Amazon bid for Deliveroo stake hinges on UK regulator's decision

London

AMAZON.COM Inc's bid to buy into one of the UK's most successful startups may get caught up in antitrust authorities' fear that they made mistakes in the past.

The Competition and Markets Authority (CMA) has until Wednesday to decide whether to continue a two-month-old probe that froze Amazon's bid of around US$500 million for a minority stake in food-delivery service Deliveroo.

"The CMA is very interested in tech giants extending their tentacles into other markets," said Alan Davis, a competition lawyer at Pinsent Masons in London. Antitrust regulators "are paranoid about it at the moment because they are concerned they have not looked at these mergers enough in the past, like Facebook-WhatsApp".

Authorities were put off over Facebook Inc's change of position on how it handled data from WhatsApp, prompting European Union (EU) officials to accuse the company of misleading them to win approval for the takeover in 2014.

Big Tech is a flash point now for antitrust across the globe. In the US, there are probes into Google, Facebook and Amazon over allegations they unfairly hinder competition. The CMA is investigating how Google plans to use Looker Data Sciences Inc data before approving that US$2.6 billion takeover.

While the CMA's mission is in part to ensure big deals won't hamper competition, it doesn't usually investigate bids for minority stakes. It may have been moved to act this time because of Amazon's access to an unending reservoir of data from its many businesses. CMA's chief executive officer Andrea Coscelli has said that it was a mistake to allow deals like Facebook's purchase of Instagram.

"UK regulators may have some antitrust concerns with the proposed investment," said Bloomberg Intelligence analysts Aitor Ortiz and Diana Gomes. "One of them could be whether Amazon could get access to Deliveroo's user data, leveraging the delivery giant's position in other markets besides on-demand restaurant delivery, such as online groceries."

The food-delivery business is no stranger to the regulator's attention. Two years ago, the agency began investigating Just Eat plc's merger with a smaller rival Hungryhouse, eventually allowing it to go through because of the competition in the sector.

Since then, the delivery business has seen a wave of acquisitions and international expansion. Just Eat agreed to a £5 billion merger (S$8.9 billion) with Dutch firm Takeaway.com NV in July, while Uber Technologies Inc. was reported to be showing interest in Spanish startup Glovo.

Deliveroo has never turned in a profit, losing £232 million last year despite a 72 per cent increase in global sales. A ruling against Amazon would be a setback for the UK company, which has already raised US$1.53 billion in investor funding.

Food-service consultant Peter Backman, a former director of Horizons FS, says: "The pressure to get scale is becoming more intense. Although the market has gotten bigger, they are under huge pressure to become profitable." BLOOMBERG