Mergers: Commission opens in-depth investigation into the proposed acquisition of iRobot by Amazon

This article is brought to you in association with the European Commission.

The European Commission has opened an in-depth investigation to assess, under the EU Merger Regulation, the proposed acquisition of iRobot by Amazon. The Commission is concerned that the transaction would allow Amazon to restrict competition in the market for robot vacuum cleaners (‘RVCs’) and to strengthen its position as online marketplace provider.

Amazon provides an online marketplace (the Amazon Stores), which allows retailers to advertise and sell products (including RVCs) to customers. Amazon is active as a retailer of various products (including RVCs) on its marketplace. Amazon also offers the Alexa voice assistant. iRobot manufactures RVCs and sells them also on Amazon’s online marketplace.

The Commission’s preliminary competition concerns

The Commission’s preliminary investigation indicates that the transaction may allow Amazon to: (i) restrict competition in the market for the manufacturing and supply of RVCs; and (ii) strengthen its position in the market for online marketplace services to third-party sellers (and related advertising services) and/or other data-related markets.

In particular, the Commission preliminarily found that:

• Amazon’s online marketplace is a particularly important channel to sell RVCs in several EU Member States.
• Amazon may have the ability and the incentive to foreclose iRobot’s rivals by preventing them from selling RVCs on Amazon’s online marketplace and/or by degrading their access to it through several strategies. This may include: (i) favouring iRobot’s RVCs in both non-paid (i.e., organic) and paid results (i.e., advertisements) displayed in Amazon’s marketplace; (ii) preventing iRobot’s rivals from sourcing certain advertising services; and/or (iii) raising the costs of iRobot’s rivals to advertise and sell their RVCs on Amazon’s marketplace. Such foreclosure strategies could restrict competition in the market for the manufacturing and supply of RVCs, leading to higher prices, lower quality, and less innovation for consumers.
• Amazon may have the ability and the incentive to foreclose iRobot’s rivals by preventing them fromaccessing theexisting and/or future Application Programming Interfaces of Amazon’s Alexa software as well as the ‘Works with Alexa’ (‘WWA’) certification and/or by degrading such access. Interoperability with the Alexa software and access to the WWA certification appear to be important selling points for RVC manufacturers and suppliers to compete.
• Amazon would obtain access to iRobot’s users’ data, including: (i) information provided by iRobot’s RVCs users; (ii) information collected by iRobot’s RVCs; and (iii) information collected by iRobot from third parties. This data may provide Amazon with an important advantage in the market for online marketplace services to third-party sellers (and related advertising services) and/or other data-related markets. For example, iRobot’s data may allow Amazon to better rank organic results and advertisements on its own marketplace and/or to better personalize and target the advertisements, making it more difficult for rival marketplace providers to match Amazon’s online marketplace services. Thus, the transaction may raise barriers to entry and expansion for Amazon’s competitors to the detriment of consumers.

The Commission will now carry out an in-depth investigation into the effects of the proposed transaction to determine whether its initial competition concerns are confirmed.

The Commission closely cooperated with other competition authorities during the initial investigation and will continue such cooperation during the in-depth investigation.

The proposed transaction was notified to the Commission on 1 June 2023. The Commission now has 90 working days, until 15 November 2023, to take a decision. The opening of an in-depth inquiry does not prejudge the outcome of the investigation.

Companies and products

Amazon is aUS-based multinational company. It provides an online marketplace, which allows retailers to advertise and sell products (including RVCs) to customers. Amazon is active as a retailer of various products (including RVCs) on its Amazon Stores. Amazon also offers the Alexa voice assistant.

iRobot is a US-based manufacturer of robot vacuum cleaners which iRobot sells also on Amazon’s online marketplace.

Merger control rules and procedures

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the European Economic Area or a substantial part of it.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

In addition to this proposed transaction, there are currently four on-going Phase II merger investigations: (i) the proposed creation of a joint venture between Orange and MasMovil; (ii) the proposed acquisition of eTraveli by Booking; (iii) the proposed acquisition of Asiana by Korean Air; and (iv) the proposed acquisition of VMware by Broadcom.

More information will be available on the Commission’s competition website, in the public case register under the case number M.10920.