British regulators have given the initial green light for Amazon’s investment in Deliveroo, the London online food delivery company that said it could go bankrupt without an infusion of cash due to COVID-19.
On Friday (April 17), the Competition and Markets Authority (CMA), the U.K. agency responsible for protecting competition, approved the deal, which will require more study. Its final decision is expected in June. Neither company would reveal the value of the deal.
“In recent weeks, it has become clear that the coronavirus pandemic is having a significant negative impact on Deliveroo’s business,” CMA said in a statement. “Deliveroo recently informed the CMA that the impact of the coronavirus pandemic on its business meant that it would fail financially and exit the market without the Amazon investment.”
The CMA investigation concluded that Deliveroo is a successful company whose growth has secured a large share of the U.K.’s online restaurant market.
“As a developing business, Deliveroo is, however, particularly reliant on continued investment to be able to support its operations,” the regulator wrote.
Stuart McIntosh, chair of the CMA’s independent inquiry group, said the unprecedented circumstances brought about by the coronavirus have meant the need to reassess the investigation, quickly react to the impact of the virus and decide what it would mean for the businesses in this transaction and, in turn, for their customers.
The lockdown in the U.K. has shuttered many restaurants served by Deliveroo, resulting in a giant dip in revenues.
“While Deliveroo has sought to expand its supply of convenience groceries during the crisis, these sales are limited and have not made up for losses in its restaurants business,” CMA said. “The CMA currently considers that the imminent exit of Deliveroo would be worse for competition than allowing the Amazon investment to proceed, and has therefore provisionally found that the deal should be cleared.”
Codec, a London trade group for startups, told The Guardian that the CMA approval was welcome news.
“But we should never have been in this position to begin with,” said Dom Hallas, Coadec’s executive director. “Coronavirus or not, venture-backed tech businesses require investment as they improve our service for customers, enable us to develop new innovations and offer people even greater choice.”
Deliveroo operates in more than 500 towns and cities across Australia, Belgium, France, Hong Kong, Italy, Ireland, Netherlands, Singapore, Spain, United Arab Emirates, Kuwait and the United Kingdom, according to the company’s website.