The UK’s Competition and Markets Authority (CMA) has launched a full-scale investigation into Amazon’s (AMZN) proposed investment in Deliveroo.
The CMA said Friday it was escalating its probe into the deal after the two companies failed to address the regulator’s concerns.
Amazon was the lead investor in a $575m (£457m) funding round for Deliveroo in May. The CMA said the deal made a full merger between the two likely in future and it opened a case file on the deal in June.
The regulator said in early December it believed the deal would lead to “a substantial lessening of competition” in the food delivery market. Amazon and Deliveroo had until December 18 to convince the regulator otherwise.
The CMA said Friday the two companies had not promised to address issues raised and, as a result, the investigation was being referred to ‘phase two’. Phase two investigations, which are more in-depth than initial inquiries, can last up to six months.
Amazon used to compete against Deliveroo in the UK through its Amazon Restaurants business in the UK but abandoned this venture last year. The CMA said it found evidence Amazon was considering re-entering the market but the regulator is concerned its investment in Deliveroo may prevent this.
The UK home food delivery market is dominated by Deliveroo, Uber Eats, and Just Eat (JE.L). Amazon’s re-entry into the market would foster more competition and potentially benefit consumers.
“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,” the regulator said at the start of the month.