The Competition and Markets Authority (CMA) has warned that Amazon’s attempted acquisition of Deliveroo could leave convenience stores paying delivery firms higher prices for worse service.

In newly released findings from phase one of its investigation, the regulator blocked the merger without the companies first resolving two points of particular concern or undergoing a full, in-depth investigation.

Andrea Gomes da Silva, CMA executive director explained: “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. This is because the significant competition which could otherwise exist between Amazon and Deliveroo would be reduced.”

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The CMA claimed that the acquisition would ‘discourage’ Amazon from re-launching its rival delivery service, which folded in 2018, therefore reducing competition. It also claimed that as Amazon and Deliveroo already have “market-leading positions” in the “emerging market for online convenience grocery delivery” so a merging of these firms would present less choice for customers and retailers.

The regulator’s decision explains: “There are only a small number of suppliers offering the ‘ultrafast’ delivery of groceries in the UK. Although several supermarkets and online food platforms are experimenting with convenience grocery delivery, Amazon and Deliveroo, which both have UK-wide delivery networks to support their operations, are 2 of the strongest players in this market at present.

While there are some differences in the services that Amazon and Deliveroo offer to customers, the CMA found that competition between them could increase in future as the market develops.”

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Amazon is attempting to acquire a significant minority shareholding in Deliveroo which would give it rights in Deliveroo’s decision making. The regulator also considered whether Deliveroo data, such as customer orders from convenience stores and convenience store data, was likely to be passed to Amazon.

The CMA concluded that this was not in the interests of both parties unless Amazon’s shareholding in Deliveroo becomes a majority holding in the future.

The CMA gave a deadline of 18 December 2019 to present answers to the CMA’s concerns. If this is not received or is deemed insufficient by the regulator, a full six-month phase two investigation will begin.

The news follows recent action by symbol groups to encourage stores to launch delivery services for their customers. In the last two months Costcutter signed a preferential deal with Uber Eats, Nisa and Deliveroo teamed up to offer partnered stores discounted commissions and RN revealed that Booker is working with Zeus Labs to build delivery and ordering apps for Premier Stores.

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