UK competition policy undermines British start-ups

In the 24 years since I co-founded Index Ventures, I have never felt the need to speak out about the actions of a UK regulator. In fact, a thoughtful and forward-thinking regulatory environment has underpinned Britain’s status as Europe’s leading technology economy and made it the single biggest destination for the £5bn Index Ventures has invested in start-ups.
Entrepreneurs have been willing to go up against large, established incumbents here in part because they are confident that the rules of the game are fair, predictable and keep pace with change.
That is why recent decisions by the Competition and Markets Authority, including the review of Amazon’s planned investment in Deliveroo, are so concerning. It sets a dangerous precedent and exposes three ways in which the UK’s competition regime is becoming inadequate at a time when other EU countries, including France and the Netherlands, are moving to take advantage of Brexit by rolling out the red carpet for fast-growing tech companies.

Index and a number of our peers are investors in Deliveroo, so we have skin in the game. But the CMA’s more interventionist approach in this case, in the 13-month long review of PayPal’s purchase of iZettle, and with a similar outlook for Takeaway.com’s deal with Just Eat, have far broader negative implications for start-ups and for the industry’s assessment of the UK as a place to invest.

First, the CMA’s timeline is not fit for purpose when it comes to high-growth companies. By the time the regulator opines on Amazon-Deliveroo in June, it will have been nearly a year since it declared its intention to intervene. For a fast-growing start-up, that is an eternity to be waiting to access funding needed to expand, hire talent and remain competitive. Removing or restricting the ability of companies like Deliveroo to raise money is like asking a Formula One driver to wait in the pit while competitors race ahead.

The irony is that in its effort to protect the competitive health of the markets, the CMA may inhibit competition and reduce British consumers’ choices. Nothing in this week’s update suggests that the CMA is alive to these concerns.

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