![]() That tire kicking amounted to what the CMA describes as an "extensive analysis of internal documents from Amazon and Deliveroo" alongside a survey of more than 3,000 consumers and lengthy submissions from interested third parties. To do this, Neill says, the watchdog had to "kick the tyres" of Deliveroo's business model to see how close to failure it truly was. More than that, the CMA had to agree that Deliveroo failing would be worse for competition than letting Amazon save it. ”Its provisional findings back in April were effectively based on a counterfactual that said, absent this transaction, Deliveroo will go out of business.” Deliveroo used the “failing firm” defence, which essentially means a company has to prove it was unable to raise any sort of funds from any other source.įor Deliveroo to survive, the CMA would need to agree that the company had no alternative. “To the credit of the CMA, it accepted the new situation,” says Neill. It told the CMA’s team of around 25 case workers, lawyers and economists, led by a four-strong inquiry panel, that if it didn’t approve the investment, the company would go bust. (Amazon was eventually handed a £55,000 penalty notice in August 2020 for providing 189 documents “between a few days and more than two months late, and only after follow-up by the CMA”.) The CMA said it had to expend significant time and public resources in verifying the completeness of Amazon’s responses. The CMA claimed there was “a pattern of errors in Amazon’s approach to compliance”, which had a “significant adverse impact on the conduct of the inquiry”. ![]() The second inquiry had not gone smoothly. So the CMA decided to put a halt to the deal and extend its investigation, which had already gone on since July 2019, to examine the market in a phase two review.īy March 17, the day Deliveroo got in touch with the CMA to admit it was failing, the watchdog was already preparing a preliminary decision on its phase two investigation. ![]() If it ushered the deal through, the CMA believed Amazon would gain entry into the operations of a major rival, and it would not need to relaunch its restaurants business, lessening the competition. The CMA had to evaluate what would happen to competition in the fast food delivery sector if the Amazon investment did not take place, a scenario it calls “counterfactual”. Two, Amazon had gained a seat on the board as part of the deal. Normally a stake under 20 per cent is unlikely to meet that criteria, Neill says, but the factors at play made this situation unusual: one, there was a £575m investment, which gives an awful lot of influence. The CMA had focused its inquiry on “material influence” – which enables it to assert jurisdiction over a deal where there's only a really small minority stake, but where the stake lets the acquirer steer the strategic direction of the business. ![]()
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