Amazon is funding a major expansion of Deliveroo, a London based food delivery service. In its latest funding round, Deliveroo secured $575 million. Although the full amount wasn’t disclosed, Amazon is the largest investor in the project. As a result, UK regulators suspect the deal amounts to takeover and have ordered Amazon and the food delivery company Deliveroo to pause any integration efforts pending an investigation into potential breaches of competition rules.
The Competition and Markets Authority said that it has “reasonable grounds” to suspect that the companies may cease to be distinct if the deal moves forward and as such has directed the companies to pause any integration of technology and services pending an investigation. The means Amazon and Deliveroo must keep their businesses and brands separate. It bars them from making substantive changes to their management teams and internal structures, integrating their technology, sharing trade secrets, or negotiating on behalf of each other.
So, what exactly is wrong with a merger or considerable investment in a company? Competition rules in the UK and Europe are quite strict and competition bodies are in place to oversee investments and mergers to ensure businesses are competing fairly. For those who try to outsmart the authorities to achieve a dominant market position they are met with some hefty fines. Google has been slapped on the wrist more than once with significant financial charges over their market share power, the way they collect and use personal data, and whether their competition, or lack thereof, is producing good outcomes for consumers. Other digital players such as Qualcomm, Microsoft, Facebook have all come under the spotlight of the competition authorities at one stage or another.
But, I thought Amazon Restaurants were closed for business? Yes, the company failed to gain traction on competitors in the food delivery space and shut down Amazon Restaurants in London last November followed by discontinuing its Amazon Restaurant service in the US this past month. The service which was originally founded in 2015 to offer consumers delivery from nearby restaurants grew to be available in over 20 markets prior to its upcoming demise. As Fortune put it, “It’s a rare black eye for a company that has dominated its competitors in nearly every arena it enters.” However, this latest hoped investment move by might be a cloak for bigger plans. If they do succeed in gaining a majority stake in Deliveroo, perhaps even buy them out right, they would have the opportunity to bring this new venture to the US in the hopes of finding greater success in the food delivery market. It has also been rumored that Amazon is potentially trying to tie-up a partnership with Deliveroo’s rival food delivery service Just Eat (JE.) – even after the regulator has ordered a halt in Amazon’s stake in Deliveroo! Something is definitely at play here.
Deliveroo competes in Britain with Just Eat and with Uber Eats which is also present in North America, South America, Europe, Asia and Africa. It also competes in Europe with Takeaway.com and Delivery Hero. In the US, four companies dominate the food delivery service industry: Uber, Grubhub, Postmates and Doordash make up 93 percent of the market share. With Amazon’s recent (although currently on pause) investment in Deliveroo, and possible others, suggests that Amazon is interested in returning to the market with a new offering, and with a more significant presence.
So, is this a sign of things to come in the US? Well, if Amazon has hopes of cornering the delivery market in US and/or become a dominant player by “investing” in a well-established food delivery company, or should that be – companies, it definitely has some challenges to overcome before they reach the shores of home namely getting past The UK Competition and Markets Authority and then possibly the EU Competition Authority. Despite these hurdles, Amazon is signally that it wants a space at the food delivery table and is keeping its competition with Uber Eats and Grubhub on the heat.