Shares of iRobot took a sharp dive, dropping by up to 19%, following a warning from the European Union’s (EU) antitrust watchdog regarding Amazon’s proposed $1.7 billion acquisition of the robotic vacuum cleaner manufacturer. This cautious approach by the EU highlights potential competition issues arising from the deal. The European Commission initiated an in-depth investigation into the acquisition in July and is expected to make a decision by February 14th. In a recent statement, the commission informed Amazon of its “preliminary view that its proposed acquisition of iRobot may restrict competition in the market for robot vacuum cleaners.”
Amazon promptly responded to the EU’s concerns, with a spokesperson emphasizing their commitment to resolving the matter with the commission. While acknowledging the fierce competition iRobot faces from other vacuum cleaner suppliers, the spokesperson expressed belief in Amazon’s ability to accelerate innovation, invest in critical features, and lower prices for consumers. Despite Amazon’s attempts to allay any doubts, iRobot underwent a temporary trading halt after the announcement, while Amazon’s shares experienced a modest increase of about 1.4%.
In addition to the EU investigation, the US Federal Trade Commission is conducting its own review of the acquisition. Meanwhile, the UK’s Competition and Markets Authority previously stated that the deal would not significantly impede competition within the country. Amazon publicly announced its intentions to acquire iRobot in August 2022, proposing an all-cash deal at $61 per share. The surge in iRobot shares on Friday, which saw a 39% increase, followed a Reuters report suggesting that the acquisition was set to receive unconditional antitrust approval from the EU.
The commission highlighted that Amazon possesses the capacity to hinder iRobot’s competitors’ access to its online platform. This could occur through various means, such as delisting rival products or reducing their visibility in search results and pivotal sections like the “other products you may like” section. Such tactics could potentially undermine fair competition in the market for robot vacuum cleaners. The European Commission will likely scrutinize Amazon’s influence further to evaluate the adverse effects it may have on the industry.
As the EU’s investigation continues, it remains to be seen if Amazon’s assurances and proposed benefits will be sufficient to address the commission’s concerns. Both iRobot and Amazon are undoubtedly keen to proceed with the deal, but they will need to confront potential obstacles head-on to secure regulatory approval. The outcome of the US Federal Trade Commission’s review is also of significant importance to the acquisition’s feasibility and ultimate success.
The EU’s antitrust watchdog’s warning has placed a cloud of uncertainty over Amazon’s acquisition of iRobot. While Amazon attempts to assuage concerns and highlight the potential advantages, the EU will carefully deliberate the consequences of the deal on competition within the robot vacuum cleaner market. As the investigation unfolds, the future of the acquisition hangs in the balance, with implications not only for iRobot and Amazon but also for the broader industry.