The UK’s competition regulator has ordered Amazon and the food delivery company Deliveroo to pause any integration efforts pending an investigation into potential breaches of competition rules.
The Competition and Markets Authority (CMA) on Friday issued an initial enforcement order against the companies after Amazon bought a stake in Deliveroo.
The order is preliminary to a decision, with no set deadline, on whether to launch a full merger inquiry.
The online retailer was the lead investor in a $575m (£457m) financing round announced in May that valued Deliveroo at more than £4bn. Amazon bought a minority stake in the company but the order was signed by the CMA’s director of mergers.
The CMA said it had “reasonable grounds for suspecting” that Amazon and Roofoods, which trades as Deliveroo, have “ceased to be distinct” or were planning to merge, which would break competition rules.
Amazon’s entry into the sector shook Deliveroo’s food delivery competitors, causing shares to fall in the FTSE 100’s Just Eat as well as Germany’s Delivery Hero and the Dutch company Takeaway.com.
Amazon has previously been tipped as a potential buyer for Deliveroo after its own effort at hot food delivery, Amazon Restaurants UK, shut in December, barely two years after opening. Deliveroo, which was founded in London by the former investment banker Will Shu, had previously been cited as a possible takeover target for Amazon amid heavy investment in technology.
The CMA’s order means that Deliveroo will be banned from taking any actions that could lead to its integration into Amazon’s business while the regulator makes its decision.
Both of the businesses will be forced to maintain their current level of service in the UK and be prevented from making changes to big contracts or senior management without prior written permission from the CMA.
A spokesman for Deliveroo said: “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.”
A spokesman for 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.”
