Globally, delivery businesses ranging from electronic gadgets to food items have increased rapidly. Many multinational companies have entered into acquisition deals to start their ventures or stay competitive in the online delivery business. Meanwhile, government authorities across the globe are taking several steps to stop unfair leverage against the acquisitions of small companies.
Inquiry over Amazon’s Bid for $ 500 Million
The UK Government-backed authorities are likely to look into the recent attempt of Amazon.com Inc. to hold a share of one of the UK’s successful startup companies, Deliveroo.
The recent Amazon’s $ 500 million bid for holding shares in Deliveroo drew the attention from the Competition and Markets Authority (CMA), as the authority feared if Amazon involved in adding pressure on the startup company to sell its shares.
According to a news report, “The Competition and Markets Authority has until Wednesday to decide whether to continue a two-month-old probe that froze Amazon’s bid of around $ 500 million for a minority stake in food-delivery service Deliveroo.”
Nevertheless, Alan Davis, a lawyer at Pinsent Masons in London, commented, “The CMA is very interested in tech giants extending their tentacles into other markets.”
Reasons for Government’s Antitrust
The decision to initiate censorship against Amazon was due to the earlier mistakes committed by the Government authorities that failed to prevent big companies’ unfair pressures to acquire small companies.
Alan described, “These antitrust regulators are paranoid about it at the moment because they are concerned they have not looked at these mergers enough in the past, like Facebook-WhatsApp.”
According to the CMA, the Facebook Inc.’s acquisition of WhatsApp in 2014 was conducted on the false pretext that the former company manipulated to gain the trust of the European Union (EU) leaders in winning approval over the takeover. The CMA’s CEO, Andrea Coscelli continued, “It was a mistake to allow deals like Facebook’s purchase of Instagram.”
Besides this, many giants companies, including Google and Amazon, have been alleged in the US for undue influence in the acquisition deal. At present, the CMA is investigating Google’s $ 2.6 billion takeover Looker Data Sciences Inc., a logistics company.
Likewise, the authority has a concern of trust deficit over the Amazon’s recent plans, as the company can access to an enormous source of data through, which it can use to manipulate the bidding system to work in its favor.
According to Bloomberg Intelligence analysts, Aitor Ortiz and Diana Gomes stated, “UK regulators may have some antitrust concerns with the proposed investment. One of them could get access to Deliveroo’s user data, leveraging the delivery giant’s position in other markets besides on-demand restaurant delivery, such as online groceries.”
Expansion of Delivery Business across the Globe
The delivery business has been evolving a massive wave of acquisitions and international expansion. To provide some instances: Just Eat entered a merger deal for $ 6.6. Billion with a Dutch company, Takeaway.com NV in July; and Uber Technologies Inc. is planning to invest in Spanish startup Glovo.
According to Backman, a former director of Horizons FS, “It’s getting more intense because the pressure to get scale is becoming more intense. Although the market has gotten bigger, they are under huge pressure to become profitable.”
Deliveroo has suffered 232 million pounds loss despite a 72% increase in sales in 2018. CMA’s surveillance over Amazon’s bid is likely to have a negative impact on Deliveroo, which has already received funding of around $ 1.53 billion. Moreover, CMA’s decision is crucial for Amazon, as its food delivery unit Amazon Restaurants U.K. failed in December 2018.
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