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Amazon’s iRobot deal faces tough FTC antitrust review

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Amazon.com Inc. is moving forward with an aggressive acquisition strategy despite an intense antitrust investigation in Washington, with Roomba vacuum maker iRobot Corp. The deal is worth $1.65 billion to buy.

Antitrust experts say the deal is expected to come under severe scrutiny from the US Federal Trade Commission, led by Chair Leena Khan, a critic of the e-commerce platform’s market dominance. The agency will also review Amazon’s $3.49 billion deal last month to buy One Medical’s parent 1Life Healthcare. The FTC did not challenge Amazon’s purchase of MGM Studios earlier this year, but before that Khan had a Democratic majority in the commission.

Closely probing Amazon’s iRobot transaction will pose no challenge, and even if the FTC sues to block the deal, there’s a chance it won’t prevail.

Hal Singer, managing director of litigation consulting firm Eikon One, said –

the FTC may have a hard time winning the merger challenge on the deal.

Khan has pushed the FTC to take a harder look at acquisitions by the biggest tech firms in the wake of a report by the agency last year that found Alphabet Inc.’s Google, Amazon, Apple Inc., Meta Platforms Inc., and Microsoft Corp. used loopholes to avoid antitrust scrutiny on hundreds of smaller deals. Last week, the agency sued to block Meta’s acquisition of virtual reality startup Within, the first time the FTC has preemptively sought to block a deal by the social networking giant.

iRobot’s Roomba dominates the smart vacuum market with a 75% market share by revenue in the US, according to industry database Statista. Amazon introduced its own offering last fall, a three-wheeled device called Astro, which sells for about $1,450. Astro, still in a limited rollout, hasn’t made a splash with consumers.

Stacy Mitchell, co-executive director of the Small Business Group Institute for Local Self-Reliance, said-

the 2019 eero acquisition may have helped Amazon decide to acquire iRobot. Amazon is using its data collection and acquisition to help it dominate the smart home in the same way that it has e-commerce, she said.

“The smart home is going to be a powerful new platform that big tech companies and Amazon, in particular, see as an opportunity to gain and experiment with market power,” said Mitchell, who has studied Amazon for years. “Any other company that wants to participate in this area will have to play by Amazon’s rules.”

However, the FTC’s review does not necessarily mean that the deal will get held up.

The managing director of Econ One, Hal Singer told Bloomberg that despite the FTC suing the merger deal, they might have a hard time with their “evidentiary burden.” According to him, antitrust laws have become “feckless”, especially in challenge cases where companies aren’t direct competitors.

Amazon’s acquisition of iRobot is not a coincidence. Since 2002, iRobot has been leading the industry in robot vacuums. Today, its Roomba product is synonymous with any other brand’s offering and according to Statista, has cornered 75% of the market share in robot vacuums by revenue, in the US.

 

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