The European Union’s competition watchdog wants to block Amazon’s £1.3 billion acquisition of iRobot, the maker of the famous “Roomba” mart vacuum. They had given the green light to the purchase at first, until the European Commission raised concerns about the possibility of a lack of competition in the robot vacuum market. The EC’s worry is that if Amazon favours iRobot’s products on the online marketplace, it could be difficult for other vacuum brands to compete.
This is a ‘setback’ for Amazon given the fact that they now want to compete in the smart home market as well. Matt Schruers, president of the tech lobbying group Computer and Communications Industry Association, spoke om the impact this could have on consumers, saying, “If the objective is to have more competition in the home robotics sector, this makes no sense.” The decision by the European Commission is expected by 14 Feb, as the consensus among its 27 top political leaders awaits.
The news of the possible rejection has already led to a huge dip in iRobot’s shares, having lost almost 40% in after-hours trading, which goes to show the uncertainty surrounding the deal and its how it could affect both companies in return.
Amazon Receives Early Warning from EU Officials
In a recent meeting with European Commission officials, Amazon was informed that its proposed acquisition of iRobot is likely to face rejection. The competition officials conveyed their concerns about the potential negative impact on competition in the robot vacuum cleaner market.
This concern aligns with the European Commission’s broader scrutiny of Big Tech deals and their potential consequences on market competition. The rejection, if confirmed, may make Amazon to reconsider the deal or explore alternative ways around the regulations.
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Market Reacts as iRobot Shares Plummet
The Wall Street Journal mentioned that European Commission officials conveyed to Amazon representatives the imminent rejection of the £1.3 billion deal. This news intensified market uncertainty, as iRobot’s stock closed well below the agreed acquisition price of £47 per share, reaching £18.
The acquisition journey has been tumultuous, with regulatory scrutiny from the U.S., UK, and EU. The UK’s Competition and Markets Authority approved the deal in June, but European regulators initiated a formal investigation in November, expressing concerns about potential competition restrictions. Amazon, having missed the deadline for submitting remedies to address these concerns, now faces the prospect of the deal being blocked by the EU.
EU Antitrust Regulators Set to Block Amazon’s iRobot Acquisition
The regulator’s main worry is that Amazon could use its online marketplace dominance to impede iRobot’s rivals, particularly in main European markets like those of France, Germany, Italy, and Spain.
Despite the possible solutions that could be addressed via the Digital Markets Act, EU officials appear inclined to block the deal due to the lengthy enforcement process and uncertainty around the new ruling. A veto affect the acquisition, and it could also set a precedent for future deals involving major tech players. The rejection could prompt Amazon to reassess its acquisition strategies and enter different markets with their regulations, with more caution.