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UK U-turn allows Amazon to invest in Deliveroo

Getty Images Deliveroo driver wearing a mask in Cardiff, WalesGetty Images

The UK's competition watchdog has said it no longer has concerns about Amazon's plan to invest in food delivery service Deliveroo.

Internet giant Amazon announced plans to buy 16% of Deliveroo in May 2019.

The Competition and Markets Authority (CMA) then began probing the deal and threatened an in-depth investigation in December.

However, in April the CMA said it would "provisionally" approve the deal to prevent Deliveroo from collapsing.

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

But the watchdog now appears to have changed its mind.

Stuart McIntosh, chair of the inquiry at the CMA, said: "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.

"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."

Getty Images A Deliveroo driver collecting food from a re-opened Burger King restaurant in LondonGetty Images
Several restaurant and fast food chains in the UK have recently reopened just for takeaway deliveries and are hugely dependent on delivery app firms

The CMA said it was waiting for Deliveroo's rivals Just Eat Takeaway and Domino's to make their final submissions, and will not release its final verdict until 6 August.

Just Eat Takeaway - which was created in April when the CMA cleared the merger between Just Eat and Dutch food delivery firm Takeaway.com - is in a strong position.

The £6.2bn deal makes the new food delivery group the largest in Europe.

And earlier this month, Just Eat Takeaway announced it had agreed to purchase US rival Grubhub in a deal worth £5.8bn. If the takeover is completed it will create the world's biggest food delivery company outside China.

A Deliveroo spokeswoman said Amazon's investment was "good news for UK customers and restaurants, and for the British economy".

"As we have argued for the past year, since the beginning of the CMA's investigation, the minority investment will enable British born, British bred Deliveroo to compete against well-capitalised overseas rivals and continue to innovate for customers, riders and restaurants."