Amazon made a $575 million investment in food delivery service, Deliveroo, in May of last year as part of a financing round. However, the funding faced regulatory hurdles in the UK after the Competition and Markets Authority (CMA) launched an investigation on its impact on competition.
Today, the regulator announced that it has provisionally cleared the investment, granting Amazon a 16% stake in Deliveroo. CMA made the approval after concluding that Amazon's funding won't give it a level of control in the firm that would lessen market competition. The regulator's original concern was that the investment might discourage the retail giant "from re-entering the online restaurant food market or further developing its presence in the online convenience grocery delivery market in the UK."
Nonetheless, like many other businesses, Deliveroo said the coronavirus pandemic has taken a great toll on its operations, which could force the company to shut down without Amazon's funding. This convinced the CMA to issue its provisional approval for the investment on grounds that Deliveroo's exit from the market would have a far worse impact on competition and customers than green-lighting the investment.
That said, Deliveroo's finances have seen signs of recovery since April, and the competition watchdog has shifted its focus on whether Amazon's shares would "affect its incentives to compete independently with Deliveroo in both restaurant delivery and online convenience grocery delivery in the coming years". It didn't find this to be the case, although it may launch a further probe if Amazon moves to gain greater influence on Deliveroo in the future.
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