Amazon vs. UK: British Regulators Could Suppress E-Commerce Giant's Appetite For Deliveroo

British regulators said Wednesday they would take a close look at Amazon’s investment in food delivery startup Deliveroo to determine whether it could harm competition in the food delivery sector – both takeout and fresh groceries. Amazon and Deliveroo have five days to allay concerns.

“We assume a phase-two investigation will now follow, opening a further six-month window of uncertainty for Deliveroo,” Giles Thorne, equity analyst at Jefferies, told the Financial Times.

Amazon said in May it was leading a $575 million funding round in the startup following the closure of its own Amazon Restaurants. The investment would give Amazon a 16% stake in Deliveroo, the British rival to UberEats that was founded in 2013.

Deliveroo has been working with the Competition and Markets Authority to convince regulators Amazon’s investment will inject competition into the sector and create more business for restaurants and work opportunities, but the authority said Wednesday the deal could discourage Amazon from restarting its own delivery service and damage competition with UberEats and Just Eat PLC, the other two players in the sector.

The authority noted Amazon, which entered the fresh grocery delivery industry in the U.K. three years ago with its Amazon Fresh, Pantry and Amazon Grocery, had $14.5 billion in sales in the U.K. last year and Deliveroo, which operates in more than 100 towns, saw its sales grow to $659 million.

Bloomberg reported Deliveroo needs Amazon’s cash and soon. The company burned through $263 million in 2018. Delaying the investment also could damage Deliveroo’s ability to compete against UberEats and Just Eat PLC.

Regulators likely are looking for assurances from Amazon that it won’t try to buy Deliveroo outright for five years.

“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,” said Andrea Gomes da Silva, executive director of the authority.

“A homegrown U.K. business like Deliveroo should have broad access to investors and supporters,” an Amazon spokesperson told the Times. “Amazon believes that this investment funding will lead to more pro-consumer innovation by helping Deliveroo continue to . . . 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.”

Analysts see the authority’s move as part of an overall effort to reign in big tech companies.

“The regulator clearly feels it needs to show they leave no stone unturned when it comes to big tech,” one competition lawyer close to the deal told the Times.