Amazon has 5 days to save its big bet on UK food delivery
London(CNN Business) Amazon's play for the UK food delivery market is in doubt after Britain's competition regulator said the company's planned investment in Deliveroo could harm customers.
The Competition and Markets Authority said in a statement Wednesday that the deal could reduce competition for online deliveries of restaurant meals and groceries.
"There's a real risk that it could leave customers, restaurants and grocers facing higher prices and lower quality services as these markets develop," Andrea Gomes da Silva, the regulator's executive director, said in a statement.
"This is because the significant competition which could otherwise exist between Amazon and Deliveroo would be reduced," she added.
The antitrust authority gave Amazon and Deliveroo five working days to submit proposals addressing its concerns. It will then decide whether to refer the case for an in-depth investigation, which could hamstring Deliveroo in the ultracompetitive UK market and give rivals Just Eat (JSTTY) and Uber (UBER) Eats a boost.
A spokesperson for Amazon defended the deal, saying in a statement that it would bolster innovation, create jobs and lead to the development of new products. It would also help Deliveroo compete in the cutthroat market.
Amazon's UK ambitions
Amazon led a $575 million funding round into Deliveroo in May, signaling that the company could become a key part of its global food delivery ambitions.
Deliveroo operates in 14 countries including Australia and France. It is present in more than 100 towns and cities across Britain, offering online delivery services for restaurants and convenience stores.
The Competition and Markets Authority ordered Amazon (AMZN) to pause its investment in July while it investigated whether the deal amounted to a takeover.
On Wednesday, the regulator said that it was also concerned that the deal would discourage Amazon from re-entering the online food delivery market as a competitor to Deliveroo in the future.
The companies fought for the same customers before Amazon shuttered its Amazon Restaurants business last year.
Amazon's direct participation would "significantly increase competition in online restaurant food delivery," the regulator said.
The Competition and Markets Authority also warned that the deal would damage competition in the emerging market for online grocery delivery, where Amazon and Deliveroo are two of the strongest players.
Food and groceries have been a growing focus for Amazon since its $13.7 billion purchase of grocery chain Whole Foods in 2017.
