Amazon’s merger could be in for a rough time
LONDON — The U.K. competition watchdog Friday launched an investigation into Amazon’s purchase of a large stake in food delivery service Deliveroo, a move that suggests authorities are taking a harder line on the expansion of Big Tech.
While the deal hadn’t been billed as a takeover by Amazon, the Competition and Markets Authority said it has “reasonable grounds for suspecting” the agreement could “result in Amazon and Deliveroo ceasing to be distinct.”
The investigation will put on hold any plans to merge Amazon operations with Deliveroo, whose delivery bikes and scooters are ubiquitous in many major cities.
Besides Britain, it also operates in several countries in Europe and Asia, including Germany, France, Italy and Australia.
The investigation comes as the regulator is taking a more activist role in seeking to protect consumers in an evolving marketplace.
“This type of deal is right in the CMA’s area of interest at the moment — large tech incumbents like Amazon investing in smaller rivals — so called ‘killer acquisitions,’” said Nicole Kar, head of the London Competition Practice at law firm Linklaters.
“You might not think there is much competition between Deliveroo and Amazon right at present given Deliveroo is very focused on food delivery but that’s too simplistic. Amazon wants to get any product to the customer fast and to ‘own’ the customer for everything they possibly want to buy in their life and every way they want it delivered.”
In the U.K., observers have noted a change of direction at the CMA since Chairman Andrew Tyrie took over last year. From the moment he started Tyrie has promised to play a crucial role in Britain’s global competitiveness.
But even so, the decisions this week marked a change of tone, if not direction.
“The CMA’s move comes as a surprise and suggests that the new regime is much more interventionalist than in the past,” said Clive Black, the head of research at financial firm Shore Capital. “As well as the focus upon an investment as opposed to a total take-over, this move by the regulator may also spell a change of view around mega-tech and their expansion in the U.K.”
British authorities will be looking into whether Deliveroo’s partnerships with grocers like the Co-Op might signal an intention to build food delivery services beyond the core Deliveroo model at the moment, which is the delivery of food-to-go from restaurants and cafes.
Kar added that the watchdog would look at whether the investment Amazon made would give the tech titan the right to determine strategy and investment.
The exact amount of money Amazon spent on the stake is unclear, but Deliveroo’s last fundraising round brought in $564 million from multiple investors, with Amazon becoming the largest.
Both Amazon and Deliveroo pledged Friday to work closely with regulators.
“There are a number of major companies within the restaurant food delivery sector and this investment will enable Deliveroo to expand, innovate and, we believe, will enhance competition,” Deliveroo said in a statement.
Amazon says the expansion will benefit consumers by increasing choice and by “creating new jobs as more restaurants gain access to the service.”