British regulators have launched an inquiry into whether a large investment by Amazon into the online takeaway delivery company Deliveroo could harm consumers.
The Competition and Markets Authority (CMA) said it had begun the first phase of an investigation, after the US technology firm revealed that it was the lead investor in a $575m (£452m) funding round in Deliveroo.
When it was announced in May, the deal sent shockwaves through the burgeoning and fiercely competitive food delivery sector, as investors anticipated Amazon using its financial muscle to take business from rivals.
Amazon’s first foray into takeaway delivery in Britain, Amazon Restaurants UK, failed in December 2018, barely two years after it opened. However, it continues to run its Amazon Fresh service, which delivers groceries to customers, and the company has spent millions worldwide on logistics technology that could give it an edge over competitors.
Other deep-pocketed rivals in the sector include Uber Eats, owned by the US taxi app, and Just Eat, the British-headquartered FTSE 100 company, which is in the midst of a takeover by Netherlands-based Takeaway.com.
Deliveroo, founded in London by the former investment banker Will Shu, made a loss of £232m last year despite a 72% rise in sales as it doubled the number of towns and cities in which it operates.
The companies did not disclose the size of Amazon’s investment, but said it was a minority investment that did not give Amazon control of Deliveroo.
However, the CMA said in July it had “reasonable grounds for suspecting” Amazon and Roofoods, which trades as Deliveroo, had ceased to be distinct or were planning to merge, which would break competition rules. The CMA ordered Amazon and Deliveroo to pause integration efforts in July.
In a short statement on Wednesday, the CMA said the deal met the criteria for a full investigation.
The phase one investigation will decide whether the deal has created a serious lessening of competition in the British food delivery market. If the CMA finds that is the case the companies can offer remedies, or a lengthier phase two investigation can be started, which could lead to a final decision on whether the deal is allowed.
The regulator has until 11 December to decide whether to proceed to the second phase of an investigation.
A spokesperson for Deliveroo said: “Deliveroo is cooperating fully with the CMA. This minority investment will help to create jobs, help restaurants to grow their businesses, improve choice for consumers and enhance competition in the UK food delivery sector.”
A spokesman for Amazon declined to comment.
