Following an in-depth investigation, the CMA has cleared Amazon’s 16% investment in Deliveroo after finding that it will not substantially lessen competition.
The Competition and Markets Authority (CMA) completed an initial ‘Phase 1’ investigation in December last year. At that point the CMA concluded that there was a ‘realistic prospect’ that the transaction could harm competition by, for example, discouraging Amazon from re-entering the online restaurant food market or further developing its presence in the online convenience grocery delivery market in the UK. The CMA therefore referred the deal for an in-depth ‘Phase 2’ investigation to assess more thoroughly the potential competition concerns.
In the course of a Phase 2 investigation, the CMA typically has to determine whether, on the ‘balance of probabilities’, a transaction would lead to a substantial lessening of competition. However, in this case, Deliveroo argued that the impact of the coronavirus (COVID-19) pandemic on its business meant that it would fail financially and exit the market without the Amazon investment. Given the seriousness and urgency of Deliveroo’s financial situation the CMA concluded that Deliveroo met the criteria for a ‘failing firm’ and that its exit from the market would have been worse for competition and customers than allowing the investment to go ahead. The deal was provisionally cleared on that basis.
The CMA continued to monitor the situation. After reviewing Deliveroo’s finances from April 2020 onwards, it became apparent that the restaurant food delivery market had recovered much more sharply than had been expected and that the restaurant ‘mix’ had also shifted towards smaller, independent restaurants and away from large fast food chains, several of which closed or stopped offering home delivery. Both factors contributed to a rapid and significant turnaround in Deliveroo’s financial position. Given this change in circumstances, the CMA concluded that Deliveroo could no longer be considered a failing firm and that it would be necessary and appropriate to complete the CMA’s substantive assessment of whether the transaction would lead to a substantial lessening of competition.
The CMA’s final decision to clear the deal on competition grounds is the culmination of extensive analysis of internal documents from Amazon and Deliveroo, a survey of more than 3,000 consumers, and extensive submissions from interested third parties.
