Amazon cancels $1.4bn iRobot purchase over EU veto

The company behind Roomba reveals intentions to cut 31% of its workforce and replace its CEO following the failed acquisition

Amazon has scrapped its proposed $1.4 billion (£1.1 billion) purchase of iRobot, a robot vacuum cleaner company, due to opposition from the EU. As part of the termination, Amazon will pay iRobot a $94 million break fee. In response, iRobot promptly revealed plans to lay off 31% of its staff, equivalent to 350 employees, and announced the departure of its CEO.

On January 18th, The Wall Street Journal stated that the EU’s executive body was getting ready to obstruct the purchase of the company that produces Roomba vacuum cleaners. It had also communicated its intended stance to Amazon.

In a joint statement, Amazon and iRobot announced that the acquisition had “no avenue for regulatory clearance in the European Union,” which prevented them from proceeding with the deal.

David Zapolsky, Amazon’s general counsel, expressed that “Excessive and disproportionate regulatory obstacles dissuade entrepreneurs, who should view acquisitions as a viable path to success. This hampers both consumers and competition, contradicting the objectives regulators claim to uphold.

In November, the European Commission officially voiced objections to the agreement, citing its potential to limit competition in the robot vacuum cleaner sector. The commission’s worries encompassed Amazon’s potential to diminish the prominence of rival vacuum cleaners on its retail platform.

Amazon unveiled the deal in August 2022. The e-commerce giant, known for its ownership of the Alexa smart speaker and Ring doorbell, aimed to broaden its range of smart home devices.

Last year in June, the UK competition regulator approved the acquisition. Nonetheless, the deal had also been under review by the Federal Trade Commission (FTC), the US competition watchdog, which has filed a separate extensive lawsuit against the company.

Verity Egerton-Doyle, a partner at the UK law firm Linklaters, stated that Amazon’s decision not to provide remedies in reaction to the commission’s statement of objections, which outlines its formal concerns, had led to the failure of the deal.

“This was an unavoidable result following Amazon’s refusal to provide solutions to the European Commission,” she commented.

Anne Witt, an antitrust law professor at EDHEC Business School, remarked that the termination of the deal was a “remarkable development” since major tech companies have historically managed to address EU apprehensions regarding acquisitions. For instance, the EU endorsed Microsoft’s $69 billion acquisition of the video game maker Activision Blizzard last year.

Witt mentioned that the EU’s apprehensions about the acquisition mirrored some of the issues raised about Amazon in the broader September lawsuit by the FTC, which alleges that the company gives preference to its own products over others.

The Open Markets Institute, a research organization studying the effects of corporate monopolies, stated on Monday that the commission should be commended for challenging Amazon.

Max von Thun, the Europe director of OMI, remarked, “Today’s significant news isn’t just about robot vacuums; it’s about addressing the increasing influence a few major corporations hold over our digital lives, including the devices we use in our homes.”

Colin Angle, the founder of iRobot, who resigned as chair and chief executive following the announcement, expressed his disappointment with the cancellation of the deal. He added, “iRobot now looks ahead to the future with a renewed focus and dedication to continuing the development of thoughtful robots and intelligent home innovations that enhance people’s lives and are beloved by our customers worldwide.”