The e-commerce giant Amazon has been informed by the Competition and Markets Authority (CMA) that it may face an investigation into its purchase of a majority stake in the UK-based food delivery service, Deliveroo.
Amazon revealed their plans to acquire Deliveroo and add it to their family of subsidiaries in early 2019, but the CMA has warned that the deal could potentially increase prices within the food delivery market.
The CMA has given Amazon and Deliveroo five days to come up with a solution to their concerns or face an official investigation that may result in the £437m deal being halted.
Negative Effect on the Markets
During their examination of the purchase, the CMA representatives expressed their concerns that Amazon’s influence in the market could have a negative impact on the markets in which Deliveroo operates.
They were worried that Amazon’s involvement could lead to an increase in prices for customers and restaurants, and a decline in quality standards over time.
Furthermore, as there are not many players in the food delivery market, particularly in the UK, there are concerns that Deliveroo would become too dominant if the deal goes ahead.
The CMA also suggested that Amazon’s investment could prevent them from launching their own food delivery service, which would encourage competition within the market.
Although Amazon briefly had their own delivery service, Amazon Restaurants, which was only available in a few cities and exclusively for Prime subscribers.
Confident that the Deal can Proceed
Representatives from both Amazon and Deliveroo have expressed their confidence in the deal and believe they can persuade the CMA not to pursue a formal investigation within the given time frame.
They also believe that the deal could increase competition within the market, particularly for major competitors Uber Eats and Just Eat.
Deliveroo currently operates in eleven different markets outside of the UK, including Europe, Hong Kong, and Australia.