European regulator is likely to block another billion-dollar acquisition

The European Union’s competition protection agency intends to block Amazon’s $1.4 billion offer to acquire iRobot, the maker of the popular Roomba vacuum cleaner, the Wall Street Journal reported.

Competition officials from the European Commission met with Amazon representatives on Thursday to discuss the deal, anonymous sources told the WSJ. Amazon was told during the meeting that the deal would likely be rejected, but the company has not yet commented on the situation.

The plan to reject the agreement still requires official approval from the 27 top political leaders of the Commission before a final decision can be issued. Historically, this process is unlikely to overturn the recommendation of the Commission’s Commissioner, Margrethe Vestager. The Commission has a deadline for a final decision by February 14.

As things currently stand, Amazon may withdraw from the deal to acquire the smart robot manufacturer, which was first mentioned back in August 2022.

iRobot’s shares fell nearly 40 percent in after-hours trading after the WSJ reported on the EU’s intentions. Specifically, iRobot’s shares closed trading at $23.62 on Thursday, significantly below the $61 per share that Amazon agreed to pay for the company, and below the $49.99 per share price the day before the acquisition announcement.

The European Commission officially expressed concerns about the agreement in November, stating that it could limit competition in the robotic vacuum cleaner market. Amazon could have the ability and incentive to harm iRobot’s competitors by preventing them from selling their products in the company’s marketplace or restricting their access, the Commission said.

Last week, Amazon missed the deadline to submit so-called remedies or commitments to the Commission in an attempt to address the concerns of competition regulators.

The EU’s decision contrasts again with the British antitrust supervisory body, which greenlit the agreement after determining that it would have a limited competitive effect on the British market. The UK’s Competition and Markets Authority (CMA) also diverged from its European counterpart by approving the deal with Booking when it attempted to acquire Etraveli and (at least initially) blocking Microsoft’s acquisition of Activision Blizzard. The CMA later changed its stance on the deal between Microsoft and Activision.

It is worth noting that European regulators have had their hands full in 2023. Along with several blockages mentioned, Meta was fined €400 million for violating privacy rules, and investments in artificial intelligence are under strict scrutiny across the EU.

When Amazon announced its intention to acquire iRobot in 2022, the potential acquisition was seen as a logical step for the e-commerce giant to expand its presence in the growing smart home device market. In addition to embedding its voice assistant Alexa into more devices, the company also introduced a personal robot named Astro.

In its early development, Astro struggled with mapping and navigating homes with complicated or unusual layouts, something iRobot had worked on for years with Roombas. Astro remains available only to select customers more than two years after its introduction, and Amazon now plans to sell a security version to companies, Bloomberg reported in November.

Although small for a company the size of Amazon, the acquisition of iRobot would be its fourth largest in history, trailing only the purchase of Whole Foods Market, MGM film studio, and One Medical.