In April 2020, the Competition and Markets Authority (CMA) cleared Amazon’s £450million investment into Deliveroo, heeding (and ultimately accepting) warnings from the parties that, absent the investment, Deliveroo would ultimately have to exit the market. Particularly so in the light of the impact of the government imposed lockdown and shuttering of restaurants.
It is tempting to wonder whether, but for the pandemic, CMA would have reached the same verdict given that it had already expressed concerns about the competitive impact of the deal. More to the point, however, is what portents the CMA’s decision might have for similar distress-based M&A in the coming months which might could otherwise invoke any competition concerns.
When it reviews a qualifying transaction, the CMA needs to consider whether or not there is a material risk of a “substantial lessening of competition”: the extent to which any weakening of competition on the relevant market(s) could act to the detriment of customers and consumers. In doing so, it is taking a view on what would happen to competition were the transaction to proceed as compared with a world in which it doesn’t.
Publicly, the CMA has said that the legal framework by which it operates remains unaffected by the pandemic. Nevertheless, the lens through which it has to make its judgments has become clouded. As such, it will need to consider carefully the extent to which otherwise problematic transactions may be justified by the simple need for businesses to survive the current upheaval. Opportunistic buyers looking to invest into/acquire competing businesses should therefore consider the extent to which they can carry the argument with the CMA in the present climate.
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