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Amazon faces review by UK watchdog into Deliveroo deal

Luxembourg

AMAZON.COM Inc is facing an initial review by the UK competition regulator into its bid to buy a slice of fast-growing food delivery start-up Deliveroo.

The Competition and Markets Authority (CMA) on Friday said it has "reasonable grounds" to believe that Amazon and Deliveroo have either ceased to be separate businesses, or will merge in the near future, according to the enforcement order posted online on Friday.

The initial review means that Amazon won't be able to close the deal and that both companies will have to continue acting as independent entities.

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While reviews into mergers by the CMA are relatively common, it is unusual for the regulator to examine acquisitions of minority stakes.

In May, Amazon said it would invest US$575 million into Deliveroo to help the London-based startup expand its technology team and network and compete against the likes of Just Eat Plc and Uber Technologies Inc in Europe's fiercely competitive food delivery industry.

"Deliveroo and Amazon have been working closely with regulators to obtain regulatory approvals," said a Deliveroo spokesman in a statement.

The UK food delivery marketplace - Deliveroo's home market - is arguably one of the most competitive. Amazon closed down its London-focused food delivery business last year. Amazon has signalled its growing ambitions in the UK with Prime Now, which offers deliveries to major British cities within two hours.

But it faces stiff domestic competition from the likes of Ocado Group Plc, an online grocery pioneer that licenses its technology to the likes of Kroger Co and aims to halve that time with a service called Zoom.

London-based Deliveroo has raised US$1.5 billion in venture capital since it was founded in 2012 and its self-employed riders have become a familiar sight in many large cities.

It now wants to reach half of the UK's population of 65 million by the end of the year, up from the 33 per cent who can currently use its mobile app, said its chief executive officer Will Shu. BLOOMBERG