Pandemic Prompts CMA to Agree to Investment
Due to the deterioration of Deliveroo’s finances as a result of the Covid-19 pandemic, the Competition and Markets Authority (CMA) has provisionally given Amazon permission to invest in the UK-based food delivery startup. In its efforts to expand into the takeaway delivery market, Amazon led a $575 million funding round in Deliveroo in May 2019. The idea was that the funding would be used to expand delivery reach, the company’s engineering team in the UK and to develop new products like delivery-only kitchens. After Amazon’s own takeaway service, Amazon Restaurants, folded a mere two years after expanding to the UK, this was clearly an effort to get back into the game. Previously, both Amazon and takeaway service rival Uber Eats attempted to buy Deliveroo outright.
Bad for Competition, or Not?
After the funding round was announced and phase 1 investigations were concluded, the CMA expressed concerns that the investment would damage competition by discouraging Amazon from developing its UK presence. But, with the coronavirus pandemic causing drastic changes in business dynamics across the globe, the CMA has now changed its stance and believes the investment would overall be better for competition. The lockdown in the UK has forced restaurants across the country to close which has knocked business for Deliveroo. To avoid shutting its doors, the company requires significant added funding. According to the CMA, an investment from Amazon is the only realistic option at this critical juncture.
Deliveroo: A Developing Business, But a Life-Line for Many
CMA’s change in outlook about the investment was prompted by the changing circumstances as people who are self-quarantining at home are now dependent on online food delivery. According to Stuart McIntosh, the chair of the CMA independent inquiry panel, the Covid-19 pandemic has forced a reassessment of the focus of the investigation. Before the pandemic, Deliveroo achieved a relatively high success rate and managed to secure a substantial share of the market in the UK. But despite its achievements, the company is still a developing business and as such remains reliant on continued investment to support its operations. Not to mention the current unprecedented circumstances that have caused the closure of several major restaurants that previously used Deliveroo’s services. Despite developing its presence with online convenience grocery deliveries, the company still needs a financial boost to continue operating.
Next Steps
Even though provisional approval for the investment has been granted by the CMA, the organisation will still observe a period in which feedback will be gathered before making a final decision. The target date for this has been set for 11 June. Should everything be in order, Amazon’s investment will bring Deliveroo into direct competition with rival food delivery companies Uber Eats and Just Eats. As of October 2019, Deliveroo is operational across 13 markets in over 500 cities and towns in countries including the United Kingdom, Ireland, France, Spain and Hong Kong. With the financial boost from Amazon, the company’s operations should be able to continue and expand, despite the global crisis.
Sources:
https://www.theverge.com/2019/5/17/18628974/amazon-deliveroo-investment-575-million-uber-eats-uk
https://www.gov.uk/government/news/cma-provisionally-clears-amazon-s-investment-in-deliveroo