.

Report written by Debra Lim

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