After months of waiting, Amazon.com's (NASDAQ:AMZN) investment in food-delivery start-up Deliveroo has finally received provisional clearance by the U.K. antitrust overseer. In 2019, Amazon was the lead investor in a round of financing that provided $575 million for the food-delivery start-up.
However, regulators in the U.K. were concerned about reduced competition if the two strongest players in U.K.'s food-delivery market joined forces. But it seems the financial crunch put on local restaurants, as well as Deliveroo's business, as a result of the COVID-19 pandemic left U.K. regulators no choice but to allow the investment.
The news comes as Amazon's own grocery-delivery business through Whole Foods stores has seen unprecedented demand lately.
Is the investment a stepping stone to something bigger?
As a result of this deal, Amazon gains a very capable new partner to expand its food-delivery stronghold beyond the U.S. Deliveroo has experienced explosive growth since its founding more than five years ago. It's using machine learning technology to help identify the fastest route to get food from restaurants to customers' door. Restaurants have seen a 30% spike in sales after signing up with Deliveroo.
The combination of Amazon's backing and Deliveroo's technology is what the U.K. regulators are worried about. The antitrust authorities want more competition in the U.K. Regulators are concerned that, by investing in Deliveroo, Amazon will no longer have an incentive to reenter the market with its own service.
Amazon had previously operated its own restaurant delivery business in London (Amazon Restaurants) until closing it in 2018. But less than a month after leading the funding round for Deliveroo last year, Amazon decided to shutdown Amazon Restaurants in the U.S., too.