E-Commerce Giant Amazon's Deal with Digital Delivery Service Deliveroo is On Hold

Recently we discussed Amazon’s $575 million investment in UK based food delivery startup Deliveroo,  how Amazon has struggled in the food service delivery arena and how Amazon Restaurants was shutting down. Speculation by industry watchers was rife that Amazon was going to use Deliveroo to gain a presence and foothold in the digital delivery market.
As of this week, UK regulators have ordered Amazon to suspend investing in Deliveroo while they consider whether the e-commerce giant’s proposed deal amounts to a takeover. The Competition and Markets Authority (CMA) has said that it “reasonable grounds” to suspect that the two companies may cease to be distinct if the deal progresses.  Currently, it’s being discussed by British authorities if the situation warrants launching a full investigation. Meanwhile, the companies have been ordered to stop any integration of technology and services. No staffing changes or employee transfers are allowed either.
In a statement Friday, Amazon defended its investment, saying that the deal will enable Deliveroo to expand its services, benefiting consumers through increased choice and creating new jobs as more restaurants gain access to the service. A Deliveroo spokesman said that both companies are working together to obtain necessary regulatory approvals.
While reviews into mergers by the CMA are fairly common, it’s unusual for the watchdog to monitor acquisitions of minority stakes. Since its founding in 2012, third party delivery platform Deliveroo has raised $1.5 billion in venture capital. Chief Executive Officer Will Shu has stated that 33% of the UK currently uses its mobile app and that they hope to increase that number to reach half of the U.K.’s population of 65 million by the end of the year.
While Deliveroo currently isn’t available in the US, long term, industry watchers have speculated that with the help of Amazon, it would launch in America. The US is simply too big a food service delivery market for Amazon too ignore. For the moment, in Europe Deliveroo competitors GrubHub, Delivery Hero and Uber Eats, have gotten reprieve. However, it’s unlikely Amazon’s deal with Deliveroo will be completely canceled outright.
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