Amazon is one step closer to taking a 16% stake in Deliveroo

Jeff Bezos, founder and CEO of Amazon, smiles as he speaks during the Economic Club of Washington Milestone Celebration event in Washington, DC on September 13, 2018.

Saul Loeb | AFP | fake pictures

Amazon’s investment in London-based food delivery startup Deliveroo seems increasingly likely to be approved by the UK competition regulator.

The Competition and Markets Authority (CMA) announced on Wednesday that it has “provisionally approved” an Amazon investment that would give it a 16% stake in the company.

“By looking closely at the size of the equity stake and how it will affect Amazon’s incentives, as well as the competition companies will continue to face in food delivery and convenience stores, we found that the investment should not have a negative impact on customers, “Stuart McIntosh, president of the CMA investigation, said in a statement.

In the past, Amazon operated an online takeaway business called Amazon Restaurants, but it closed UK operations in 2018 and closed entirely the following year. The CMA previously argued that Deliveroo’s cash injection from Amazon could reduce competition by eliminating the possibility of the e-commerce giant re-entering the market.

The CMA released “initial interim findings” in April that cleared Amazon’s investment on the grounds that it would have closed without the money.

However, the CMA said it had to reevaluate the findings after realizing that Deliveroo would not have sunk without Amazon’s investment.

“The impact of the coronavirus pandemic, while initially extremely challenging, has not been as severe for Deliveroo as anticipated when we reached our initial provisional findings in April,” said McIntosh.

Deliveroo welcomed the decision and said it is good news for UK customers and restaurants.

“As we have argued over the past year, since the start of the CMA investigation, minority investment will allow British-born Deliveroo to compete against well-capitalized foreign rivals and continue to innovate for customers, passengers and restaurants.” he told CNBC in an emailed statement.

“As the British economy recovers from the damage caused by Covid-19, a stable regulatory environment is critical. Therefore, we urge the CMA to complete its review as quickly as possible.”

The CMA said further investigation may be necessary if Amazon decides to try to increase its stake.

Amazon’s shares were little changed for the session.

– CNBC’s Ryan Browne contributed to this report.