Amazon's investment in UK food delivery unicorn Deliveroo hits a major snag as antitrust authority halts deal

Reuters / Drew Angerer of Getty Images

Amazon CEO Jeff Bezos and Will Shu, the founder of Deliveroo.

• Amazon's investment in British food delivery unicorn Deliveroo has been put on hold by Britain's competition regulator, the Competition and Markets Authority.
• The CMA said it had reasonable grounds for suspecting that Amazon and Deliveroo "have ceased to be distinct" and is considering a formal antitrust investigation.
• Amazon and Deliveroo will argue that the investment will help Deliveroo grow its coverage, increase competition and boost the restaurant sector.
• Visit Business Insider's homepage for more stories.

The Amazon-led $575 million investment in British food delivery unicorn Deliveroo has hit a huge snag.

Britain's antitrust regulator, the Competition and Markets Authority (CMA), has stepped in to halt Amazon's investment and pause any integration attempts between the two companies while it considers launching a full investigation.

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The CMA said Friday that it has served an initial enforcement order on the two companies on June 24, signalling possible concerns about the transaction.

The regulator, which referred to Amazon's investment as "a minority shareholding," said it had reasonable grounds for suspecting that Amazon and Deliveroo "have ceased to be distinct," or were putting in place or considering arrangements which would result in them "ceasing to be distinct".

The order requires Amazon and Deliveroo to operate independently for now, meaning they cannot do things like transfer staff or commercially sensitive information. It does not prevent the parties from continuing to talk.

This pause gives the CMA time to decide if it will launch a formal "Phase 1" competition probe. A CMA spokeswoman could not say when a decision will be made on a formal investigation, but it will use the coming weeks to seek representations from the two companies.

Read more: Amazon just made a major investment in buzzy British food delivery unicorn Deliveroo. Here's what it is like to use.

Deliveroo said it and Amazon had been working closely with regulators to obtain their approval. The two companies will argue that the investment will help Deliveroo grow its coverage, increase competition and boost the restaurant sector. It is understood the two firms have no plans to integrate.

In a statement sent to Business Insider, an Amazon spokesman said: "We believe this minority investment will enable Deliveroo to expand its services, benefiting consumers through increased choice and creating new jobs as more restaurants gain access to the service."

Deliveroo noted that it was competing with a number of major companies in the sector and that the investment would help to create jobs and restaurants to expand.

If the CMA were to undertake an investigation and find competition concerns then the companies could offer undertakings to try to address those concerns. That process could be compromised if the companies had already merged financially.

Neither Deliveroo or Amazon have disclosed a figure for Amazon's funding contribution.