UK Regulators Press Pause on Amazon’s $575M Investment in Deliveroo
CMA stifles Deliveroo’s plans just weeks after its sixth anniversary.
One month after Amazon announced a $575 million investment in Deliveroo, a London-based food delivery service, regulators in the United Kingdom press pause on the transaction, forcing the companies to stop any forward progress. The Competition and Markets Authority (CMA) released an initial enforcement order effective June 24 stating it has “reasonable grounds for suspecting” that Amazon.com and Deliveroo will cease to be distinct entities if the transaction goes through. If the deal is completed, Amazon would be a minority owner of Deliveroo.
The CMA has asked the parties to stop any integration of the companies as the CMA investigates further. In addition, neither company can transfer ownership to or from Amazon or Deliveroo, or impair the ability of Deliveroo or Amazon to compete independently in the markets impacted by the transaction. According to CNN, this means the two companies cannot integrate technology nor make any staffing changes or employee transfers related to the deal. In a July 2 derogation letter, the CMA granted some concessions, including allowing Deliveroo business outside the UK to operate unencumbered since they are not impacted by Amazon’s investment.
An Amazon spokesperson defended the ecommerce giant’s intentions.
“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,” said Tom Parker, a spokesman for Amazon, in a statement.
Deliveroo announced Amazon’s investment in a May 17 news release, stating they would use the funding to grow its engineering team in London, expand delivery, continue innovating in the food sector, including through its delivery-only Editions super kitchens, and expand product delivery for a personalized customer experience, additional support for restaurants and new tools to offer riders more flexible, well-paid work opportunities.
“This new investment will help Deliveroo to grow and to offer customers even more choice, tailored to their personal tastes, offer restaurants greater opportunities to grow and expand their businesses, and to create more flexible, well-paid work for riders,” said Will Shu, co-founder and CEO of Deliveroo. “Amazon has been an inspiration to me personally and to the company, and we look forward to working with such a customer-obsessed organization.”
On June 6, Deliveroo celebrated its sixth birthday in the UK with some exciting announcements:
- The company, which works with 20,000 partners in the UK, is launching in eight new towns by the end of July and 40 additional towns by year end.
- Deliveroo is preparing to launch “click and collect” with thousands of its restaurant partners this year. This will allow customers to order their food and pick it up themselves, using the Deliveroo platform.
- Yoobi Sushi is the first British restaurant that will launch internationally via Deliveroo.
- Restaurants and UK takeaways can grow revenue by up to 30% by working with Deliveroo.
"Six years ago, I never thought we'd get the chance to work with the likes of Gregg's or Pizza Express. Now we're in 14 countries across the globe, boast one of Britain's biggest tech teams and are supporting some of the UK's best takeaways and restaurants,” said Shu.
“As we look to the future, we want to continue to provide our amazing restaurant partners across the UK with incremental revenue, continue to offer our riders with great flexible and well-paid work, and of course give our customers the very best food delivery service around,” Shu added.
Deliveroo was founded in 2013 by Shu and Greg Orlowski. Deliveroo partners with more than 80,000 restaurants and takeaways and with 60,000 riders to provide food delivery service in 500 cities and towns across 14 markets. Deliveroo operates in the United Kingdom, Australia, Belgium, France, Germany, Hong Kong, Italy, Ireland, Netherlands, Singapore, Spain, Taiwan, United Arab Emirates and Kuwait. Deliveroo has about 2,500 employees around the world.
Customers can order meal delivery online or through Deliveroo’s iOS or Android apps. They input their post code to find restaurants that delivery in their area, place their order and a Deliveroo rider will deliver their meal. Deliveroo does not accept cash, only cards, and tipping is optional with 100% of tips going to riders.
For frequent takeaway customers who want to save on delivery fees, the company offers Deliveroo Plus, a membership plan. Customers pay a flat monthly fee for unlimited, free delivery. They also receive exclusive restaurant offers not available to other customers. Deliveroo Plus is designed for use by individuals, not businesses or for sharing with other customers.
It is not clear how a temporary pause on Amazon’s investment in Deliveroo could potentially impact the company’s plans for expansion. Amazon and Deliveroo knew there would be regulatory approvals to secure before their agreement was a done deal. Hopefully, Deliveroo wasn’t banking on Amazon’s cash for its current wave of expansion. If so, Deliveroo will have to dial back quickly as it works with the CMA to satisfy its concerns.