European Regulators Raise Concerns Over Amazon's Acquisition of iRobot

Yesterday, European regulators announced that Amazon's proposed acquisition of iRobot, a robot vacuum maker, could potentially harm competition. The European Commission, which serves as the executive arm of the European Union and the top antitrust enforcer, informed Amazon of its "preliminary view" following an investigation that began in July.

The news of the regulators' concerns immediately raised alarm among investors, leading to a significant drop in the shares of iRobot Corp., a company based in Bedford, Massachusetts, known for its popular Roomba vacuum. iRobot shares plummeted more than 17% on Monday, reflecting investors' worries about the potential negative impact of the acquisition.

European regulators specifically expressed worries that the buyout could hinder iRobot's rivals from effectively competing on Amazon's marketplace, which they consider a crucial platform for sales of robot vacuum cleaners in France, Germany, Italy, and Spain. If the deal were to go through, the commission believes that Amazon may have the incentive to impede competitors from selling their products on its marketplace or make it extremely challenging for them to do so.

The commission outlined various potential strategies that Amazon could employ to stifle competition. They suggested that Amazon might reduce the visibility of a competitor's product on its marketplace or limit access to certain labels, such as "Amazon's choice," that tend to attract more customers. Additionally, Amazon could find ways to increase the costs for iRobot's rivals to advertise and sell their products on its platform.

The European Commission has until February 14 to reach a final decision on the deal. It is worth noting that Amazon may choose to address some of the concerns raised by the regulators. Alexandra Miller, an Amazon spokesperson, stated that the company is actively working with the commission and is focused on addressing their questions. Miller emphasized that iRobot offers practical and innovative products, facing fierce competition from other vacuum cleaner suppliers. Amazon believes that it can provide iRobot with the necessary resources to accelerate innovation, invest in critical features, and lower prices for consumers.

Amazon's acquisition of iRobot was initially announced last year for a total of $1.7 billion. However, the value of the deal has since declined by 15% after iRobot incurred new debt. This decline, coupled with concerns from anti-monopoly organizations, has raised further apprehension regarding the e-commerce giant's dominance in the smart home market. Notably, British antitrust regulators cleared Amazon's purchase of iRobot in June. The acquisition is currently undergoing review in the United States by the Federal Trade Commission.

Despite the concerns raised, Amazon's stock experienced a relatively small increase of less than 1% on Monday, indicating that investors may not view the potential consequences of the acquisition as significantly impactful.