Competition watchdog opens first phase of formal probe into Amazon's Deliveroo deal

CMA will examine whether Amazon's investment in Deliveroo could result in a substantial lessening of competition

The UK's competition watchdog has launched the first phase of a formal investigation into Amazon's investment in takeaway delivery service Deliveroo.

The Competition and Markets Authority (CMA) has announced plans [PDF] to examine whether Amazon's investment into Deliveroo could result in a "substantial lessening of competition" in the UK.

The CMA has set a 11^th December deadline for a decision on the first phase of its probe. If it finds that the Amazon-Deliveroo deal could result in lessening of competition in the country's food delivery market, it may ask the firms to devise remedies, or move onto a longer phase two investigation into the matter.

A final decision on the deal would be taken only after the conclusion of the phase two investigation.

"Deliveroo is cooperating fully with the CMA," a spokesperson for Deliveroo told The Guardian.

"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," the spokesperson added.

Earlier in May, Amazon surprised many people in the intensely competitive food delivery sector by revealing that it was the main investor in a $575 million funding round in Deliveroo. The Series G funding round was also backed by Deliveroo's existing investors Greenoaks , T. Rowe Price, and Fidelity Management and Research Company.

Most investors anticipated that Amazon would use its financial power to capture business from rivals. But, Amazon said that the deal would allow the London-based start-up to expand its services and create new jobs in the country.

Deliveroo was founded by Will Shu and Greg Orlowski in 2013. The firm currently has nearly 15,000 riders in its workforce to deliver meals in the UK. Last year, the firm announced £232 million loss despite a 72 per cent increase in its sales.

In July, CMA said that it had "reasonable grounds" to suspect that that Amazon and Deliveroo had ceased to operate as distinct entities or were planning to merge in near future.

The CMA then ordered both firms to pause their integration while it decides whether to start a formal investigation into the matter.

On Wednesday, the CMA said the deal meets the criteria for a full investigation.