Amazon announced on Monday that it had cancelled its $1.45bn purchase of Roomba manufacturer iRobot, as EU regulators were preparing to block the deal over concerns about competition.
In a Monday statement, David Zapolsky Amazon senior vice-president said, “We are disappointed that Amazon could not complete its acquisition of iRobot.” This will prevent consumers from enjoying faster innovation and competitive prices that would have improved their lives.
EU antitrust regulators filed a formal objection to the deal in the past year. They warned that the transaction would limit competition by allowing online retail giants to reduce the visibility on their ecommerce website of robot vacuum cleaners from rival companies. This procedural step is seen as the first step in Brussels blocking the deal. A final decision must be reached by February 14th.
Margrethe Vestager said, “We also found, preliminarily, that Amazon would’ve had an incentive to close iRobot rivals, because it would’ve been economically profitable for them to do so,” Margrethe stated, EU competition commissioner Margrethe, after the announcement. This strategy would reduce competition and “lead to higher prices, lower product quality, and less innovation” for consumers.
Investors grew increasingly concerned that regulators might block the takeover, and its business performance was deteriorating. Shares of iRobot dropped about 10% to $15.19 at the start of trading on Monday. This brings their monthly decline to over 60%.
iRobot also announced that it was terminating the deal. This included a number of management changes including the departure from its long-time chief executive Colin Angle, and a restructuring which will result in the loss of 350 employees, or almost a third, of the company’s staff. iRobot’s revenue fell by 25 percent last year, to $891mn.
Andrew Miller will take over Angle’s role as iRobot chair. “We’re disappointed by the company’s performance in 2023, but we’re now focused on the future,” he said. Glen Weinstein, iRobot’s executive vice president and chief legal office, has been named interim chief executive.
Amazon has terminated its iRobot agreement just a little over a month after Adobe’s purchase of design software company Figma for $10bn was abandoned due to the growing opposition of regulators worldwide against Big Tech deals.
Amazon, which is active in many sectors, including ecommerce, cloud computing, video streaming, and groceries, has attracted the attention of regulators of the US, UK, and EU for some time.
The US Federal Trade Commission (FTC) filed a broad antitrust lawsuit in September against the company, alleging it was abusing its monopoly to harm consumers, competitors and sellers.
Amazon lowered its initial offer of $61 per share to $51.75 in July, last year. The maker of vacuum cleaners with autonomous capabilities had taken on additional debt.
In June, the UK’s Competition and Markets Authority approved the deal after concluding that Amazon had few financial and strategic incentives for undermining smaller competitors. Before the termination, the FTC was still reviewing the transaction.
Amazon is concerned that the failure of iRobot would lead to concerns over incentives in Europe created for start-ups whose innovative products could eventually make them targets for larger companies.
Regulators are looking more closely at other Big Tech acquisitions, amid concerns that these deals could be a way of killing competitors before they grow too large and become a threat to businesses.
In the past, antitrust investigators were accused of being overly permissive when they waived certain deals. For example, Facebook’s acquisitions of Instagram and WhatsApp and Google’s purchase of Fitbit.
Daniel Friedlaender is the head of Europe for the Computer and Communications Industry Association. This trade association counts Amazon as a member.
Friedlaender stated that “the size or profitability should not be used by EU regulators as an excuse to argue that it cannot innovate in another sector.” In this case, there are no valid reasons for preventing a company from buying a struggling domestic appliance producer.
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