Amazon’s investment in Deliveroo is given the green light by the watchdog due to fears the delivery service would go bust without it
- The Covid-19 lockdown is causing grave financial harm to Deliveroo’s business
- Takeaway.com’s £6.2billion takeover of its rival Just Eat has also been probed
- Deliveroo was started by two American expatriates Will Shu and Greg Orlowski
Britain’s competition body has provisionally cleared a major investment in the online food delivery firm Deliveroo by multinational giant Amazon, arguing that it will stop the fledgling business from going under.
The Competition and Markets Authority (CMA) says Amazon’s £575million ‘minority investment’ in the London-based company would ensure it avoids collapsing due to the coronavirus pandemic causing significant losses in its restaurant division.
It said that the virus has restricted the ability of start-ups like Deliveroo to obtain finance and that its exodus from the food delivery business ‘would be worse for competition’ than allowing Amazon to inject new capital into the company.
Deliveroo argued that without Amazon’s $575million investment, it would collapse
Stuart McIntosh, who chairs the CMA’s independent inquiry group believes this could mean ‘some customers are cut off from online food delivery altogether, with others facing higher prices or a reduction in service quality.’
The public body had previously warned at the end of last year that the Amazon-Deliveroo deal could severely limit competition in the sector.
Another CMA concern was that a merger between the two firms could cause higher prices and reduced quality of service for customers. It subsequently launched an investigation into the tie-up.
However, it said today that the Covid-19 lockdown was causing grave financial harm to Deliveroo’s business, due to the closure of multiple essential restaurants available through the firm.
Without Amazon’s financial support it argued, the company, which was started seven years by American expatriates Will Shu and Greg Orlowski, would go under.
Since the lockdown, Deliveroo has formed partnerships with Morrisons and Co-op, along with other independent retailers to help turn corner shops and newsagents into delivery businesses
In response to the CMA’s decision, Deliveroo said in a statement: ‘The unprecedented health crisis we all face has disrupted businesses across the country.
‘This investment will help us to overcome immediate and long-term challenges, allow us to continue to improve our service for customers, enable us to develop new innovations and offer people even greater choice.’
Since the lockdown began, the company has launched partnerships with Morrisons and Co-op, along with other independent retailers to help turn corner shops and newsagents into delivery businesses.
The CMA is also probing Takeaway.com’s £6.2billion takeover of its rival Just Eat, which was agreed in July last year, but which the government department ordered to put on hold
This has not been enough to compensate for the income that has been lost due to the quarantine measures though. Along with other tech firms, Deliveroo has written to the Government asking for access to funding during the crisis as the impact is felt throughout the economy.
Earlier versions of the lending schemes left some tech firms unable to apply. However, on Thursday night, the Government unveiled its latest package of lending for medium-sized and larger companies in the UK to access loans.
The CMA is also probing Takeaway.com’s £6.2billion takeover of its rival Just Eat, which was agreed in July last year, but which the government department ordered to put on hold until in February until over consumer concerns.