Coverage: UK watchdog puts Amazon’s acquisition of Deliveroo on hold

The UK’s Competition and Markets Authority has paused the takeover of food delivery startup Deliveroo by Amazon on competition concerns.

Kate Holton and James Davey reported the news for Reuters:

Britain’s competition regulator has stepped in to pause Amazon’s (AMZN.O) investment in online food delivery group Deliveroo while it considers launching a full investigation.

Amazon led a $575 million fundraising in Deliveroo in May, making what the two parties called “a minority investment” and going up against Uber Eats (UBER.N) in the global race to dominate the market for takeaway meal deliveries.

On Friday, Britain’s Competition and Markets Authority (CMA) said it had served an initial enforcement order (IEO) on the two companies, signaling possible concerns about the transaction.

The order requires companies to operate independently for now, meaning they cannot press ahead with a tie-up or operate as a merged entity. It gives the regulator time to decide if it will launch a formal “Phase 1” probe.

CNBC’s Elizabeth Schulze quoted a statement by Amazon saying:

“We believe this minority investment will enable Deliveroo to expand its services, benefiting consumers through increased choice and creating new jobs as more restaurants gain access to the service,” an Amazon spokesperson said in a statement Friday.

A Deliveroo spokesperson said in a statement the companies had been working closely with regulators to obtain required approvals.

“There are a number of major companies within the restaurant food delivery sector and this investment will enable Deliveroo to expand, innovate and, we believe, will enhance competition. This investment will help create jobs, help restaurants to grow their businesses and will improve choice for consumers,” the Deliveroo spokesperson said.

The Daily Mail’s Natasha Bernal noted there has been criticism of the deal even before the probe:

Amazon led a $575m fundraising in Deliveroo in May in a move to regain a foothold in the takeaway food delivery market and position itself as a major competitor to Uber Eats and Just Eat. 

Jeff Bezos’ e-commerce empire was the lead investor in the funding round, which took the total amount of cash raised by Deliveroo to $1.5bn.

Critics of the deal, including deputy Labour leader Tom Watson, called for a probe from competition authorities into Amazon’s move to get its “mighty claws” on more consumer data. 

Deliveroo has been under pressure to compete with major rival Uber Eats, which secured exclusive deal with big brands such as McDonald’s and Starbucks.Deliveroo recently claimed that it had lured 70 restaurants from Uber Eats since the start of this year, hitting back on claims that it was losing market share.