By Matthew Perlman

Law360 (April 17, 2020, 8:05 PM EDT ) The U.K.'s competition enforcer on Friday provisionally cleared Amazon's planned minority investment in Deliveroo after the British food delivery company said it needs the infusion to help survive turmoil in the restaurant industry being caused by the COVID-19 pandemic.

The Competition and Markets Authority was probing the investment for concerns about how much influence it would give Amazon over Deliveroo's operations and the impact that could have on competition for restaurant and grocery deliveries in the U.K.

But Stuart McIntosh, chairman of the CMA inquiry group overseeing the investigation, said in a statement Friday the coronavirus outbreak has caused the agency to change course and clear the deal to make sure Deliveroo stays afloat.

"These wholly unprecedented circumstances have meant reassessing the focus of this investigation, reacting quickly to the impact of the coronavirus and deciding what it would mean for the businesses involved in this transaction and, in turn, for customers," McIntosh said. "Without additional investment, which we currently think is only realistically available from Amazon, it's clear that Deliveroo would not be able to meet its financial commitments and would have to exit the market."

A representative for Deliveroo told Law360 on Friday the company is delighted with the CMA's decision and said the investment is part of its plan to improve its offerings and will also help the company deal with the current situation.

"The unprecedented health crisis we all face has disrupted businesses across the country," the representative said. "This investment will help us to overcome immediate and long-term challenges, allow us to continue to improve our service for customers, enable us to develop new innovations, and offer people even greater choice."

Amazon led a $575 million funding round for London-based Deliveroo in May alongside existing investors T. Rowe Price, Fidelity Management & Research Co. and Greenoaks Capital. Deliveroo said at the time the money would be used to help grow its engineering team in the U.K. and expand its services' reach. The company said at the time it had raised a total of $1.53 billion.

Founded in 2013, Deliveroo operates in more than 500 towns and cities across 12 markets globally, including in France, Belgium, Australia and Hong Kong, among others, according to its website. The firm has 2,500 employees and works with 80,000 restaurants and 60,000 delivery riders worldwide, the website said.

The CMA launched an investigation into the transaction in July and referred it for an in-depth review in December. The agency found the deal could discourage Amazon from re-entering the online restaurant food delivery market in the U.K. The e-commerce giant shuttered its Amazon Restaurants business in the country in November 2018 and its U.S. version of the service last year.

The initial investigation also found issues in the market for grocery deliveries where Amazon and Deliveroo currently compete in the U.K.

On Friday, the CMA issued its provisional findings, saying in a statement that Deliveroo is a "highly successful company" in many respects and that it now accounts for a significant share of the online restaurant delivery market in the U.K. But, the agency said, it also relies on continuing investment to support its operations, since it's a developing company.

The findings said that Deliveroo was already a "loss-making" business in the U.K. and globally when the Amazon investment was announced, and that the COVID-19 crisis has "substantially" affected its financial position for the worse. The company has seen a significant decline in revenues with a large number of restaurants in the country closing as part of lockdowns imposed to prevent spread of the novel coronavirus, the agency said.

The CMA also said Deliveroo has tried to pivot to more grocery deliveries as restaurants closed, but that these sales haven't offset "any significant proportion of the decline in restaurant sales."

"As a result, Deliveroo recently informed the CMA that the impact of the coronavirus pandemic on its business meant that it would fail financially and exit the market without the Amazon investment," the CMA said in its statement. "Deliveroo's submission was supported by evidence from the company's financial advisers."

The provisional findings also said the company is unlikely to secure an alternative investor in the current climate and that allowing Deliveroo to exit the market would be worse for competition and consumers than letting Amazon make its investment. The CMA is taking comments on the provisional findings and is set to issue a final report by June 11.

In a statement Friday, a representative from Amazon said it is committed to the investment and called Deliveroo "an innovative, customer-obsessed company with a mission-driven leader."

"Our investment will benefit both consumers of Deliveroo's service and its small business restaurant partners," the statement said. "U.K. businesses like Deliveroo continue to benefit from broad access to investors and supporters."

Deliveroo's statement Friday echoed the sentiment.

"Everyone at Deliveroo is excited that Amazon, the most customer-obsessed and innovative company in the world, has chosen to invest in Deliveroo's future," the company said.

The CMA is also currently investigating the £6.2 billion ($8.1 billion) merger of restaurant delivery providers Takeaway.com and Just Eat. Takeaway had operated in the U.K. until 2016, and the company has said enforcers are looking at whether it would have re-entered the market absent the merger with Just Eat.

Takeaway denies that it had any other plans to start back up in the country.

On Thursday, the CMA lifted an initial enforcement order that had prevented the companies from integrating or sharing sensitive information and intellectual property. Takeaway and Just Eat have moved ahead with the transaction despite the CMA's merger investigation, but said they were abiding by the agency's order while it was in place.

--Editing by Philip Shea.

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