The competition regulator has provisinally approved Amazon’s investment in Deliveroo, after deciding the food delivery firm was at risk of collapse without an influx of new funding.
The Competition and Markets Authority said it had become clear the coronavirus pandemic was having a “significant negative impact” on Deliveroo’s business.
The company had warned the CMA it would “fail financially and exit the market” without the Amazon investment, the regulator added.
Deliveroo’s investors had become concerned about a cash shortage prior to the Covid-19 pandemic, after the CMA said it would probe an Amazon-led round of investment announced last May.
The $575 million (£460m) investment round was to give Amazon a 16 percent stake in Deliveroo.
The CMA began its review in June, leading to a formal merger inquiry in October and a “Phase 2” probe in December.
The funding issue became more acute when the UK’s lockdown made delivery apps an essential source of food supplies, as well as a financial lifeline to shuttered restaurants.
Stuart McIntosh, chair of the CMA’s independent inquiry group, said “wholly unprecedented” circumstances required a reassessment of the investigation.
“Without additional investment, which we currently think is only realistically available from Amazon, it’s clear that Deliveroo would not be able to meet its financial commitments and would have to exit the market,” McIntosh said.
“This could mean that some customers are cut off from online food delivery altogether, with others facing higher prices or a reduction in service quality.
“Faced with that stark outcome, we feel the best course of action is to provisionally clear Amazon’s investment in Deliveroo.”
Deliveroo said the investment would “help us to overcome immediate and long-term challenges”, including developing new ways of working and offering greater choice, while Amazon said its investment would “benefit both consumers of Deliveroo’s service and its small business restaurant partners”.
The CMA’s final decision is due by 11 June.
The regulator is also reviewing the merger of Just Eat and Takeaway.com, and last week lifted restrictions preventing the two companies from integrating their businesses.
But the CMA said its assessment was continuing and that it had not yet made a final decision.
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