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Amazon deal with Deliveroo could lead to higher prices, says competition watchdog

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Written by: Paloma Kubiak
11/12/2019
Amazon’s substantial investment in delivery firm Deliveroo could lead to higher prices for customers, restaurants and grocers, the UK's competition watchdog has said.

The Competition and Markets Authority (CMA) said it may open an in-depth investigation after Amazon led a £450m funding round in rival food delivery group Deliveroo earlier this year.

The investment by Amazon would give it a minority shareholding in Deliveroo and would allow it to participate in the management of the company.

However, the CMA is now looking at how Amazon’s influence over Deliveroo would impact competition in the market, particularly as there are just three large suppliers in the area, including Just Eat and Uber Eats.

It said that the investment in its current form could harm competition as it could discourage Amazon from re-entering the online restaurant food delivery service. Last year, Amazon closed down its food delivery service – Amazon Restaurants – but if it were to re-enter the market, this would increase competition.

The CMA is also concerned that the deal could damage competition in online grocery delivery, where Amazon and Deliveroo are market leaders.

Andrea Gomes da Silva, CMA executive director, said: “Millions of people in the UK use online food platforms for takeaways, and more than ever are making use of similar services for the same-day delivery of groceries.

“There are relatively few players in these markets, so we’re concerned that Amazon having this kind of influence over Deliveroo could dampen the emerging competition between the two businesses.

“If the deal were to proceed in its current form, there’s a real risk that it could leave customers, restaurants and grocers facing higher prices and lower quality services as these markets develop. This is because the significant competition which could otherwise exist between Amazon and Deliveroo would be reduced.”

The companies have five days to answer the CMA’s concerns. The CMA will then have five days to accept the offer or look to start an in-depth investigation.

An Amazon spokesperson, said: “A homegrown UK business like Deliveroo should have broad access to investors and supporters. Amazon believes that this investment funding will lead to more pro-consumer innovation by helping Deliveroo continue to build its world-class service and remain competitive in the restaurant food delivery space by creating more highly-skilled jobs, innovating in the restaurant food delivery sector, and developing new products for customers.”

A Deliveroo spokesperson, said: “Deliveroo has been working closely with the CMA and will continue to do so. We are confident that we will persuade the CMA of the facts that this minority investment will add to competition, helping restaurants to grow their businesses, creating more work for riders, and increasing choice for customers. Deliveroo is a British company operating right across the country and this investment will be particularly beneficial to the UK economy.”

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