Startups and investors are at war with the UK's competition regulator over its aggressive approach to deals like the Amazon-led $575 million investment in Deliveroo
Reuters / Drew Angerer of Getty Images
- There's a fight brewing in the UK over whether the competition regulator is too aggressive about probing deals involving big US tech firms.
- Tech lobby group COADEC wrote to UK chancellor Rishi Sunak on Tuesday stating that delays caused by regulatory probes risk killing off British startups.
- The UK's competition watchdog has been examining a $575 million funding round led by Amazon into UK delivery startup Deliveroo since July 2019.
- The watchdog has signalled it will scrutinize deals involving big US tech firms more closely.
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There's a political fight brewing in the UK about whether big US tech firms should be allowed to buy or take big stakes in British startups.
UK tech lobby group COADEC wrote to UK Chancellor Rishi Sunak on Tuesday, fretting that long competition probes by the UK's Competition and Markets Authority into such deals were "killing British companies."
Business Insider has obtained a copy of the letter, penned by COADEC's executive director Dom Hallas. The document doesn't mention any live probes, but is clearly referring to the CMA's months-long investigation into the $575 million investment led by Amazon into UK food delivery startup Deliveroo.
Hallas wrote in his letter: "There must be a more appropriate approach than stifling British companies of investment whilst their global competitors grow.
"Lengthy investigations risk not only sending the wrong message about the UK to global investors but also result in anti-competitive outcomes."
The CMA iced a $575 million investment in Deliveroo over competition concerns
Deliveroo is a London-headquartered food delivery firm that offers takeaway from local restaurants via an app. It is one of the UK's most valuable startups, with an official valuation of $2 billion.
Amazon announced its investment into Deliveroo in May 2019 as part of a giant $575 million round, but the CMA put the deal on ice in July over worries that it would dent competition. The CMA has indicated that the probe may end in June 2020, leaving Deliveroo in limbo over the Amazon stake for a total of almost a year.
Deliveroo is fast-growing but unprofitable, and has expressed ambitions to oust Just Eat as the number one player in the UK food delivery market. Although well-capitalized and highly valued, it needs cash to grow and operate, especially against well-funded competition like Uber Eats.
Hallas in his letter called on Sunak to "engage" with the CMA.
He wrote: "The recent actions of the CMA reflect an ignorant one-size-fits-all approach to tech acquisitions, investment and mergers that can only damage the tech ecosystem in the UK."
The COADEC letter comes after Deliveroo's investors, Index Ventures and Accel Partners, accused the CMA of stymieing innovation with its aggressive approach to regulation. Early Index backer Neil Rimer said the probe "sets a dangerous precedent."
There is some further politics at play.
COADEC's letter coincides with the CMA's own major conference on Tuesday about its approach to regulating tech. And COADEC's former executive director, Romilly Dennys, is now head of corporate communications at Deliveroo.
A source close to COADEC said neither Amazon nor Deliveroo had requested the letter, but that venture capital investors in the startup were deeply concerned.
For its part, the CMA has signalled it would take a closer look at deals involving a major US firms and a smaller UK player.
CMA chief executive Andrea Coscelli gave a speech on Monday that pointed to Facebook's acquisitions of Instagram and WhatsApp leading to "poor market outcomes."
And CMA chair Lord Andrew Tyrie said on Tuesday that while consumers had benefited from the arrival of food delivery, taxi, and other types of apps, regulation was still needed.
"There's probably been underenforcement of merger control in digital markets," he said. "And because of the nature of these markets, this can be particularly costly for consumers.
"Increasingly, competition authorities are now waking up to this."
Deliveroo declined to comment.
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