July 10, 2020
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UK’s CMA clears Amazon’s 16% Deliveroo stake, says COVID-19 impact less severe than initially thought – TechCrunch

UK’s CMA clears Amazon’s 16% Deliveroo stake, says COVID-19 impact less severe than initially thought – TechCrunch

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More than a year after Amazon announced that it would invest $ 575 million in a UK-based product delivery startup, Deliveroo, the country’s competition regulator, CMA finally announced that it has pre-cleaned deal. Investments that give Amazon a 16% stake in Deliveroo are now open to review and receive stakeholder feedback again, until July 10, before announcing their final decision on August 6.

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“This decision reflects the 16% stake that Amazon is currently acquiring,” notes CMA. “If Amazon acquired a higher level of control over Deliveroo, in particular by making a full acquisition of the company, this could trigger further investigation by the CMA.”

The deal came about two months after the CMA initially indicated that it would give a nod to the investment, although – in a strange turn – the reasons for approving this changed at that time.

Back in April, the CMA said that the impact of COVID-19 would mean that without cash, Amazon Deliveroo would go bankrupt. Now, however, he changed his tune, saying that the impact was not as strong as originally intended on the startup’s business. Despite this, Stuart Mackintosh, who led the CMA investigation into the deal, noted other developments in a wider competitive environment – remember that JustEat and Takeaway.com now merged and will represent a strong competition between Deliveroo and Uber Eats, another major player, which means that this deal will not negatively affect the food delivery market as a whole, including the competition between Deliveroo and Amazon themselves.

“The impact of the coronavirus pandemic, although it was initially extremely complex, was not as serious for Deliveroo as expected when we reached our preliminary preliminary results in April,” he said. “The updated data no longer shows that Deliveroo will leave the market in the absence of this deal. This required us to reassess our initial preliminary results.

“We carefully examined how these investments can affect competition between the two companies in the future. Having carefully examined the size of the block of shares and how this will affect Amazon’s incentives, as well as the competition that businesses will continue to face in delivering groceries and convenience products, we found that investments should not negatively impact customers. ”

The development completes almost a year of research by the Office of Competition and Markets, first spurred Labor MP Tom Watsonwho asked CMA to either restrict the deal or block it directly, not only because of the impact it will have on the competitive environment, but also because of the data flow that Amazon will accumulate as a result of the transaction.

“This is called supervisory capitalism,” he said during Amazon’s approach to how he uses customer data to create and sell products. “This is a digital dystopia, and I will write to the Competition and Markets Authority demanding that they begin an investigation into these” investments. “

CMA then spent months studying transaction numbers – which would be Amazon’s only attempt to deliver ready-made food to the UK on its own after it stopped its own efforts, Amazon Restaurants, in 2018 (around the time he first began studying Deliveroo). But this investigation has taken a few more turns over the past few months.

The first turn occurred in the form of COVID-19, which led to a significant halt in the economy. While many see e-commerce and the food delivery subsection as two areas that can thrive – because people were largely attached to their homes and restaurants were closed – it turned out that in fact, the business seemed to drag out because people decided to reduce the impact of for contactless supplies leading to large decrease in demand,

This led CMA to determine that “Deliveroo would leave the market without [the Amazon investment]due to the negative impact of the coronavirus pandemic (COVID-19) on his business. The CMA felt that Deliveroo’s early exit would have been worse for competition than letting Amazon’s investment continue. ”

However, Deliveroo made cuts (including 15% of staff) and upon closer inspection: “Deliveroo’s finances show a significant improvement in its financial situation, partially reflecting changes that were not predictable in the early stages of the pandemic,” said CMA. This means that no deal with Amazon would kill the company, so attention turned to competition between the two companies as a result of investments.

It says that 3,000 consumers were interviewed, a presentation from third parties was read, and the internal documents of the two companies were studied, without going into details of what kind of competition could ever exist in the future between the two companies, especially considering that Amazon already refused food. delivery to the UK – it was decided that the deal would not stop her, based on Deliveroo’s interest in food delivery in the restaurant and Amazon’s existing food delivery business, which in the UK currently includes both Amazon Fresh and a small amount of Whole Foods sales but could potentially expand into more.

Not all.

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