The Competition and Markets Authority (CMA) will launch an official investigation into Amazon’s purchase of a share in UK food delivery service Deliveroo after it was announced that the two companies had failed to come up with enough justification for the sale to go ahead.
Concerns Raised
Earlier in December, after the CMA voiced concerns over the sale reducing competition within the UK based food delivery sector, the authority gave the companies a week to provide sufficient evidence that the sale would boost competition, rather than hinder it.
The CMA now believes that its concerns about limitations for other competitors were justified and will commence an investigation in the New Year.
CMA Statement
In a statement released by the authority, representatives said they had found just concerns that the sale of a significant share in Deliveroo to the e-commerce giant Amazon would not only hurt competition in the market, but could also hurt customers, restaurants and grocers across the UK.
The £440m deal, which has been controversial since it was first made public in the summer of 2019, could now face up to six months of intense scrutiny from the CMA, who may rule that the deal would do more damage than good.
The primary reason the CMA have scrutinized this deal so closely is perhaps because they’re acutely aware that Amazon could launch their own delivery service in the UK market, rather than buy a share in an already established company.
This would stimulate competition within the market and could ultimately generate lower prices for better quality goods for consumers.
Latest Amazon Attempt On Food Market
Amazon has tried this venture once before with Prime Restaurants but failed to make a splash within the UK’s market. Currently, Deliveroo sits as one of the market leaders, alongside Just Eat and Uber Eats.
It operates in most of the major cities across the UK and several in Europe and is looking to continue expanding, should the deal with Amazon be successful.
However, Deliveroo may not be on the market for very long. Uber Eats have reportedly been in talks with top executives at Deliveroo to buy the company outright, something Amazon attempted to do just a few years ago.