Amazon’s deal with Deliveroo going to get cancelled?
The UK objective of Amazon has been examined by the competition watchdog (Investigative journalism program) after it releases a deep investigation into the online retailer’s purchase of a stake in a food delivery company, Deliveroo.
On Friday, Amazon and Deliveroo denied compromising in reaction to the CMA’s initial raising of concerns earlier this month, after which The Competition and Markets Authority announced the investigation.
In May it was reported that Amazon was the top Investor in a funding round of $575 million, which gave it a 16% stake in Deliveroo. To boost its performance against other rivals (Uber Eats and Just Eat), Deliveroo has been searching for ways to gain Investment.
However, the CMA’s decision to mention the agreement to a full investigation on Friday will bear doubt on whether the Investment can go ahead or not. The director has the power to stop the Investment completely or ask for specific treatment from the companies.
“The deal could leave customers, restaurants, grocers facing increased prices and decreased quality services,” says CMA.
5 days have been given to Amazon and Deliveroo from 11 December to come up with changes but did not offer alternations to the deal. The CMA says they will finish it’s Investigation by 11 June 2020. The impact on the growing super-fast grocery delivery market was one of the biggest problems.
In the UK, Deliveroo has been functioning on grocery deliveries that are within half an hour range with convenience stores such as the Co-op, rising up against Amazon’s venture with Morrisons, which is available only to a few subscribers of its Prime service.
Amazon did a (failed) attempt in entering the food market. In 2016, it launched into the market with the name of Amazon Restaurants, which was initially available to some Londoners who were part of its Prime membership. After 2 years, the project was closed in December 2018, as a testament to the tough economics of delivering hot food at a low cost.
FOOD is a market which worth nearly $1tn a year in the US alone, which remains a key part of Amazon’s plan. In June 2017, the organic food chain Whole Foods was bought by Amazon, giving it a stand-in bricks-and-mortar retail.
CMA’s investigation shows a rare regulatory reproach to Amazon. The $926 billion worth company has built up commanding positions around the globe in online retail and cloud computing with relatively few regulatory problems.
However, the attention of politicians across the world was heavily attracted by its size and use of offshore authority to minimize the tax payments. Amazon and other online platforms such as Google and Facebook have been called to broken up, by the US Democratic presidential candidates Elizabeth Warren and Bernie Sanders.
Last month in the UK, Boris Johnson said that internet companies needed to build a “fairer contribution” on tax, although the question was raised by the trade experts whether his government will push ahead with a levy that could anger the US ahead of difficult post-Brexit trade talk.
The CMA conclusion will be a blast to the growth plans of Deliveroo. The company was founded in London by the former investment banker Will Shu, which has raised a total of $1.5 billion since 2013 from backers.
In the coming weeks, it is understood that the CMA will publish an issue statement in detail.
The companies are anticipated to put their whole attention in convincing CMA the minority investment by Amazon will not stop US companies from re-entering the British food delivery market, as well as to highlight the differences in their business models.
“Deliveroo has been working closely with the CMA and will continue to do so. We are confident that we will persuade the CMA of the facts that this minority investment will add to the competition, helping restaurants to grow their businesses, creating more work for riders, and increasing choice for customers,” said a salesperson by Deliveroo.
“Deliveroo is a British company operating right across the country and this investment will be particularly beneficial to the UK economy,” he added.
A spokesperson from Amazon said, “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.”
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