Amazon's Deliveroo Investment Attracts Formal U.K. Probe -- 7th Update

Date : 10/16/2019 @ 5:30PM
Source : Dow Jones News
Stock : Amazon com (AMZN)
Quote : 1746.14  -14.55 (-0.83%) @ 4:49PM

Amazon's Deliveroo Investment Attracts Formal U.K. Probe -- 7th Update

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By Parmy Olson and Daniel Michaels 

Britain's antitrust watchdog has launched a formal probe into Amazon.com Inc.'s investment into Deliveroo, a British food-delivery startup, marking the official start of a relatively novel review that regulators signaled earlier this month.

The regulator could block the deal if it finds the companies have breached antitrust rules.

The probe is the latest in Europe amid a flurry of regulatory moves -- and heightened scrutiny -- targeting technology companies. The European Union has in the past few years taken the lead in investigating a handful of mostly American tech giants, such as Google parent Alphabet Inc., Facebook Inc. and Amazon, as they grew to dominate markets from online search and ads to e-commerce. More recently, the rest of the world has piled in, too, including the launch of a handful of probes in Washington, targeting Google and Facebook, in particular.

Europe, meanwhile, has increasingly turned to a set of rarely used tools to further its own scrutiny. On Wednesday, the EU's antitrust regulator ordered chip maker Broadcom Inc. to stop requiring certain contract terms that the regulators deemed anticompetitive. It took the rare step of issuing an injunction ordering Broadcom to stop the practice, even as its probe continues. It was the first use of this tool in 18 years.

The EU said it needed to halt the practice immediately, to prevent market damage, even if it has yet to finish its probe and make specific findings. Broadcom said it will appeal the decision but abide by the injunction.

In the U.K., British authorities moved forward Wednesday with their own unusual probe of Amazon. In July, the country's Competition and Markets Authority said it was reviewing a deal by Amazon to invest in Deliveroo, whose food-delivery motorbikes and bicycles are a common sight on the streets of many British cities. The company offers quick delivery of restaurant meals, charging restaurants a commission and customers a flat fee on each order.

Amazon led a $575 million fundraising round into Deliveroo in May. The CMA required the two companies to hold off on consummating the deal until it decided whether to launch a formal probe. On Wednesday, the agency said it was moving ahead. It will decide by Dec. 11 whether to move the deal to the next phase of the probe, or let it go ahead.

The CMA, without specifying any antitrust issues, has said it was examining the deal because it believed the two companies had either "ceased to be distinct" or had made plans to that effect. Legal experts say the CMA has been looking at big tech investments in startups to determine whether they are essentially targeted toward blunting budding competitors.

One particular issue the CMA might be concerned with is whether Amazon's investment in Deliveroo would allow it to curb the startup's plans for grocery delivery to its own advantage. Amazon has a grocery-delivery partnership in the U.K. with local supermarket chain Wm Morrison Supermarkets PLC, and Deliveroo has teamed up with the Co-Operative Group Ltd., a rival grocer.

Amazon declined to comment. In the past, Amazon has said its investment in Deliveroo would help the startup expand its service, benefiting consumers through increased choice and creating jobs. Deliveroo said it was cooperating with the CMA. "This minority investment will help to create jobs, help restaurants to grow their businesses, improve choice for consumers and enhance competition in the U.K. food-delivery sector," a Deliveroo spokesman added.

If the regulator rules against the deal, it would give Amazon and Deliveroo the opportunity to remedy any competition issues by, for instance, selling off a part of their business, a CMA spokeswoman said.

Write to Parmy Olson at parmy.olson@wsj.com and Daniel Michaels at daniel.michaels@wsj.com

 

(END) Dow Jones Newswires

October 16, 2019 13:15 ET (17:15 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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