Suggesting possible concerns over Amazon’s Deliveroo deal, Britain’s Competition and Markets Authority (CMA) said it served an initial enforcement order (IEO) on both companies on June 24.
In May, Amazon led a $575 million fundraising in Deliveroo making what the two parties called “a minority investment” going up against Uber Eats.
The regulator said that it has grounds to believe that Amazon and Deliveroo “have ceased to be distinct” or were putting in place or considering arrangements which would result in them “ceasing to be distinct”.
Consequently, the IEO means that Amazon and Deliveroo must operate independently and cannot proceed with the tie-up. This will give the regulator adequate time to decide whether to launch a formal “Phase 1” competition probe.
The Deliveroo investment marks Amazon’s latest attempt to enter the takeaway delivery market, worth around $100 billion globally. It previously shut down its own service, Amazon Restaurants, first in the UK and then last month in the United States.
Deliveroo said it and Amazon had been working closely with regulators to obtain their approval. The two companies will argue that the investment will help Deliveroo to grow its coverage, increase competition and boost the restaurant sector.
In a statement, Amazon said: “We believe this minority investment will enable Deliveroo to expand its services, benefiting consumers through increased choice and creating new jobs as more restaurants gain access to the service”.
Deliveroo noted that it was competing with a number of major companies in the sector and that the investment would help to create jobs and restaurants to expand.
Traditionally, IEOs do not prevent parties from continuing to engage with each other, however, they do prevent the transfer of key staff or the transfer of commercially sensitive information.
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If the CMA were to undertake an investigation and find competition concerns, then the companies could offer undertakings to try to address those concerns. However, that process could be compromised if the companies had already merged financially. Neither Deliveroo nor Amazon have disclosed a figure for Amazon’s funding contribution.
In Britain, Deliveroo competes with Just Eat and with Uber Eats and is also present in North America, South America, Europe, Asia and Africa. In Europe, it also competes with Takeaway.com and Delivery Hero.
Headquartered in London, Deliveroo uses 60,000 riders to deliver meals from more than 80,000 restaurants and takeaway outlets in 14 countries including France, Germany, Hong Kong, Singapore and Kuwait.
Since former lawmaker Andrew Tyrie became chairman of the CMA a year ago, it blocked supermarket group Sainsbury’s 7.3 billion pound takeover of rival Asda.
Following the aftermath of the Enron scandal, in April the regulator also proposed some of the biggest reforms to auditing globally. Earlier this month, the CMA launched an investigation into the power wielded by Facebook and Google in digital advertising markets.