Deliveroo, Amazon tell CMA its antitrust probe is based on flawed assumptions

Deliveroo may need 'alternative sources of funding' if the CMS blocks Amazon's investment

Amazon and Deliveroo have told the British competition watchdog that its antitrust investigation is based on flawed assumptions and is not supported by the evidence.

In their submission, the companies are understood to have told the watchdog that it had several misunderstandings about UK's food delivery market and that Amazon has no plan to re-enter the food delivery sector in the UK.

They also argued that the watchdog failed to consider different business models employed by the two firms.

The details of the firms' objections to the CMA's decision are expected to be published this week.

That's according to Sky News, which reports that the food delivery company recently informed investors that the two firms have submitted a strong refutation to the Competition and Markets Authority (CMA) launching phase two investigation into Amazon's proposed investment in Deliveroo.

Analysts believe Deliveroo may acquire alternative funding in just the next few months if the CMA decides to completely block Amazon's investment in Deliveroo.

Earlier this month, Bloomberg reported that Amazon had offered Deliveroo a loan after the CMA's probe threatened a cash crunch for the British firm. The report said that while the size of the loan was unclear, Deliveroo had acquired significant funds to continue operating.

Amazon, however, rejected the report, saying that "a homegrown UK business like Deliveroo should have broad access to investors and supporters".

In May last year, Amazon shocked analysts by announcing that it was the main investor in a $575 million funding round in Deliveroo. The Series G funding round was also backed by Deliveroo's existing investors Greenoaks, T. Rowe Price, and Fidelity Management and Research Company.

In October, the CMA announced that it was opening the first phase of an formal probe into Amazon's proposed investment in Deliveroo. The Authority said that it would examine whether Amazon's investment could result in a "substantial lessening of competition" in the UK.

After completing the 'Phase 1' probe, the CMA found that Amazon's investment in Deliveroo is likely to damage competition in two ways.

First, it would discourage Amazon's re-entry into the British online restaurant food delivery market, thus potentially harming the competition.

Second, it could damage the competition in online grocery delivery, where Amazon and Deliveroo are both leading names.

Last month, the watchdog called on the two companies to offer undertakings, within five days, to address its concerns.

On 27 December, the CMA said that it was launching a detailed phase two probe after Amazon failed to address the concerns that its investment in Deliveroo "could be bad for customers, restaurants and grocers".