EU says Amazon, iRobot merger ‘may restrict competition’

An edited image showing an iRobot roomba with Amazon branding. | Source: iRobot, Amazon

The European Commission shared an update on its investigation into Amazon.com Inc.’s $1.7 billion acquisition of iRobot Corp. The EC informed Amazon yesterday that its preliminary view is that the acquisition may restrict competition in the market for robot vacuum cleaners. 

iRobot shares have had a volatile week. On Friday, its shares were up 34% when Reuters reported that the EC was set to give unconditional approval for the acquisition. Reuters cited three people familiar with the matter in its reporting. 

However, the company’s shares dropped 17% on Monday when the EC made its preliminary statement. The commission first opened its investigation into the acquisition in July and is expected to rule on the deal by Feb. 14.

Amazon first announced its plans to purchase iRobot in August 2022. The deal was quickly put on hold in September 2022, when the U.S. Federal Trade Commission officially started an antitrust investigation.  

In the past few months, the European Commission has conducted a wide-ranging investigation to better understand the robot vacuum market and the potential impact of the deal. This investigation has included analyzing internal documents provided by Amazon and iRobot.

The EC has also gathered views from market participants, including suppliers of robot vacuums and other smart home devices, as well as providers of online sales channels. 

The EU specifies antitrust concerns

The European Commission’s concerns with the merger center around Amazon’s ability to throttle iRobots’ competition in its online marketplace. The commission said it is concerned that Amazon could hamper rival robotic vacuum makers’ ability to effectively compete with iRobot in the European Union or national markets. 

In particular, the EC said that “Amazon may have the ability and incentive to foreclose iRobot’s rivals.” It could do this by engaging in several strategies aimed at making it more difficult for rivals to sell robotic vacuums on Amazon. The company could do this by: 

• Delisting rival robot vacuum makers
• Reducing the visibility of rival vacuum makers in both non-paid and paid results
• Limiting access to certain widgets, such as the “other products you might like” widget, or certain commercially attractive product labels, like “Amazon’s Choice” or “Works with Alexa”
• Directly or indirectly raising the costs of iRobot’s rivals 

The commission found that Amazon was a particularly important channel for selling robotic vacuums in France, Germany, Italy, and Spain. Consumers in these countries rely on Amazon for product discovery and to make their final purchasing decisions, it said. 

Does Amazon has a financial incentive to limit iRobot competition?

Not only did the European Commission say that Amazon has the ability to throttle iRobot’s competition in its marketplace, but it noted that it may have a financial incentive to do so. 

The commission said that after the merger, Amazon could gain more from additional sales of iRobot’s vacuums than it would lose from fewer e-commerce sales of iRobot’s rivals and other related products. The EC said these gains could include additional data gathered from iRobot’s users. 

Any throttling of competition on Amazon’s marketplace could lead to higher prices, lower quality, and less innovation for consumers, said the EC.

The global market for robotic vacuum cleaners could experience a compound annual growth rate (CAGR) of 6.9%, expanding from $6.41 billion in 2023 to $8.37 billion by 2027, according to Research and Markets. It noted that Asia-Pacific and Western Europe are the largest markets.

While the EU hasn’t made its final decision on whether Amazon can acquire iRobot, the situation isn’t looking great for the retail giant. 

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