In a surprising turn of events, Amazon and iRobot, the creators of the popular Roomba vacuum, revealed on Monday that they are terminating their proposed $1.7 billion merger. The decision was made due to a lack of a path towards regulatory approval within the European Union (EU), according to a joint statement from the companies.
The tech giant and the vacuum maker voiced their disappointment at the development, pointing fingers at the EU for creating obstacles that would hinder the growth of smaller companies like iRobot. They argue that such hurdles would stifle innovation and the release of new products at affordable prices.
Amazon’s Stand on the Merger Termination
Amazon’s senior vice president and general counsel, David Zapolsky, voiced his concern over the regulatory barriers. He stated, “Mergers and acquisitions like this help companies like iRobot better compete in the global marketplace, particularly against companies, and from countries, that aren’t subject to the same regulatory requirements in fast-moving technology segments like robotics.”
Zapolsky further added that such “undue and disproportionate regulatory hurdles discourage entrepreneurs,” and could be detrimental to competition and consumers, ironically, the very entities that the regulators aim to protect.
As a consequence of the deal falling apart, Amazon is set to pay iRobot a hefty $94 million termination fee. In addition, iRobot announced a layoff of about 31% of its employees, reports the Wall Street Journal.
The EU’s Stance on Big Tech
This isn’t the first time that Amazon, or U.S. Big Tech for that matter, has had a run-in with the EU regulators. The continent has been increasingly proactive in limiting the expansion of dominant tech companies. Several major tech players such as Apple, Google, and Amazon have been under the scrutiny of top competition watchdog Margrethe Vestager for their significant influence on online marketplaces and digital advertising businesses.
As part of its rigorous approach, the EU passed two comprehensive pieces of legislation last year – the Digital Services Act (DSA) and the Digital Markets Act (DMA). The DSA, aimed at curbing the influence of powerful tech companies, classified Amazon as a “very large online platform,” imposing additional restrictions on data usage for digital advertising. The DMA, on the other hand, designated Amazon as a “gatekeeper,” prohibiting it from giving its own services preferential treatment when recommending products.
A Deal Doomed from the Start?
Amazon’s proposed acquisition of iRobot was fraught with challenges right from the start, with the EU launching an investigation in July. The regulators expressed concerns that post-acquisition, Amazon might use its position as an online marketplace to harm other third-party sellers of robot vacuums competing with Roomba. They also feared that Amazon might unjustly restrict competitors’ access to the Amazon Alexa interface used to control a Roomba using voice commands.
By November end, the EU had formally communicated its investigation findings to Amazon, and the European Commission was expected to make a formal decision by February 14. However, that deadline became irrelevant as the two companies chose to voluntarily terminate the agreement.
The EU’s crackdown on Big Tech is spearheaded by Vestager, the European commissioner for competition. Her office has, in the past, levied hefty fines against major tech players, including Google’s parent company Alphabet, which was slapped with a total of $9 billion in fines since 2017. Apple, Facebook, and WhatsApp owner Meta have also felt the EU’s regulatory heat. Vestager even visited several tech companies in the U.S. earlier this month, including Alphabet and Apple.
While the termination of the Amazon-iRobot merger is a setback for the companies involved, it underlines the EU’s firm stance on regulating Big Tech to maintain a fair and competitive marketplace. It remains to be seen how these companies will navigate the increasingly regulated landscape to ensure their continued growth and success.
