Amazon's investment in Deliveroo faces a potential roadblock after the Competition & Markets Authority outlined "serious" concerns that the deal risks leaving customers and restaurants facing higher prices.
The online behemoth made a significant investment in Deliveroo in May, entitling it to a minority shareholding and the ability to participate in the management of the company. It prompted a CMA investigation into the potential impact that any influence by Amazon could have on the food-delivery sector.
The size of Amazon's investment was undisclosed, but it was the lead investor in a funding round worth $575m (£437m).
Amazon had previously launched a rival, Amazon Restaurants, in 2016. It was closed in 2018.
The CMA said in its findings on Wednesday that it was concerned the deal could "damage competition" between the two companies by discouraging Amazon from re-entering the food-delivery market.
It also said the investment could potentially harm competition in the growing convenience grocery delivery sector, given both Amazon and Deliveroo have a foothold in this market.
"If the deal were to proceed in its current form, there’s a real risk that it could leave customers, restaurants and grocers facing higher prices and lower-quality services as these markets develop," the regulator said.
"This is because the significant competition which could otherwise exist between Amazon and Deliveroo would be reduced."
Both companies have five working days to address the CMA's concerns or the regulator will proceed with an in-depth, lengthy investigation, it said.
Before the announcement of Amazon's investment, Deliveroo was reported to be in discussions with another rival, Uber, on a potential sale.