The UK’s Competition and Markets Authority (CMA) has provisionally cleared an investment from Amazon in connected food delivery service Deliveroo.
Like many businesses, Deliveroo is struggling during the COVID-19 pandemic. While it’s grasping some unique opportunities, such as delivering essential groceries from local supermarkets, the overall business has suffered from a large number of key restaurants closing their doors.
In a press release, the CMA wrote:
“Deliveroo has sought to expand its supply of convenience groceries during the crisis, these sales are limited and have not made up for losses in its restaurants business.
As a result, Deliveroo recently informed the CMA that the impact of the coronavirus pandemic on its business meant that it would fail financially and exit the market without the Amazon investment.”
The CMA was investigating Amazon’s proposed investment in Deliveroo over concerns that it would reduce the likelihood of Amazon itself making a return to the restaurant market, and therefore harming competition.
In light of the unprecedented pandemic, the CMA now believes that Deliveroo will be forced to exit the market entirely if it cannot access further investment.
“Deliveroo’s exit from the market would be inevitable without access to significant additional funding, which the CMA considers that only Amazon would be willing and able to provide at this time.
While securing additional funding from other sources may have been possible before the coronavirus outbreak, the pandemic has severely limited the availability of finance for early-stage businesses such as Deliveroo.”
Deliveroo occupies a significant marketshare in the UK and is helping to deliver food during these difficult times. If Deliveroo is forced to exit the market, the only other service of its kind in the UK is Uber Eats.
The CMA is calling for views on its provisional decision by 5pm on Monday 11th May. More information is available here.
(Photo by Ross Sneddon on Unsplash)
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