NON- CONFIDENTIAL JUST EAT TAKEAWAY.COM Submission to the CMA in response to its request for views on its Provisional Findings in relation to the Amazon/Deliveroo merger inquiry 1 INTRODUCTION AND BACKGROUND 1. In line with the Notice of provisional findings made under Rule 11.3 of the Competition and Markets Authority ("CMA") Rules of Procedure published on the CMA website, Just Eat Takeaway.com N.V. ("JETA") submits its views on the provisional findings of the CMA dated 16 April 2020 (the "Provisional Findings") regarding the anticipated acquisition by Amazon.com BV Investment Holding LLC, a wholly-owned subsidiary of Amazon.com, Inc. ("Amazon") of certain rights and minority shareholding of Roofoods Ltd ("Deliveroo") (the "Transaction"). 2. In the Provisional Findings, the CMA has concluded that the Transaction would not be expected to result in a substantial lessening of competition ("SLC") in either the market for online restaurant platforms or the market for online convenience groceries ("OCG")1 on the basis that, as a result of the Coronavirus ("COVID-19") crisis, Deliveroo is likely to exit the market unless it receives the additional funding available through the Transaction. The CMA has also provisionally found that no less anti-competitive investors were available. 3. JETA considers that this is an unprecedented decision by the CMA and questions whether it is appropriate in the current market circumstances. In its Phase 1 Decision, dated 11 December 20192, the CMA found that the Transaction gives rise to a realistic prospect of an SLC as a result of horizontal effects in the supply of food platforms and OCG in the UK. In particular, the CMA's initial investigation found that the investment in Deliveroo could harm competition in two ways. 4. First, the CMA was concerned that the deal could damage competition in online restaurant food delivery by discouraging Amazon from re-entering the market in the UK. Although Amazon closed its Amazon restaurants business, in its Phase 1 Decision, the CMA stated that the evidence uncovered in Amazon's internal 1 JETA does not agree with the CMA's position in relation to market definition in either of these two areas. JETA considers itself to be active in the food delivery market, which comprises a wide range of consumer options to enjoy takeaway food at home and elsewhere, both online and offline. For example, consumers can order food directly by calling or visiting a restaurant, by using a restaurant’s own website or mobile app, including those of vertically-integrated branded food chains (e.g. Dominos, Pizza Hut). JETA considers its main rival to be the telephone. However, for the purposes of this submission, references to "market" will align with the CMA's definition as set out in the Provisional Findings. 2 ME/6836/19, Anticipated acquisition by Amazon of a minority shareholding and certain rights in Deliveroo, Decision on relevant merger situation and substantial lessening of competition, 11 December 2019. 1 / 18 NON- CONFIDENTIAL business documents shows a strong, continued interest in this sector and a material likelihood that Amazon would look to re-enter. Given the limited number of existing suppliers, the CMA found that the potential re-entry by a supplier such as Amazon would significantly increase competition in online restaurant food delivery in the UK. 5. Second, the CMA was concerned that the deal could also damage competition in the emerging market for OCG delivery, where the two companies have already established market-leading positions. 6. As a result of these concerns, on 27 December 2019, the CMA referred the Transaction for an in-depth investigation. On 28 January 2020, the CMA published the Issues Statement. 7. The CMA has provisionally concluded that by virtue of its investment, Amazon will acquire material influence over Deliveroo due to the cumulative impact of several avenues of influence, such as i) voting rights; ii) Amazon's rights as a holder of a majority of Deliveroo's Series G shares; iii) Amazon's status and expertise; iv) Amazon's right to representation on Deliveroo's Board3. In addition, the CMA found a strong body of evidence that Deliveroo's management, its other shareholders and its commercial teams perceive that Amazon has a special status as a "strategic" investor, with various additional rights and is a credible potential future acquirer of Deliveroo (or source of funding) as well as a current and potential future strategic / commercial partner of Deliveroo.4 8. JETA believes that the theory of harm laid down in the Phase 1 Decision and the Issues Statement was a distinct possibility prior to the COVID-19 crisis. It believes, absent any CMA clearance decision, that it continues to be a very real possibility in the future. Given the strategic nature of the investment of Amazon and its position in the UK market, JETA believes that the Transaction will remove incentives for Amazon to enter or, at the very least, will ensure it has limited incentives to compete effectively as an independent competitor. 9. JETA, like other parties who have been following developments in this case, is therefore concerned by the very sudden U-turn in the CMA's decision-making. Whilst JETA does not question the very serious and perturbing nature of the COVID-19 crisis, it does not believe that this creates a "carte blanche" to assume permanent, irreversible negative impact on businesses, particularly those who are in the business of delivering food to people at home in circumstances that align with social distancing rules. 3 Provisional Findings, paras 3.18, 3.19-3.22, 3.28, 3.29, 3.33, 3.54. 4 Provisional Findings, para 3.83. 2 / 18 NON- CONFIDENTIAL 10. JETA notes that the crisis should not offer the opportunity to circumvent the usual, robust CMA review processes. In particular, the CMA must ask itself, the parties and relevant third party experts - whether Deliveroo is providing fully accurate information and context about the impact of COVID-19 on its business and if so, whether it took sufficient steps to mitigate for and counteract any negative effects of the current situation, as other players in this sector have been forced to. In light of the sudden, but likely relatively short-lived, measures that have been put in place to deal with the effects of COVID-19, JETA would urge the CMA to be extra vigilant and diligent in terms of ensuring that the basis on which it makes its ultimate decision in this case is sound, appropriate in the longer term and based on verifiable evidence. 11. All markets in which JETA operates have been experiencing significant disruption as a result of COVID-19. However, most countries tend to be (one to six weeks) ahead of the UK in terms of moving out of a position of (near) total lockdown to a more sustainable economic model. JETA therefore asks the CMA to take note of its observations in this paper, as an expert in food ordering and delivery both in the UK and many EU Member States. 12. Should the CMA nonetheless decide that a clearance decision is warranted, JETA assumes that it will mitigate to the maximum extent possible: (i) Amazon's influence on Deliveroo; and (ii) incentives on Amazon to decide not to compete as an independent party. At Section 3 of this submission, JETA proposes some ways in which such considerations could be safeguarded. 2 THE EXITING FIRM SCENARIO Impact of COVID-19 crisis 13. JETA understands that in assessing whether Deliveroo would have exited the market absent the merger, the CMA considered: i) whether the impact of COVID- 19 made exit inevitable; ii) whether Deliveroo had alternative potential funding options to it; iii) whether Deliveroo could restructure its operations to support its liquidity to avoid insolvency; and iv) whether alternative investments were available to Deliveroo. 14. The CMA considered the evidence it received from Deliveroo on the financial impact of COVID-19 on its business. In particular, on the supply side, Deliveroo has apparently experienced a significant reduction in the number of restaurants operating during the crisis, and the restaurants that have closed or reduced operations have included major brands. On the demand side, Deliveroo stated that it experienced a significant decline in customer orders5. 5 Provisional Findings, para 4.36 3 / 18 NON- CONFIDENTIAL 15. Based on the information provided by Deliveroo, the CMA appears to now be convinced that, without assurance that it will receive additional funds in the immediate future, Deliveroo's directors would be obliged to declare it insolvent.6 The CMA also provisionally concludes that no less anti-competitive investor is available.7 16. JETA agrees with the CMA that COVID-19 has had a significant and wide-ranging impact on businesses operating all over the world, including Deliveroo. Although the effects of the COVID-19 crisis are indeed unprecedented, the CMA's Provisional Findings fail to outline that, alongside the reduction in the number of operating restaurants as a result of COVID-19, two developments took place which had (or should have had) a positive impact on Deliveroo's business, namely: (i) increased demand for food delivery; and (ii) increased demand for delivery of groceries. Both developments are examined in more detail below. Increased demand for food delivery as a result of COVID-19 crisis 17. Research shows that the food delivery market has not been affected in the same way as many other industries. In fact, it is one of the industries actually experiencing significant increased demand, as a result of the COVID-19 pandemic. With high street restaurants closed for dining, more people staying indoors and practicing social distancing, online food marketplaces, including Deliveroo, Takeaway and UberEats are now experiencing increased demand for their services and have taken steps, like offering contactless delivery, to ensure they can continue to deliver despite the lockdown.