Due to the coronavirus pandemic, numerous businesses are taking a considerable hit in revenue. However, at the same time, we have seen various startups and companies coming up with innovative solutions to tackle the impact of COVID-19. Now, it seems like the UK-based food delivery startup Deliveroo is facing troubled waters due to the pandemic and taking this into consideration, UK’s Competition and Markets Authority (CMA) has given a provisional clearance to Amazon’s investment in the startup.
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CMA provisionally clears Amazon’s investment in Deliveroo
The Competition and Markets Authority (CMA) has given provisional clearance for Amazon’s investment in Deliveroo. This is in light of the pandemic, which has deeply impacted the takeaway firm’s business in the UK. Deliveroo told CMA that it has suffered a “significant decline in revenues” due to the government imposed lockdown for limiting coronavirus’ spread and this is due to the fact that many of the restaurants it dealt with are shut down from some time now.
“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,” an update by CMA reads. “ It has provisionally concluded that Deliveroo’s exit from the market would be inevitable without access to significant additional funding, which the CMA considers that only Amazon would be willing and able to provide at this time.”
This is not untrue, considering the fact that most businesses are currently struggling to stay afloat. While VCs have assured that fundings won’t completely dry up, it stands to reason that resources for startups and early-stage companies are required now more than ever. CMA further says that its decision to clear Amazon’s investment is also because Deliveroo’s exit would be detrimental for competition.
Stuart McIntosh, Chair of the CMA’s independent inquiry group, said, “These wholly unprecedented circumstances have meant reassessing the focus of this investigation, reacting quickly to the impact of the coronavirus and deciding what it would mean for the businesses involved in this transaction and, in turn, for customers.”
“Without additional investment, which we currently think is only realistically available from Amazon, it’s clear that Deliveroo would not be able to meet its financial commitments and would have to exit the market. This could mean that some customers are cut off from online food delivery altogether, with others facing higher prices or a reduction in service quality. Faced with that stark outcome, we feel the best course of action is to provisionally clear Amazon’s investment in Deliveroo.”
Amazon’s investment in Deliveroo faced in-depth enquiry
Deliveroo was started in 2012 by founders Greg Orlowski and William Shu with the aim of transforming the online food delivery system. With London-based headquarter, the company operates globally across 14 markets and has over 2,500 employees worldwide. Earlier in May 2019, Amazon led an investment round for the startup wherein it raised a notable €528 million. CMA, however, raised concerns about the deal and said that it could result in higher prices and lower-quality services for customers, restaurants and grocers.
Amazon and Deliveroo were instructed to come up with counter-proposals for concerns raised by the CMA. However, failing to do so, the investment round was undergoing a six-month investigation, which will conclude on June 11, 2020. In its latest announcement, CMA also asked for views on its provisional findings by May 11, 2020, and says it will assess all the evidence before announcing a final decision on the subject.
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