In a surprising turn of events, the proposed $1.7 billion merger between Amazon and Roomba maker, iRobot, has been aborted. Announced on Monday, the two tech giants cited the lack of a “path to regulatory approval in the European Union” as the main reason for the deal’s collapse. The joint statement also expressed the companies’ disappointment at the outcome, pointing the finger squarely at EU regulators.
Amazon and iRobot Speak Out
Amazon was vocal in its frustration, stating that the EU’s decision would hinder the growth of smaller companies like iRobot. According to Amazon, the ability to expand and offer new products at lower prices would be compromised.
David Zapolsky, Amazon’s senior vice president and general counsel, criticized the EU’s regulatory hurdles. He argued that they discourage entrepreneurs and limit their options for success, ultimately hurting consumers and fair competition.
As a result of the merger’s dissolution, Amazon will pay iRobot a hefty $94 million termination fee, reported the Wall Street Journal. Unfortunately, iRobot also announced a substantial workforce reduction, laying off about 31% of its employees.
The EU’s Increasing Scrutiny of U.S. Big Tech
This isn’t Amazon’s first encounter with European regulators. Over the years, the EU has been increasingly proactive in curbing the expansion of dominant U.S. tech companies, including Google, Apple, and Amazon. The EU’s top competition watchdog, Margrethe Vestager, has been particularly vigilant in scrutinizing these companies for their outsized influence in online marketplaces and digital advertising.
Last year, the EU passed two robust pieces of legislation: the Digital Services Act (DSA) and the Digital Markets Act (DMA). The DSA designates Amazon as a “very large online platform”, imposing additional restrictions on its digital advertising data. The DMA, on the other hand, governs online marketplaces, designating Amazon as a “gatekeeper” and prohibiting it from giving preferential treatment to its own services.
An Amazon spokesperson responded to the DSA’s restrictions, stating that the majority of Amazon’s revenue comes from online retail sales, not digital advertising. They also pointed out that Amazon is not the largest retailer in any of the countries where it operates.
A Deal Doomed From the Start?
From the get-go, Amazon’s proposed acquisition of iRobot was fraught with challenges. The EU launched an investigation in July, expressing concerns that Amazon might use its position to harm other third-party sellers of robotic vacuums that compete with Roomba. There were also fears that Amazon would restrict competitors’ access to the Amazon Alexa interface, which can be used to control a Roomba.
By November, the EU had formally informed Amazon of its investigation’s findings. The European Commission communicated that a final decision would be made by February 14th. However, that deadline is now irrelevant, as the two companies have voluntarily terminated their agreement.
Vestager’s Crusade Against Big Tech
The European commissioner for competition, Margrethe Vestager, has been instrumental in the EU’s crackdown on Big Tech. She has previously reached a settlement with Amazon, forcing the company to modify its business practices. Google parent Alphabet has also been hit with $9 billion in fines since 2017, while Facebook and WhatsApp owner Meta have come under scrutiny for their role in facilitating online sales. Apple had to overhaul its App Store to comply with new EU regulations or risk being banned from the continent.
As we continue to monitor these developments, the question remains: How will these regulatory measures affect the future of Big Tech? Subscribe to the Eye on AI newsletter to stay informed on how AI is shaping the future of business.
