LONDON (Reuters) - Amazon's purchase of a stake in Deliveroo has been provisionally cleared by Britain's competition regulator in view of a potentially fatal deterioration in the online food delivery group's finances because of the coronavirus pandemic.
Amazon (O:AMZN) led a $575 million fundraising in Deliveroo in May, making what the two parties called "a minority investment" and pitching it against Uber Eats (N:UBER) and Takeaway.com (AS:TKWY) in the global race to dominate the market for takeaway meal deliveries.
The Competition and Markets Authority (CMA) launched a detailed investigation in December, saying the deal could damage competition by discouraging Amazon from re-entering the online restaurant food market and further developing its presence within the online convenience grocery delivery market.
However, the CMA said on Friday it had become clear that the health emergency was having a significant negative impact on Deliveroo's revenues, given the closure of a large number of the restaurants available through its platform during the lockdown.
The regulator said Deliveroo informed it the impact of the pandemic on its business meant it would fail financially and exit the market without the Amazon investment.
"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," Stuart McIntosh, chair of the CMA’s independent inquiry group, said.
He said Deliveroo's demise could leave some customers cut off from online food delivery, 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," he said.
Deliveroo said it was delighted with the CMA's decision.
"This investment will help us to overcome immediate and long-term challenges," a spokeswoman said.
Amazon had no immediate comment.
The CMA is seeking views on its provisional findings by May 11. The deadline for its final report is June 11.