Amazon.com Inc.’s $1.4 billion deal for Roomba maker iRobot Corp. risks being derailed unless the firms fix a list of competition concerns highlighted by the European Union’s antitrust arm.
The European Commission in Brussels issued a so-called statement of objections on Monday, warning how Amazon’s proposed deal could hurt the robot vacuum cleaner market and let the e-commerce giant strengthen its position in online marketplaces and in other data-related services.
IRobot shares fell 17% to $34.35 on Monday, the biggest drop in almost three years. The stock had soared last week after a Reuters report suggested the deal would be cleared unconditionally.
In its warning, the European Commission said Amazon could demote other robot vacuum cleaners on its platform and promote its own products with such labels as “Amazon’s choice” or “Works With Alexa.” The commission also said Amazon may find it “economically profitable” to shut out rivals.
While getting a statement of objections signals the EU has serious concerns with a transaction, most merging companies avoid a veto by addressing competition issues. Companies also have the right to challenge the preliminary findings of regulators in writing or at a hearing.
“Given the intense competition that iRobot faces, we are disappointed the EC has issued a Statement of Objections on the grounds that the proposed merger would restrict competition,” Colin Angle, iRobot’s chairman and chief executive officer, said in a statement. He said the Bedford, Massachusetts-based company continues to cooperate with the EC and other regulators.
An Amazon spokesperson said that the company is focused on addressing the European Commission’s concerns.
When Amazon announced its intention to buy iRobot last year, the acquisition was seen as a way for the e-commerce giant to expand its presence in the burgeoning market for smart-home gadgets. Besides baking its Alexa voice assistant into multiple devices, the company has fielded a personal robot named Astro, which has failed so far to resonate with consumers. Amazon now plans to sell a version of the robot as a rolling security guard for businesses, Bloomberg reported earlier this month.
IRobot’s sales surged during the pandemic as housebound families looked for faster ways to clean their residences. But demand for its products has since waned. Meanwhile, rivals have been rolling out their own robotic cleaning machines, prompting the company to file patent infringement lawsuits. In July, Amazon cut its offer by 15% to $51.75 a share to account for fresh financing taken out by iRobot as the merger review drags on.
The EU opened an in-depth probe into the deal in July, noting that it could thwart other robot vacuum cleaners and make it “more difficult for rival marketplace providers to match Amazon’s online marketplace services.”
Monday’s move puts the commission at odds once again with Britain’s Competition and Markets Authority, which gave the deal the green light after concluding that iRobot has a modest market power.
The US Federal Trade Commission has been eyeing the transaction since September 2022 over competition concerns and critiques by privacy activists that the deal would give Amazon too much control over the smart-home device market and valuable data about American’s homes.
Failure to remedy the European Commission’s concerns could mean that Amazon’s deal for iRobot faces the same fate as Booking Holdings Inc.’s €1.6 billion ($1.7 billion) deal for Sweden’s Etraveli Group, which was blocked by the EU in September. More recently, the EU raised concerns over Adobe Inc.’s $20 billion buyout of Figma Inc.
The commission currently has a deadline of Feb. 14 to decide whether to approve the iRobot deal with concessions, or to block it.