Amazon will be allowed to buy a stake in British takeaway company Deliveroo, even though the company is no longer at risk of collapse, the merger watchdog has ruled.
For the second time, the Competition and Markets Authority (CMA) provisionally approved the deal, which officials revealed would see the US giant taking a 16% cut of Deliveroo, despite a major reassessment.
It had previously given Amazon the green light over fears that Deliveroo could go out of business during the coronavirus pandemic.
Since that decision in April, Deliveroo’s finances have improved considerably, the CMA said, meaning it can keep trading on its own.
The updated evidence no longer shows that Deliveroo would exit the market in the absence of this transactionStuart McIntosh, CMA
Yet the companies were given a second provisional go-ahead, this time because the CMA thinks the deal is unlikely to reduce competition.
The watchdog warned it might change its mind if the US retailer tried to buy more of the UK business.
“The impact of the coronavirus pandemic, while initially extremely challenging, has not been as severe for Deliveroo as was anticipated when we reached our initial provisional findings in April,” said the CMA’s Stuart McIntosh, who chaired the inquiry into the deal.
“The updated evidence no longer shows that Deliveroo would exit the market in the absence of this transaction. This has required us to re-evaluate our initial provisional findings.
“We’ve carefully considered how this investment could affect competition between the two businesses in future. Looking closely at the size of the shareholding and how it will affect Amazon’s incentives, as well as the competition that the businesses will continue to face in food delivery and convenience groceries, we’ve found that the investment should not have a negative impact on customers.”
The watchdog is set to make a final decision by August 6 at the latest, which will mark the end of Amazon’s roller coaster ride courting the takeaway firm.
The CMA will likely face calls from some of Deliveroo’s competitors to block the deal in its final ruling.
Last month, Domino’s Pizza questioned the logic that the CMA had used to justify its first thumbs up for the deal.
It was wrong, Domino’s said, to conclude that Deliveroo would collapse without Amazon’s cash.
Deliveroo said on Wednesday: “This minority investment is good news for UK customers and restaurants, and for the British economy.
“As we have argued for the past year, since the beginning of the CMA’s investigation, the minority investment will enable British born, British bred Deliveroo to compete against well-capitalised overseas rivals and continue to innovate for customers, riders and restaurants.
“As the British economy recovers from the damage caused by Covid-19, a stable regulatory environment is critical. We therefore urge the CMA to conclude their review as swiftly as possible.”