The US online shopping giant was the lead investor in a US$575mln funding round undertaken by Deliveroo last year, which the CMA said at the time could reduce competition in the UK market.
However, the regulator said on Friday that it had changed its mind “in light of a deterioration in Deliveroo's financial position as a result of coronavirus”, adding that the company had previously told the CMA that without the cash injection it would “fail financially and exit the market”.
“The CMA's investigation has found that Deliveroo is, in many respects, a highly successful company which has grown strongly and now accounts for a significant share of the online restaurant platform market in the UK. As a developing business, Deliveroo is, however, particularly reliant on continued investment to be able to support its operations”, the regulator said.
“The ongoing 'lockdown' in the UK has resulted in the closure of a large number of the key restaurants available through Deliveroo, and a significant decline in revenues. While Deliveroo has sought to expand its supply of convenience groceries during the crisis, these sales are limited and have not made up for losses in its restaurants business”, they added.
As a result of Deliveroo’s financial position, Stuart McIntosh, chair of the CMA’s independent inquiry group, said without additional investment it was “clear that Deliveroo would not be able to meet its financial commitments and would have to exit the market”.
“This could mean that some customers are cut off from online food delivery altogether, with others facing higher prices or a reduction in service quality. Faced with that stark outcome, we feel the best course of action is to provisionally clear Amazon's investment in Deliveroo", he added.
However, the regulator is still assessing the merger ahead of the statutory deadline for its final report on 11 June.