European Union regulators have sent Amazon a formal statement of objections setting out competition concerns over its proposed takeover of robot vacuum maker, iRobot.
The move does not confirm that the EU will seek to block the deal but it shows that antitrust regulators remain concerned. This could push Amazon to offer remedies to EU authorities to settle the investigation and avoid the risk of claims being blocked.
Amazon has already lowered its takeover price for iRobot – which was originally an all-cash offer of $1.7BN in August 2022 – by 15% due to the increase in debt its target has acquired while regulatory snags delayed closing the deal at the original purchase price.
The bloc has been closely scrutinizing the Amazon-iRobot deal since July when the EU announced its in-depth review. The Commission said at the time that it was concerned that the transaction would allow Amazon to restrict competition in the market for robot vacuum cleaners (RVCs) and strengthen its position as an online marketplace provider in several ways.
Today’s EU announcement, after months of in-depth scrutiny of how the transaction will affect competition, outlines formal concerns for Amazon’s response. The EU’s objections point to the risks of expropriation.
The EU said its concerns focused on whether the deal would give Amazon the ability and incentive to usurp rivals iRobot by deploying strategies aimed at preventing competitors from selling RVCs in the Amazon market and / or making it more difficult for them to do so – such as delisting competing products; reducing their visibility in non-paid (ie organic) and paid results (ie ads) displayed in his market; limiting their access to certain widgets it activates (such as the “other products you may like” feature) or “certain commercially attractive product labels” (eg ‘Amazon’s choice’ or ‘ Works With Alexa’); and/or by directly or indirectly raising the costs of iRobot’s competitors in advertising and selling their RVCs in its market.
“Amazon may have the ability to overtake iRobot’s rivals because Amazon’s online marketplace is an important channel to sell RVCs in France, Germany, Italy, and Spain,” the Commission wrote in a press release. “RVC customers in these countries increasingly rely on Amazon both in terms of product discovery as well as for their final purchase decision.”
The Commission is also concerned that Amazon has an incentive to foreclose on iRobot’s rivals because it would be economically beneficial for it. “The combined entity will likely gain more from increased sales of iRobot RVCs, than it will lose from lower sales of iRobot’s rivals and other Amazon-related products. Such gains include of the benefits from the additional data obtained from iRobot users,” it said.
If Amazon were to deploy such foreclosure strategies, the Commission’s view at this stage of the investigation would be to prevent competition in the market for RVCs, leading to “higher prices, lower quality, and less innovation for consumers”.
The EU reached this pass to raise formal concerns after conducting what it described as an “extensive investigation to understand the market and the potential impact of the deal”, which it said included analyzing internal documents provided by Amazon and iRobot and gathering. views from market participants such as suppliers of RVCs and other smart home devices, as well as from providers of online sales channels.
It also said it cooperated closely with other competition authorities during the initial investigation and the in-depth investigation, adding that it would continue to do so during the remaining in-depth investigation. Although the UK competition authority had already cleared the deal in June.
Amazon has been contacted for a response to the EU statement of objection. A company spokesperson sent us this statement in which it claimed that iRobot faces “intense competition” from other RVC suppliers:
We continue to work through the process with the European Commission and are focused on answering its questions and any identified concerns at this stage. iRobot, facing fierce competition from other vacuum cleaner suppliers, offers practical and inventive products. We believe that Amazon can offer a company like iRobot the resources to accelerate innovation and invest in critical parts while lowering prices for consumers.
Late last year the EU settled with Amazon over two earlier competition probes – one examining antitrust concerns about Amazon’s use of merchant data to bolster its own retail business; and the second which looks at how it operates the “Buy Box” and its Prime loyalty program.
In those cases Amazon agreed to a series of commitments to end the investigations – including saying it would stop using non-public data from its marketplace sellers and improve transparency for business people; and promises to treat all sellers equally, regardless of whether they pay for its logistics services.
At the time the EU’s then competition chief, Margrethe Vestager, blasted the outcome as setting what she called “new rules for how Amazon operates its business in Europe” – arguing that the settlement means the ecommerce giant will “no longer abuse its dual role” as marketplace operator and own brand retailer; and further claims that the result will ensure that “competing independent sellers and carriers as well as consumers will benefit from these changes that open up new opportunities and options.”
Given the commitments already obtained by the EU from Amazon after previous investigations it is interesting to see that the bloc remains concerned with the levers the ecommerce behemoth still has at its disposal to be able to influence the results of competition in its market vis -a-vis iRobot vs rival robot vacs.
Amazon has since also been named a gatekeeper under the EU’s shiny new competition regulation, the Digital Markets Act – which lists its marketplace as a core platform service. This designation means that Amazon must comply with a series of obligations up front, which includes restrictions on self-interest.