The e-commerce giant Amazon has been told by the Competition and Markets Authority (CMA) that it may launch an investigation into its purchase of a majority stake in the UK food delivery service, Deliveroo.
The firm announced early in 2019 that it planned to buyout Deliveroo and integrate it into the Amazon family of subsidiaries but has been dogged by warnings by the CMA that the purchase could ultimately drive prices up within the food delivery market.
The CMA has thus given the two companies just five days to come up with a solution to their concerns or face an official investigation that could see the £437m deal come screeching to a halt.
In their examination of the purchase of a stake in Deliveroo, representatives from the CMA suggested that the influence of Amazon, which is one of the biggest and most globally penetrative companies in the world, could have a negative effect on the markets in which Deliveroo operates.
Predominantly, they were concerned that Amazon’s influence could drive up prices for customers and restaurants in the long-term whilst quality standards declined over time.
The food delivery market, particularly in the United Kingdom, is not made up of many players and there is an increasing concern that Deliveroo would dominate to a level considered unhealthy for competition if the deal goes forward.
The CMA also suggested that the investment could prevent Amazon from launching their own food delivery service and thereby encouraging competition within the market.
Though short-lived, Amazon did have their own delivery service in Amazon Restaurants, which ran in a handful of cities and only for Prime subscribers.
Confident Deal Can Proceed
Representatives from both Amazon and Deliveroo have stated that they’re confident in the deal and will be able to persuade the CMA not to pursue a formal investigation within the allotted time.
They also suggested that the deal could help increase competition within the market, particularly for major competitors Uber Eats and Just Eat.
Deliveroo currently operates in eleven different markets outside of the UK, including Europe, Hong Kong and Australia. In the last year alone, it doubled the number of towns it operated in.