Amazon is one step closer to taking a 16% stake in UK food delivery firm Deliveroo

Key Points
  • Amazon is the lead investor in Deliveroo’s $575 million funding round, which was announced back in May last year.
  • However, the deal is being investigated by U.K. competition regulators. 
  • The Competition and Markets Authority "provisionally cleared" Amazon's investment in Deliveroo for a second time on Wednesday. 
Saul Loeb | AFP | Getty Images

Amazon's investment in London-headquartered food delivery start-up Deliveroo is looking increasingly likely to be approved by the U.K. competition regulator. 

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

"Looking closely at the size of the shareholding and how it will affect Amazon's incentives, as well as the competition that the businesses will continue to face in food delivery and convenience groceries, we've found that the investment should not have a negative impact on customers," Stuart McIntosh, chair of the CMA inquiry, said in a statement. 

Amazon has in the past operated an online takeout business, called Amazon Restaurants, but it shuttered U.K. operations in 2018 and closed down completely the following year. The CMA previously argued that Deliveroo's cash injection from Amazon could reduce competition by removing the possibility of the e-commerce giant re-entering the market.

The CMA issued "initial provisional findings" in April that cleared Amazon's investment on the basis that it would have gone out of business without the money.

However, the CMA said it had to re-evaluate the findings after realizing that Deliveroo wouldn't have gone under without Amazon's investment. 

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

Deliveroo welcomed the decision, saying it is good news for U.K. customers and restaurants.  

"As we have argued for the past year, since the beginning of the CMA's investigation, the minority investment will enable British born, British bred Deliveroo to compete against well-capitalized overseas rivals and continue to innovate for customers, riders and restaurants," Deliveroo told CNBC in an emailed statement.

"As the British economy recovers from the damage caused by Covid-19, a stable regulatory environment is critical. We therefore urge the CMA to conclude their review as swiftly as possible."

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

Shares of Amazon were little changed for the session.

— CNBC's Ryan Browne contributed to this report.