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An edited picture displaying an iRobot roomba with Amazon branding. | Supply: iRobot, Amazon

The European Fee shared an replace on its investigation into Amazon.com Inc.’s $1.7 billion acquisition of iRobot Corp. The EC knowledgeable Amazon yesterday that its preliminary view is that the acquisition might prohibit competitors available in the market for robotic vacuum cleaners. 

iRobot shares have had a risky week. On Friday, its shares have been up 34% when Reuters reported that the EC was set to offer unconditional approval for the acquisition. Reuters cited three folks accustomed to the matter in its reporting. 

Nonetheless, the corporate’s shares dropped 17% on Monday when the EC made its preliminary assertion. The fee first opened its investigation into the acquisition in July and is predicted to rule on the deal by Feb. 14.

Amazon first introduced its plans to buy iRobot in August 2022. The deal was shortly placed on maintain in September 2022, when the U.S. Federal Commerce Fee formally began an antitrust investigation.  

Prior to now few months, the European Fee has carried out a wide-ranging investigation to higher perceive the robotic vacuum market and the potential influence of the deal. This investigation has included analyzing inner paperwork supplied by Amazon and iRobot.

The EC has additionally gathered views from market individuals, together with suppliers of robotic vacuums and different good residence units, in addition to suppliers of on-line gross sales channels. 

The EU specifies antitrust issues

The European Fee’s issues with the merger focus on Amazon’s capacity to throttle iRobots’ competitors in its on-line market. The fee mentioned it’s involved that Amazon might hamper rival robotic vacuum makers’ capacity to successfully compete with iRobot within the European Union or nationwide markets. 

Particularly, the EC mentioned that “Amazon might have the power and incentive to foreclose iRobot’s rivals.” It might do that by participating in a number of methods aimed toward making it tougher for rivals to promote robotic vacuums on Amazon. The corporate might do that by: 

• Delisting rival robotic vacuum makers
• Lowering the visibility of rival vacuum makers in each non-paid and paid outcomes
• Limiting entry to sure widgets, such because the “different merchandise you would possibly like” widget, or sure commercially engaging product labels, like “Amazon’s Alternative” or “Works with Alexa”
• Immediately or not directly elevating the prices of iRobot’s rivals 

The fee discovered that Amazon was a very necessary channel for promoting robotic vacuums in France, Germany, Italy, and Spain. Customers in these nations depend on Amazon for product discovery and to make their remaining buying choices, it mentioned. 

Does Amazon has a monetary incentive to restrict iRobot competitors?

Not solely did the European Fee say that Amazon has the power to throttle iRobot’s competitors in its market, however it famous that it could have a monetary incentive to take action. 

The fee mentioned that after the merger, Amazon might acquire extra from further gross sales of iRobot’s vacuums than it might lose from fewer e-commerce gross sales of iRobot’s rivals and different associated merchandise. The EC mentioned these features might embody further information gathered from iRobot’s customers. 

Any throttling of competitors on Amazon’s market might result in larger costs, decrease high quality, and fewer innovation for shoppers, mentioned the EC.

The worldwide marketplace for robotic vacuum cleaners might expertise a compound annual development fee (CAGR) of 6.9%, increasing from $6.41 billion in 2023 to $8.37 billion by 2027, in accordance with Analysis and Markets. It famous that Asia-Pacific and Western Europe are the biggest markets.

Whereas the EU hasn’t made its remaining choice on whether or not Amazon can purchase iRobot, the scenario isn’t trying nice for the retail big.