Restaurant delivery old-timer Just Eat has questioned the provisional approval of Amazon’s £461 million investment in restaurant delivery rival Deliveroo. The Competition and Markets Authority (CMA) suspended its investigation into the investment last month, after Deliveroo claimed that the coronavirus pandemic had had such an impact on its business that it would need to “exit the market” — shut down — without Jeff Bezos’ billions.
The provisional approval of the funding came with the caveat that interested parties could submit evidence to the CMA, and Just Eat is asking whether Deliveroo’s struggles are in fact “due to coronavirus or because of the quality of its business model,” as reported by Propel. The company goes on to acknowledge the seriousness of COVID-19’s impact on the restaurant world, while suggesting that it should not “create a ‘carte blanche’ to assume permanent, irreversible negative impact on businesses, particularly those who are in the business of delivering food to people at home in circumstances that align with social distancing rules.”
The company also cited Deliveroo’s report of 3,000 new restaurants joining its platform in the early stages of the pandemic, a figure that would account for around 10 percent of the company’s global restaurant portfolio. Just Eat claims that “This should have generously compensated the loss of other restaurants. The majority of them did not perform delivery services before the coronavirus pandemic.”
Just Eat, whose full name is now Just Eat Takeaway.com after its own £6 billion merger, has so far held fast against Deliveroo’s disruption of the £8.1 billion U.K. restaurant delivery market thanks to its sheer scale. This Amazon investment would threaten that security, and it’s clear that the CMA agreed, given its initial blocking was predicated on the fear that restaurant delivery competition would decrease if Amazon invested in Deliveroo.
The CMA has also already addressed Just Eat’s contention that Deliveroo’s investment model is fundamentally broken, considering genuine viability in its decision to provisionally approve the investment: “We have concluded that none of the alternative investments [new investors; existing shareholders; loans] to the Amazon investment available at that time would have put Deliveroo in a viable position to survive the Coronavirus (COVID-19) disruption,” it said. Deliveroo’s most recent available accounts up to the end of December 2018 reported revenues of £476,167,954. It made a loss of £232,011,608 in the same period, with its model attracting investors on the promise of disrupting an entire industry despite, like Uber, existing through hundreds of millions of losses with or without a pandemic.
Just Eat is not the only company to criticise the CMA’s U-turn. Domino’s Pizza submitted its own evidence, also focussing on doubts that Amazon was the only recourse to investment and questioning the short-termism of the decision. Its contention is that approving such an investment based on short-term difficulty ignores long-term ramifications:
“By taking a short-term view unduly influenced by Covid-19 and without proper interrogation of the counterfactual, the CMA provisionally intends to permit Amazon to extend its ecosystem dominance into food delivery, quite apart from foreclosing its own incentives to enter Deliveroo’s market.”
The CMA concluded its provisional approval with the observation that Deliveroo’s absence would cause less competition in the delivery market, even if — when the immediate impact of COVID-19 subsides — this investment may cause the very flattening of competition that the CMA feared in the first place. With the 11 June decision date looming, this unlikely beef between restaurant delivery juggernauts is not going to go away.
- Just Eat Takeaway.com questions whether Deliveroo’s financial decline was due to coronavirus or quality of business model in CMA submission [Propel]
- Deliveroo Says Only Jeff Bezos’ Billions Can Get it Through COVID-19 [ELDN]
- Amazon’s Multimillion Pound Investment in Deliveroo May Never Happen [ELDN]