The U.K. Competition and Markets Authority said Dec. 11 that Amazon.com Inc.'s minority investment in Roofoods Ltd., doing business as Deliveroo, can damage competition in online restaurant food delivery and the emerging market for online convenience grocery delivery in the country.
In May, Amazon announced its plans to become the largest investor of the U.K.-based food delivery startup by funding $575 million. Amazon stopped its food delivery business in the U.K. last year.
The competition watchdog noted that there are only a few restaurant food delivery companies in the U.K. and that a deal between Amazon and Deliveroo might discourage Amazon from reentering the market in the U.K., which can lead to competition issues.
"If the deal were to proceed in its current form, there's a real risk that it could leave customers, restaurants and grocers facing higher prices and lower quality services as these markets develop. This is because the significant competition, which could otherwise exist between Amazon and Deliveroo, would be reduced," said Andrea Gomes da Silva, CMA executive director, markets and mergers.
In an e-mailed statement to S&P Global Market Intelligence, Amazon said the company's investment would create more jobs in the market.
"A homegrown UK business like Deliveroo should have broad access to investors and supporters. 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 by creating more highly-skilled jobs, innovating in the restaurant food delivery sector, and developing new products for customers," the statement said.
Amazon and Deliveroo have five days to provide proposals to address the CMA's concerns. The CMA will then decide whether to accept the offer or refer the case to an in-depth investigation.