Amazon has been given approval to buy a minority stake in U.K. food delivery start-up Deliveroo, ending a lengthy battle by the firms to convince regulators the deal would not harm competition.
In May 2019, Deliveroo announced it had raised a $575 million funding round led by Amazon. Just two months later, the U.K.'s Competition and Markets Authority put the brakes on the deal. Then, later in the year, the CMA launched a formal probe to examine potential anti-competitive implications.
On Tuesday, the competition watchdog issued its final decision on the investment confirming that Amazon's minority investment — which would see it take a 16% stake in Deliveroo — can go ahead. That move upheld two previous provisional findings that the deal should be approved.
When it began its investigation last year, one of the CMA's main concerns was the potential for the deal to prevent Amazon from re-entering the online restaurant food market. Amazon had previously operated an online takeout business called Amazon Restaurants but subsequently exited the market last year.
Earlier this year, the CMA gave Amazon and Deliveroo initial clearance to move ahead as it was concerned Deliveroo would fail financially without the cash due to the coronavirus outbreak. After a recovery in the food delivery market, regulators then switched focus to whether the transaction would hamper competition in restaurant and online grocery delivery.
"When looking at any merger, the CMA's role is to assess whether consumers will lose out from a substantial lessening of competition," Stuart McIntosh, inquiry chair of the CMA, said Tuesday. "We have not found this to be the case given the scale of Amazon's current investment, but if it were to increase its shareholding in Deliveroo, that could trigger a further investigation by the CMA."
A Deliveroo spokesperson said the firm was "delighted" with the CMA's final verdict.
"This is fantastic news for U.K. customers and restaurants, and for the British economy. British born Deliveroo will use the investment to increase choice and value for customers, support for restaurants and will be able to offer more riders the flexible work they value as the company expands."
An Amazon spokesperson said: "Our investment will benefit both consumers of Deliveroo's service and its small business restaurant partners. UK businesses like Deliveroo continue to benefit from broad access to investors and supporters."
Venture capital firm Accel, which is an investor in Deliveroo, said the move was a "long time coming." Deliveroo investors such as Accel and Index Ventures had previously expressed frustration with the regulators' actions.
"We felt it should have been approved a long time ago and so we're very delighted. It's a great thing for the UK entrepreneurial ecosystem," Seth Pierrepont, an Accel investor who helped lead the firm's investment in Deliveroo, told CNBC Tuesday. "I think it's been an attractive place to invest and I think this cast a bit of a shadow over that."
— CNBC's Sam Shead contributed to this article.