The UK’s competitions watchdog will examine Amazon’s investment in Deliveroo, it said this morning, putting the brakes on the multi-million pound deal.
The internet retail giant took a stake in Deliveroo in May, leading a $575m (£450m) funding round. It did not reveal the exact size of the stake.
However, now the Competitions and Market Authority has has served an initial enforcement order on the deal.
It means Amazon and Deliveroo can continue talks, but cannot merge until they get the thumbs up from the regulator.
The CMA will now examine whether to open a full investigation into the deal. If it eventually has regulatory concerns, it may ask Amazon to sell part of its business before green-lighting the deal.
Linklaters head of competition in London, Nicole Kar, said that the CMA is starting to turn its eye to deals like this when a tech giant invests in a smaller rival.
“You might not think there is much competition between Deliveroo and Amazon right at present given Deliveroo is very focussed on food delivery but that’s too simplistic. Amazon wants to get any product to the customer fast and to ‘own’ the customer for everything they possibly want to buy in their life and every way they want it delivered,” Kar said.
“The key questions for the CMA are first whether the investment Amazon has made (a cash injection and minority stake) give it rights to determine Deliveroo’s strategy and investment and/or insights into what innovation and expansion it is working on.”
Amazon, a giant in delivery, had hoped Deliveroo would give it a foothold in the food delivery market, where it has failed to compete. The Amazon Restaurants concept closed last month.
Although it is famed for offering one-day delivery to customers across the UK, the firm often outsources the final mile.
Therefore its infrastructure has not been set up for food deliveries, which need rapid and local execution, experts have said.
Read more: Amazon in talks to invest £450m in Deliveroo
Deliveroo, for its part, has said it will use the retail giant’s cash to invest in its London-based technology team. It will also expand to reach new customers.
“This new investment will help Deliveroo to grow and to offer customers even more choice, tailored to their personal tastes, offer restaurants greater opportunities to grow and expand their businesses, and to create more flexible, well-paid work for riders,” founder Will Shu said in May.