Amazon’s big bet on UK food delivery is in jeopardy

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Amazon’s big bet on UK food delivery is in jeopardy

The Competition and Markets Authority said in a statement Friday that it had opened a “phase 2” probe after the companies failed to address its concerns about how the deal would affect the market for online deliveries of restaurant meals and groceries.

“There’s a real risk that it could leave customers, restaurants and grocers facing higher prices and lower quality services as these markets develop,” Andrea Gomes da Silva, the regulator’s executive director, said in statement earlier this month.

The in-depth investigation could delay the completion of the deal, hurting Deliveroo in the ultracompetitive UK market while giving rivals Just Eat (JSTTY) and Uber (UBER) Eats a boost.

A spokesperson for Deliveroo said the company would continue to work closely with the regulator.

“We are confident that we will persuade the [Competition and Markets Authority] of the facts that this minority investment will add to competition, helping restaurants to grow their businesses, creating more work for riders, and increasing choice for customers,” the spokesperson said in a statement.

Amazon (AMZN) did not immediately respond to a request for comment. The company previously defended the deal, saying it would bolster innovation, create jobs and lead to the development of new products.

Amazon’s UK ambitions

Amazon led a $575 million funding round into Deliveroo in May, signaling that the company could become a key part of its global food delivery ambitions.

Deliveroo operates in 14 countries including Australia and France. It is present in more than 100 towns and cities across Britain, offering online delivery services for restaurants and convenience stores.

The Competition and Markets Authority ordered Amazon (AMZN) to pause its investment in July while it investigated whether the deal amounted to a takeover.

Earlier this month, the regulator said that it was also concerned that the deal would discourage Amazon from re-entering the online food delivery market as a competitor to Deliveroo in the future. The companies fought for the same customers before Amazon shuttered its Amazon Restaurants business last year.

Amazon’s direct participation in the restaurant delivery business would “significantly increase competition in online restaurant food delivery,” the regulator said.

The antitrust authority also warned that the deal would damage competition in the emerging market for online grocery delivery, where Amazon and Deliveroo are two of the strongest players.

Food and groceries have been a growing focus for Amazon since its $13.7 billion purchase of grocery chain Whole Foods in 2017.

— Hanna Ziady contributed reporting.

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