Amazon-Deliveroo tie-up may affect competition, says CMA

The companies have been given five working days to come up with new proposals

Amazon's investment in online food delivery firm Deliveroo could leave restaurants, grocers and customers facing lower quality services at higher prices, the Competition and Markets Authority (CMA) has warned.

The British competition regulator has given the both companies five working days to come up with proposals addressing the concerns raised by the Authority.

The CMA will then whether to accept their offers or begin an in-depth probe into the matter, which could take nearly six months.

After completing the initial 'Phase 1' probe, which opened in October, the CMA found that Amazon's investment in Deliveroo, in its current form, could damage competition in two ways.

First, it would discourage Amazon's re-entry into the British online restaurant food delivery market, thus potentially harming the competition.

Second, it could damage the competition in online grocery delivery, where Amazon and Deliveroo are both leading names.

"There are relatively few players in these markets, so we're concerned that Amazon having this kind of influence over Deliveroo could dampen the emerging competition between the two businesses," Andrea Gomes da Silva, executive director of the CMA, said.

Earlier in May, Amazon announced that it was the main investor in a $575 million funding round for Deliveroo, giving the online retail giant a 16 per cent stake in the British firm.

The investment surprised many in the food delivery sector, who anticipated that Amazon would use its financial power to take business from competitors like Just Eat and UberEats.

Responding to the CMA statement, Amazon insisted that its investment in Deliveroo would actually help the food delivery firm to introduce new products and remain competitive in the market.

'A homegrown UK business like Deliveroo should have broad access to investors and supporters', the company stated.

'Amazon believes that this investment funding will lead to more pro-consumer innovation by helping Deliveroo continue to build its world-class service and remain competitive in the restaurant food delivery space'.

Deliveroo said that it was confident that it could convince the competition regulator that Amazon's investment would help in increasing competition, increase options for customers and help restaurants to grow their businesses in the long run.

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