Whose Failure Is the Failed Amazon/iRobot Merger?

In November 2023, the European Commission informed Amazon of its initial belief that Amazon’s proposed acquisition of iRobot would restrict competition in the market for robot vacuum cleaners (RVCs) and potentially hinder the ability of other RVC suppliers to compete effectively. According to the Commission, the acquisition could provide Amazon with incentives to hinder iRobot’s competitors through various anti-competitive tactics, including delisting rival RVCs from its marketplace, reducing their visibility, limiting access to certain features like “Amazon’s Choice” or “Works with Alexa” labels, and potentially increasing rivals’ sales and advertising costs.

In response to the Commission’s anticipated negative clearance decision, Amazon and iRobot jointly announced the termination of their acquisition agreement.

The Commission’s stance is based on a series of legal and economic misconceptions. Amazon has built its reputation as a valuable retail platform by offering a diverse selection of affordable products. Engaging in actions such as delisting, reducing visibility, limiting access, or increasing prices of products on its platform would undermine its marketplace and credibility as a provider of goods, potentially driving consumers to seek alternatives, including brick-and-mortar stores.

This approach seems to assume an unrealistic view where Amazon prioritizes monopolizing a niche vacuum cleaner market over maintaining the health of its marketplace platform, which is the source of its success. Moreover, the idea that Amazon could monopolize RVC sales in the European Union overlooks the numerous other channels through which RVCs are sold on the continent, including other online stores, websites, and physical retail locations.

Lastly, the Commission’s handling of this case appears reminiscent of its broader stance against vertical integration, which fails to acknowledge the legitimate and pro-competitive reasons for platforms and sellers to merge…

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