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Amazon’s iRobot deal likely to garner close regulatory scrutiny, deserved or not
01 June 2023 16:41 by Natalie McNelis
Amazon's plan to buy iRobot, notified to the European Commission today, is a deal that probably wouldn’t have raised any regulatory eyebrows a few years ago.
Indeed, its acquisition in early 2018 of digital doorbell service Ring sailed through without any competition pushback whatsoever. Now though, the iRobot deal will probably go through the regulatory wringer — and it might not come out in one piece in every jurisdiction.
Last August, Amazon announced its $1.7 billion acquisition of iRobot, a company best known for its Roomba robot vacuum cleaner. It also makes the floor mopper Braava and other autonomous cleaning devices.
These machines make up a class of products that the e-commerce giant doesn’t have. The closest Amazon comes is Astro, household robot. Like Roomba, Astro travels from room to room, only not for cleaning, but for home security.
iRobot has said in its corporate filings that it faces direct competition from a host of companies, including robot vacuum cleaner specialists such as Ecovacs, Neato and Roborock, as well as major appliance makers such as Panasonic, LG and Samsung. Chinese competitors, particularly Xiaomi, are also vying for the market. Amazon is not mentioned as a competitor.
Setting the stage
Yet detractors have already sounded the alarm, saying the deal would strengthen Amazon’s strong position in smart home devices, as well as reduce iRobot's incentive to innovate in markets where the tech giant is already present, such as smart speakers.
They’ve also hinted that this is a “killer” or “reverse killer” acquisition, saying “Amazon’s acquisition of iRobot is straight out of its well-honed playbook of buying out promising rivals, instead of competing on its own merits”. The theory is that Amazon is buying Roomba to “kill” it and replace it with its own offering, or that it would buy Roomba and subsequently mothball its own projects, rather than pursue them.
Critics have even gone so far as to say that combining iRobot's suite of smart products with Amazon’s virtual assistant/smart speaker Alexa, smart speaker Echo and smart doorbell Ring could create a “home knowledge juggernaut” that raises data privacy concerns.
Traditionally, such theories of harm could only go so far in a case without any direct overlap between the merging parties' businesses.
But the iRobot deal comes after regulators have vowed to clamp down on Big Tech's galloping expansion across markets. To do so, merger regulators globally have shown a growing willingness to test the limits of competition law with novel theories of harm.
Conscious of the hostile regulatory environment it’s facing, Amazon started the merger-control process early. The run-up to its EU notification took months of prenotification, with countless meetings, questions and exchanges, and the commission had already reviewed thousands of internal documents, MLex understands.
New theories, new solutions
Particularly where the EU merger regulator identifies a risk on the basis of novel theories of harm, it’s also shown itself willing to entertain creative solutions. Just last week, competition chief Margrethe Vestager said a “binary” approach to merger control — block or clear, with nothing in between — is not EU policy.
A case in point is Google’s 2019 acquisition of fitness tracker Fitbit. Google also argued that it barely had a competing product with the Pixel watch at the time, that Fitbit wasn’t the market leader, and that it had plenty of competition from the likes of Garmin, Samsung and Xiaomi. But the deal still faced vociferous opposition, with privacy concerns also being flagged.
The commission ultimately cleared the Google-Fitbit deal with a battery of behavioral commitments, and other regulators rode its coat tails. The deal wasn't reviewed in the UK, but the CMA's head at the time, Andrea Coscelli, said it probably wouldn't have accepted similar commitments.
The UK probe into the Amazon-iRobot deal was formally opened on April 18, and the CMA has until June 16 to decide whether it needs an in-depth investigation.
The deal also faces tough regulatory scrutiny in the US, where Lina Khan, a strident critic of Amazon in the past, heads the regulatory authority charged with vetting the deal, the Federal Trade Commission.
Amazon's filing for approval to the EU regulator may be the latest step in its campaign to get the deal over the line, but the EU review likely won't be its biggest problem, at least if Microsoft’s experience with its Activision Blizzard acquisition is anything to go by — given that deal was cleared in the EU after being blocked in the UK and with US regulators waiting in the wings to sink it.
“We’re working cooperatively with the relevant regulators in their review of this merger,” an Amazon spokesperson told MLex.
The commission case file number for the deal is M.10920.
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