Amazon large investment in online food courier Deliveroo presents a "real risk" it could leave customers and businesses facing higher prices and poorer services, the Competition and Markets Authority (CMA) has warned.
The companies now have five working days to offer legally-binding proposals to address the concerns raised, which the regulator will then consider whether to accept or refer the case for a full investigation.
If a ‘phase two’ probe is launched, it could take several months, as officials comb through the detail and take evidence from the sector more widely.
The CMA has the ultimate power to block the deal as it did when Sainsbury’s and Asda sought a tie-up and with O2’s previous plans to join with rival Three.
Andrea Gomes da Silva, head of the Competition and Markets Authority, said: “Millions of people in the UK use online food platforms for takeaways, and more than ever are making use of similar services for the same-day delivery of groceries.
“There are relatively few players in these markets, so we’re concerned that Amazon having this kind of influence over Deliveroo could dampen the emerging competition between the two businesses.
“If the deal were to proceed in its current form, there’s a real risk that it could leave customers, restaurants and grocers facing higher prices and lower quality services as these markets develop.
“This is because the significant competition which could otherwise exist between Amazon and Deliveroo would be reduced.”
The move comes after Amazon announced a “substantial investment” in Deliveroo earlier this year as part of a £450m fund-raising push by the UK-based firm to finance its expansion plans as it battled rivals, including Uber Eats and Just Eat.
The CMA fears the deal could discourage Amazon from re-entering the restaurant food delivery sector – having previously launched and closed its Amazon Restaurants business a year ago.
The regulator’s report stated: “Although Amazon closed its restaurant delivery business, evidence examined in the CMA’s investigation indicated that Amazon has a strong continued interest in the restaurant delivery sector.”
It also had concerns the deal could damage competition in the fast-growing convenience grocery delivery market, where the two firms were already strong players.
The CMA said: “While there are some differences in the services that Amazon and Deliveroo offer to customers, the CMA found that competition between them could increase in future as the market develops.”
A Deliveroo spokesman said: “Deliveroo has been working closely with the CMA and will continue to do so.
“We are confident that we will persuade the CMA of the facts that this minority investment will add to competition, helping restaurants to grow their businesses, creating more work for riders, and increasing choice for customers.
“Deliveroo is a British company operating right across the country and this investment will be particularly beneficial to the UK economy.”
