In
We consider what lessons may be drawn from these matters.
ACQUISITION OF MINORITY INTEREST IN DELIVEROO BY AMAZON
Background
In late 2019, the CMA commenced an investigation of Amazon's proposed purchase of a 16% shareholding in
The CMA considered whether the acquisition would be expected to result in a substantial lessening of competition (SLC) within any markets in the
Areas of overlap
While Amazon operates across multiple markets, the main areas of competition between the parties were considered to be:
- the supply of online restaurant platform services in the
UK ; and -
the supply of online convenience grocery delivery services in the
UK .
Amazon does not currently operate in the online restaurant platforms market but it had previously entered the market at a limited capacity before exiting in 2018. Amazon does however supply online convenience grocery delivery services and has key partnerships in the
Competition concerns
The main areas of concern in both markets were that the acquisition would result in a SLC because Amazon would likely:
- compete less strongly with Deliveroo;
- discourage Deliveroo from competing; and/or
- rely on Deliveroo for its presence in either market.
Why did the CMA ultimately clear the transaction?
Online Restaurant Platforms Market
The CMA considered that the acquisition would be unlikely to result in a SLC in the online restaurant platforms market because Amazon did not have sufficient control over Deliveroo given it was only acquiring a minority interest. While a 16% interest would provide Amazon with the ability to materially influence, it would not have control over the commercial policy of Deliveroo and would be unable to drive policy in a direction that board members or shareholders objected to.
Some other factors relevant to the CMA's decision were that:
- Amazon was unlikely to compete materially less vigorously because it would have a strong preference for acquiring a customer (and receiving 100% of the profits from that customer) over allowing Deliveroo to retain that customer (with Amazon receiving 16% of profits);
- due to having influence less than would arise from a controlling interest, Deliveroo would be unable to “worsen” its offering (via higher prices or reduced output or quality) to accommodate Amazon; and
-
there would be sufficient competitive constraint on Deliveroo from companies such as
Uber Eats and Just Eat post-acquisition.
Online Convenience Groceries Market
Likewise, the CMA considered that the acquisition would be unlikely to result in a SLC in the online convenience groceries market because while Amazon would not have sufficient control over Deliveroo, even if it had material influence over it.
Some other factors relevant to the CMA's decision were that:
- the companies' offerings in the market were largely differentiated in terms of product range, speed of delivery and price range;
- there was sufficient competitive constraint in the market to prevent Amazon from increasing prices or competing less aggressively; and
- the CMA found that uncertainty in the market (as a result of COVID-19) and the potential for competitors to develop their services further reduced the likelihood of Amazon failing to develop its own presence in the market.
Plans to increase interest
In its assessment, the CMA took into account internal documents of Amazon which indicated that the minority acquisition was a “potential first step” towards a full acquisition, rather than a purely financial investment.
However, these potential future plans did not ultimately impact the CMA's decision because, if Amazon attempted full acquisition, it would face significant cost and risk being outbid by another buyer. The CMA did caution though that the assessment could be different if Amazon acquired a materially larger interest and such an acquisition would be assessed by the CMA.
ACQUISITION OF MINORITY INTEREST IN ALLIANCE BY
Background
In
At the time of acquisition,
While
Areas of overlap
The main areas of overlap identified by the ACCC were as follows:
- Charter Services:
Qantas is in competition with Alliance for corporate customers requiring FIFO services, principally in regions includingQueensland ,Northern Territory andWestern Australia . In relation to some of these services, Alliance operates in cooperation withVirgin Australia (Virgin), under a charter agreement; and - RPT Services:
Qantas is in competition withAlliance for RPT routes betweenBrisbane and regional areas, Bundaberg and Gladstone.
ACCC's concerns
The ACCC published a Statement of Issues (SOI) outlining its preliminary competition concerns with the acquisition. The SOI focussed on the close competition between
- putting
Qantas in a position to limit fundraising by Alliance, thereby blocking alternative investors; -
the potential impact
Qantas ' shareholding may have on Alliance's perception as an independent competitor toQantas , thereby affecting its ability to grow and compete; -
positioning
Qantas to seek and use material influence over Alliance to lessen competition betweenQantas and Alliance and/or Virgin; and -
reducing
Qantas ' incentive to compete with Alliance because it has an interest in Alliance's profits.
In particular, the ACCC appears concerned that the acquisition will result in a SLC given that Alliance is
The ACCC investigation is continuing.
Conclusion
The CMA draws a clear distinction between “influence” and “control” in determining whether the acquisition of Deliveroo by Amazon would result in a SLC in a market. Where a party has the former but not the latter, the CMA has indicated that the transaction will not result in a SLC.
For example, while the CMA determined that Amazon would have some degree of influence over Deliveroo, it considered that it did not have control over Deliveroo's management and was not able to force it into lessening prices or offers. The CMA concluded: “it does not amount to an ability to drive policy in a direction that other shareholders, management or the board object to. As such we cannot assume that Amazon will be able to drive policy in a direction that would lead to a SLC…”, or to put it aptly, “[t]he ability materially to influence a target's policy is not an ability to control it”.
Both cases of course serve as a good reminder that under Australian law any acquisition of shares or assets will give rise to ACCC interest (and a potential breach) where the acquisition may result in a SLC.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Mr
Level 25,
NSW 2000
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