The UK’s and Germany’s national competition authorities are investigating Amazon’s minority investment into restaurant delivery service Deliveroo.
The UK’s Competition and Markets Authority served an initial enforcement order on the companies on 24 June. Germany’s Federal Cartel Office began proceedings on 12 June.
In May, Amazon was the lead investor in a £457 million financing round into Deliveroo.
London-based Deliveroo, which was founded in 2013 by an American businessman but does not operate in the US, delivers food from restaurants in 14 countries, including France, Singapore and Australia. It has been valued at £4 billion.
Last month Amazon announced that it was going to shut down its own food delivery service, Amazon Restaurants, in the US. The service was launched in Seattle in 2015 and was available in over 20 major US cities. Amazon Restaurants was also available in London from September 2016, but was closed in November last year.
Of the 26 reviews of minority investments since 2004 that are listed on the CMA’s website, the agency blocked only one: RyanAir’s attempt to buy a stake in Irish airline rival Aer Lingus.
The CMA in 2017 unconditionally cleared JustEat's purchase of Hungryhouse after a Phase II review, finding that the market for ordering food online is “dynamic and evolving”.
The initial enforcement order requires Amazon and Deliveroo to keep business, sales and brand identity separate. Both businesses are also barred from making any senior management changes and trading confidential business information without obtaining written permission from the CMA beforehand.
The CMA issued new guidance earlier this week, which provided detail on what merging companies should do to be compliant, following recent failures by some companies to comply with interim measures.
The CMA has yet to set any public deadlines for the merger inquiry and has not referred the deals to the European Commission, despite Amazon and Deliveroo both operating in several EU member states.
A spokesperson for Deliveroo said that the two companies have been working together to gain regulatory approvals.
“This investment will enable Deliveroo to expand, innovate and, we believe, will enhance competition,” the spokesperson said. “This investment will help create jobs, help restaurants to grow their businesses and will improve choice for consumers.”
A spokesperson for Amazon added that the minority investment would allow Deliveroo to “expand its services, benefiting consumers through increased choice and creating new jobs as more restaurants gain access to the service.”
Amazon and Deliveroo declined to comment on how many competition authorities would have to be notified of the deal.
The European Commission is currently examining the interdependencies between Amazon marketplace and Amazon’s online retail operations, as well as Amazon’s use of data.
In April, Italy’s competition authority began a preliminary investigation into Amazon’s possible abuse of dominance position, due to the self-preferencing of Amazon’s own logistics services.
Sarah Long, a partner at Euclid Law in London, said that this case is significant because it is the first time the CMA has opened an investigation into Amazon, whose business practices are under the “regulatory spotlight across the EU”.
The UK authority “has been notable for its absence in scrutinising Amazon’s practices”, Long said, and it is interesting that the authority has now chosen to do so in the context of a minority investment.
“The CMA has intervened, and issued strict [initial enforcement orders] in a number of non-notified mergers in the past – including the ICE/Trayport merger, which was ultimately prohibited,” Long said.
She believes it is too early to know whether the CMA will find any substantive competition concerns in the Amazon and Deliveroo merger.
But “the fact the CMA has chosen to open an investigation at all demonstrates that the appetite for regulatory scrutiny of Amazon shows no sign of abating,” Long said. It signals a “more proactive engagement by the CMA within digital mergers, a step which is likely to be welcomed by many.”
Counsel to Deliveroo
Proskauer Rose LLP (represented Deliveroo on its Series G funding round)