EU regulators have sent Amazon a formal statement of objections outlining competition concerns over its proposed acquisition of robotic vacuum maker, iRobot.
The move does not confirm that the European Union will seek to block the deal, but it shows that antitrust regulators remain concerned. It could therefore prompt Amazon to provide remedies to EU authorities to settle the investigation and avoid the risk of the acquisition being blocked.
Amazon has already cut the price of its iRobot acquisition — originally a $1.7 billion all-cash offer in August 2022 — by 15% due to increased debt carried by its target while regulatory hurdles delayed closing the deal at the original purchase price. .
The European Union has been closely examining the Amazon-iRobot deal since July when the EU announced its in-depth investigation. The Commission said at the time that it was concerned that the deal would allow Amazon to restrict competition in the market for robotic vacuum cleaners (RVCs) and strengthen its position as an online market provider in several ways.
Today’s EU announcement, after several months of in-depth examination to consider how the deal would affect competition, makes clear the official concerns Amazon must respond to. The EU’s objections focus on the risk of foreclosure.
The EU says its concerns focus on whether the deal would give Amazon the ability and incentive to block iRobot’s competitors by deploying strategies aimed at preventing competitors from selling RVCs on Amazon’s marketplace and/or making it more difficult for them to do so — such as delisting. competing products; Reduce their visibility in both unpaid (i.e. organic) and paid (i.e. advertising) results displayed in the marketplace; Restrict their access to certain tools you work with (such as the “Other products you might like” feature) or “certain commercially attractive product labels” (such as “Amazon’s Choice” or “Works with Alexa”); and/or by directly or indirectly raising the costs of iRobot’s competitors to advertise and sell their regional value chains in its marketplace.
“Amazon may have the ability to exclude iRobot’s competitors because Amazon’s online marketplace is a particularly important channel for the sale of RVCs in France, Germany, Italy, and Spain,” the commission wrote in a memo. press release. “RVC customers in these countries particularly rely on Amazon both in terms of product discovery and in terms of making the final purchasing decision.”
The Commission is also concerned that Amazon may have an incentive to alienate iRobot’s competitors because it may be economically profitable for it to do so. “The combined entity is likely to gain more from additional sales of iRobot RVCs than it will lose from reduced sales of iRobot’s competitors and other related products on Amazon. These gains suggest benefits from the additional data collected from iRobot’s users.”
If Amazon deploys these foreclosure strategies, the Commission’s view at this stage of the investigation is that they could limit competition in the regional value chain market, leading to “higher prices, lower quality, and reduced innovation for consumers.”
The EU has come to the point of raising formal concerns after conducting what it describes as a “wide-ranging investigation to understand the market and potential impact of the deal,” which it says included analyzing and compiling internal documents provided by Amazon and iRobot. Views of market participants such as regional value chain suppliers and other smart home devices, as well as from online sales channel providers.
It also says that it cooperated closely with other competition authorities during both the preliminary investigation and the in-depth investigation, adding that it will continue to do so during the remainder of the in-depth investigation. Although the UK Competition Authority had already cleared the deal in June.
Amazon has been contacted to respond to the EU’s statement of objections. A company spokesperson sent us this statement claiming that iRobot faces “intense competition” from other RVC suppliers:
We continue to work through the process with the European Commission and are focused on addressing its questions and any specific concerns at this stage. Facing stiff competition from other vacuum cleaner suppliers, iRobot offers practical and innovative products. We believe Amazon can provide a company like iRobot with the resources to accelerate innovation and invest in important features while lowering prices for consumers.
Late last year, the European Union reached a settlement with Amazon over two previous competition investigations — one delving into antitrust concerns about Amazon’s use of merchant data to boost its retail business; The second looks at how Buy Box and its main loyalty program operate.
In those cases, Amazon agreed to a series of commitments to end the investigations — including saying it would stop using non-public data from marketplace sellers and enhance transparency for merchants; And pledge to treat all sellers equally, regardless of whether they pay for its logistics services.
At the time, then-EU competition chief Margrethe Vestager touted the outcome as setting out what she called “new rules for how Amazon conducts its business in Europe” — arguing that the settlement meant the e-commerce giant “can no longer abuse its dual role” as marketplace operator. and private label retailer; Further claiming that the outcome will ensure that “retailers, competing independent carriers as well as consumers will benefit from these changes that open up new opportunities and options.”
Given the commitments the EU has already extracted from Amazon following those previous investigations, it’s interesting to see the bloc still concerned about the levers the e-commerce giant still has at its disposal to potentially influence competitive outcomes in its iRobot versus rival robot market.
Since then, Amazon has also been named a gatekeeper under the EU’s shiny new pre-competition regulation, the Digital Markets Act – which lists its marketplace as an essential platform service. This designation means that Amazon must make a series of prior commitments, which include restrictions on self-preference.