Amazon to rescue Deliveroo? Food delivery firm risks collapse without investment
Amazon’s investment in Deliveroo has been given a provisional green light by the UK’s competition watchdog, amid fears the app delivery firm could collapse.
The Competition and Markets Authority (CMA) has concluded that the ingoing Coronavirus pandemic was ‘having a significant negative impact’ on the delivery company’s business.
The CMA had previously halted the deal, saying that it believed consumers would have less choice as a result of the tie up and that it would discourage Amazon from re-entering the online restaurant food market and further developing its presence within the online convenience grocery delivery market in the UK.
The ongoing lockdown in the UK had resulted in the closure of a large number of the key restaurants available through Deliveroo, and a significant decline in revenues. While Deliveroo has sought to expand its supply of convenience groceries during the crisis, these sales are limited and have not made up for losses in its restaurants business.
As a result, Deliveroo recently informed the CMA that the impact of the coronavirus pandemic on its business meant that it would fail financially and exit the market without the Amazon investment.
“These wholly unprecedented circumstances have meant reassessing the focus of this investigation, reacting quickly to the impact of the coronavirus and deciding what it would mean for the businesses involved in this transaction and, in turn, for customers,” says Stuart McIntosh, chair of the CMA’s independent inquiry group.
“Without additional investment, which we currently think is only realistically available from Amazon, it’s clear that Deliveroo would not be able to meet its financial commitments and would have to exit the market.
“This could mean that some customers are cut off from online food delivery altogether, with others facing higher prices or a reduction in service quality.
“Faced with that stark outcome, we feel the best course of action is to provisionally clear Amazon’s investment in Deliveroo.” The CMA is now asking for views on its provisional findings by 11 May 2020 and will then assess all evidence provided before making a final decision.
The deadline for its final report is 11 June.