The pandemic threatens Deliveroos continuity in the British market without additional investment.
The Competition and Markets Authority of the United Kingdom (CMA) has decided to provisionally authorize the entry of Amazon into the capital of the home delivery company Deliveroo, an operation with respect to which it had opened in December 2019 a in-depth research, “in light of the deterioration in Deliveroos financial position as a result of the coronavirus (Covid-19)”.
In its decision, the British Competition Authority has assessed the strong negative impact that the pandemic and the measures of confinement applied in the United Kingdom are having on Deliveroos activity, which recently informed the CMA that without Amazon’s support it could be forced to leave the market.
“Deliveroo recently reported that the impact of the coronavirus on your business meant you could go bankrupt financially and abandon the market without Amazon’s investment, “said the CMA, which after urgently analyzing the evidence presented, has reached the provisional conclusion that Deliveroo would be forced to exit the market without access to significant additional financing, that at this time only Amazon would be willing to provide.
“CMA currently considers that Deliveroos impending departure would be worse for competition than allowing Amazon investment and, therefore, it has provisionally concluded that the agreement must be authorized, “he announced.
“These totally unprecedented circumstances have meant re-evaluating the focus of this investigation, reacting quickly to the impact of the coronavirus and deciding what it would mean for the companies involved in this transaction and, in turn, for customers,” said Stuart McIntosh, president of the CMA independent research group.
Additionally, McIntosh has noted that the absence of additional investment would prevent Deliveroo from meeting its financial commitments, forcing its exit from the market. “This could mean that some customers would be totally excluded from online food delivery, while others would face higher prices or a reduction in service quality,” he added.
At the end of last month December, CMA announced the opening of a In-depth investigation into Amazon’s entry into Deliveroos capital, after the companies had not presented within the prescribed period solutions to the competition problems detected by the supervisor, who had warned that the transaction would result in the creation of a relevant merger situation that could lead to a substantial decrease in competition in any market or markets for goods or services in the UK.
The UK Competition Authority will keep the deadline for receiving opinions regarding its provisional conclusions until next May 11 and after evaluating all the evidence provided, it will adopt a final decision, for which it has a deadline of June 11 2020.
In May 2019, Amazon entered the capital of the digital home delivery platform Deliveroo by leading a round of financing for the company, which managed to raise between different investors 575 million dollars (529 million euros). In addition to the company founded by Jeff Bezos, investors already present in Deliveroos capital also participated in this financing round, such as T. Rowe Price, Fidelity Management & Research Company, and Greenoaks.