Covid-19: CMA clears Amazon to save Deliveroo from bankruptcy

The Competition and Markets Authority (CMA) has provisionally cleared Amazon’s investment into food takeaway platform Deliveroo.

The CMA has been investigating the proposed deal for the last year, as concerns that Amazon’s stake in Deliveroo would discourage competition by preventing the retail titan from re-entering the online restaurant food market itself.

But in recent weeks, Deliveroo told the CMA that its business is struggling since the enforced closure of the restaurant industry, despite a number of new tie-ups with supermarkets and convenience stores to delivery grocery shops instead.

Deliveroo provided financial evidence that without Amazon’s investment it would go bust. As a start-up business it is reliant on investment, but the ongoing pandemic has limited the availability of finance for early-stage businesses. The CMA has concluded that Deliveroo’s exit from the market would be “inevitable without significant access to funding, which the CMA considers that only Amazon would be willing and able to provide at this time”.

The CMA said the imminent exit of Deliveroo would be worse for competition than allowing Amazon’s investment to proceed, and has therefore cleared the deal.

“These wholly unprecedented circumstances have meant reassessing the focus of this investigation, reacting quickly to the impact of the coronavirus and deciding what it would mean for the businesses involved in this transaction and, in turn, for customers,” said Stuart McIntosh, chair of the CMA’s independent inquiry group.

“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.”