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M&A

Amazon’s proposed stake in Deliveroo cleared by CMA

The Competition and Markets Authority (CMA) has provisionally cleared Amazon’s 16% investment in Deliveroo for the second time, on the basis that it is not likely to result in a “substantial lessening of competition”.

In its initial provisional findings, published in April, the CMA provisionally cleared Amazon’s investment on the basis that Deliveroo would have exited the market without it – a result of negative impact of the coronavirus pandemic on its business.

However the CMA was concerned that the £440m deal would prevent Amazon from launching a rival company, which would increase competition and potentially lower prices for consumers.

Yet at the time the CMA considered that the imminent exit of Deliveroo would have been “worse for competition than allowing the Amazon investment to proceed”.

Since its initial provisional findings, the CMA has continued to gather and analyse evidence. A detailed assessment of Deliveroo’s finances shows “considerable improvement” in its financial position, reflecting, in part, changes which were not foreseeable during the early stages of the pandemic.

Consequently, the CMA also provisionally concluded that Deliveroo would no longer be likely to exit the market in the absence of this transaction. Given this, the CMA instead required to base its provisional decision specifically on the impact of the transaction on competition between the two businesses.

The watchdog stressed that its decision reflects the 16% shareholding that Amazon is acquiring at the present time, and said if Amazon were to acquire a greater level of control over Deliveroo, in particular by making a full acquisition of the company, this could trigger a further investigation.

Stuart McIntosh, inquiry chair, said: “The impact of the coronavirus pandemic, while initially extremely challenging, has not been as severe for Deliveroo as was anticipated when we reached our initial provisional findings in April.

“The updated evidence no longer shows that Deliveroo would exit the market in the absence of this transaction. This has required us to re-evaluate our initial provisional findings.”

He added: “We’ve carefully considered how this investment could affect competition between the two businesses in future.

“Looking closely at the size of the shareholding and how it will affect Amazon’s incentives, as well as the competition that the businesses will continue to face in food delivery and convenience groceries, we’ve found that the investment should not have a negative impact on customers.”

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