The Competition and Markets Authority (CMA), which has the power to block deals if it believes consumers will have less choice, says the tie-up raises "serious concerns".
Firstly, the regulator is concerned it could damage competition in online restaurant food delivery by discouraging Amazon from re-entering a market it exited a year ago.
"A homegrown United Kingdom business like Deliveroo should have broad access to investors and supporters", an Amazon spokesperson told the Times.
Britain's competition authority on Wednesday said it had "serious" concerns over U.S. online giant Amazon's investment in Deliveroo, the app-based firm delivering restaurant meals.
After completing a "Phase 1" investigation, the Competition and Markets Authority (CMA) said it would proceed to an in-depth investigation if Amazon and Deliveroo could not offer legally binding proposals that addressed their concerns. "This is because the significant competition which could otherwise exist between Amazon and Deliveroo would be reduced", concluded Silva. Additionally, the CMA is also concerned that the deal could damage competition in emerging markets for online convenience grocery delivery.
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Earlier this year, Amazon announced a substantial investment in Deliveroo, which would give it a minority shareholding along with certain other rights, allowing it to participate in the management of the company.
The competition watchdog also raised concerns that a tie-up between Amazon and Deliveroo would dampen competition in the ultra-fast grocery delivery market in the United Kingdom, in which there were now only a small number of suppliers.
The regulator said that the two companies were among the strongest players in the nascent ultra-fast grocery market, as they both have UK-wide delivery networks.
In its initial investigation the CMA found evidence Amazon had looked to re-enter the sector independently, which it felt would "significantly increase competition in online food delivery".
But the competition watchdog warned there was a "real risk" that customers, restaurants and grocers could be left paying higher prices as a result, with lower quality services. The CMA also found internal Amazon documents suggesting the tech giant was seriously considering re-entering the market.The CMA is anxious the combined strength of Amazon and Deliveroo would prevent smaller companies entering the market. The CMA would then have 5 working days to consider whether to accept the offer instead of referring the case to an in-depth investigation.