The CMA (Competition and Markets Authority) have begun enquiries into the proposed merger of Amazon (NASDAQ: AMZN) and Deliveroo.
The UK based competition regulator stated that investigations have been opened in the acquisition, amidst worries that this merger would stifle competition.
In May, Amazon claimed its interest in Deliveroo with a $575 million investment at a Deliveroo fundraiser into parent company Roofoods Ltd. This was a strange move following the closure of Amazons’ food chain, Amazon Restaurants last year.
Deliveroo also faced donations from T Rowe Price (NASDAQ: TROW), Fidelity (NYSE: FIS) and Greenoaks Capital.
The news comes following speculation that the investment by Amazon was a foundation to launch a merger campaign.
Analysts have questioned whether this move was driven by the employment nature of Deliveroo drivers.
As Deliveroo drivers are effectively self-employed, this would allow the ability to deliver Amazon parcels along with food deliveries.
Amazon said in a statement ““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.”
In June, the CMA released a statement which barred any approaches to integrate the two firms.
The CMA also added it had ““reasonable grounds for suspecting” Amazon and Deliveroo had “ceased to be distinct”, or that “arrangements are in progress or in contemplation”
Nicole Kar, head of law firm Linklaters’ commented “This type of deal is right in the CMA’s area of interest at the moment — large tech incumbents like Amazon investing in smaller rivals, so-called “killer acquisitions. Please use the sharing tools found via the share button at the top or side of articles”
Kar also noted, “The key questions for the CMA are first whether the investment Amazon has made give it rights to determine Deliveroo’s strategy and investment and/or insights into what innovation and expansion it is working on. This [Amazon] deal plays right into the sweet spot for the CMA at the moment. Anything connected to what Amazon, Facebook and Google do at the moment is really high on the agenda,””
The June statement stops Amazon and Deliveroo operating as a ‘merged entity’ as well as stopping the transfer of key staff or commercially sensitive information, pending this formal investigation.
This is the latest plan of action in the retail market following its decision to stop the proposed £7.3 billion merger of J Sainsbury (LON: SBRY) and Asda in February 2019.
The CMA commented “This is consistent with a more activist and interventionist role taken by the CMA since the new chairman and chief executive took hold,” said Mr Black, adding that the approach had been “most dramatically revealed in the evisceration of the Asda Sainsbury’s deal and the clinical destruction of their attempt to merge”.
The CMA has placed a deadline of 11th December for this investigation to conclude.
To note, shares in Amazon have increased 1.78%, trading at $1,767.38.
In retail news, there have been changes to the stock prices of Laura Ashley (LON: ALY), Dunelm (LON: DNLM) and N Brown (LON: BWNG).
