Once again, a major competition agency, the European Commission, appears poised to take an anticompetitive enforcement action—in this case, blocking Amazon’s acquisition of consumer robotic-manufacturer iRobot.
iRobot, headquartered in Bedford, Massachusetts, is an American success story:
Founded in 1990 by Massachusetts Institute of Technology roboticists with the vision of making practical robots a reality, iRobot has sold more than 40 million robots worldwide. The company has developed some of the world’s most important robots, and has a rich history steeped in innovation. Its robots have revealed mysteries of the Great Pyramid of Giza, found harmful subsea oil in the Gulf of Mexico, and saved thousands of lives in areas of conflict and crisis around the globe. iRobot inspired the first Micro Rovers used by NASA, changing space travel forever, deployed the first ground robots used by U.S. Forces in conflict, brought the first self-navigating FDA-approved remote presence robots to hospitals and introduced the first practical home robot with Roomba [a robotic vacuum cleaner], forging a path for an entirely new category in home cleaning.
Amazon and iRobot signed an agreement in August 2022 under which Amazon would acquire the robotics company. Subsequently, Amazon explained the rationale behind the acquisition:
iRobot, which faces intense competition from other vacuum cleaner suppliers, offers practical and inventive products. We believe Amazon can offer a company like iRobot the resources to accelerate innovation and invest in critical features while lowering prices for consumers.
A September 2022 iRobot investor filing revealed that the Federal Trade Commission (FTC) had made a “second request” for additional information pertaining to the transaction. Surprise, surprise, this followed hard on the heels of a letter to the FTC from 24 interventionist-leaning “public interest” groups (including the Open Markets Institute), requesting that the commission challenge the acquisition (which, the letter alleged, “would endanger fair competition and open markets”). The FTC has not yet announced its position on the merger.
The acquisition was also reviewed by the European Commission and by the UK Competition and Markets Authority (CMA). In June 2023, the CMA announced that it had cleared the transaction, finding that it would not lead to competitive concerns in that market. In particular, the CMA found that:
- “iRobot’s market position in the supply of robot vacuum cleaners in the UK is modest and that it already faces several significant rivals”;
- “while Amazon could use its position as a major retailer to disadvantage rival robot vacuum cleaner manufacturers, it would lack the incentive to do so”; and
- “the acquisition of iRobot would not disadvantage Amazon’s rival ‘smart home’ platforms.”
The European Commission, however, had a different view. In a November 2023 press release, the Commission announced that it “ha[d] informed Amazon of its preliminary view that its proposed acquisition of iRobot may restrict competition in the market for robot vacuum cleaners [RVCs].” The key concern was that “Amazon may have the ability and the incentive to foreclose iRobot’s rivals by engaging in several foreclosing strategies aimed at preventing rivals from selling RVCs on Amazon’s online marketplace and/or at degrading their access to it.”
Subsequently, it was reported last week that the Commission plans to block Amazon’s acquisition of iRobot.
A closer look at this matter indicates that a decision to block the merger would harm consumer welfare and undermine dynamic competition.
Market Research Finds a Highly Competitive Robotic Vacuum-Cleaner Market
The robotic vacuum-cleaner market is highly competitive, according to data gathered by market-research company Mordor Intelligence. Mordor has conducted detailed studies of the evolution of this market and has fly-specked 2023 and 2024 market-share data in reaching its conclusion. According to a 2024 Mordor report:
The robot vacuum cleaners market is very competitive primarily due to the presence of major players such as iRobot Corporation and Neato Robotics (Vorwerk). Furthermore, the probability of new players entering the market is moderately high, which could further intensify the market competition. Product launch, high expense on research and development, and strategic partnerships and acquisitions are the prime growth strategy followed by the companies to sustain the intense competition.
Not only is the robotic market competitive, but iRobot has been lagging competitively over the last two years, during the period that it has faced merger-review uncertainty. At the same time, Chinese robot vacuum-cleaner producers have been on the rise.
In November 2023, China Daily reported that Chinese robot vacuums had captured nearly 50% of the category, and more specifically, that Chinese robotic-vacuum brands had 68% and 55% of the category in Southeast Asia and Europe, respectively. According to Nikkei Asia, Chinese companies like Ecovacs are competing globally with cutting-edge features and affordable prices, gaining market share at iRobot’s expense.
These recent robotics-market dynamics suggest that the real effect of blocking iRobot’s acquisition by Amazon would not be to prevent some anticompetitive foreclosure (a dubious theory at best, given the CMA’s findings), but rather, to strengthen the competitive position of fast-rising Chinese competitors relative to an American rival.
My Non-Scientific Experiment
Has Amazon attempted to promote iRobot products at the expense of its rivals? Do iRobot vacuum cleaners enjoy disproportionate attention and favorable publicity compared to those made by its rivals? Is there really a vibrant, intensely competitive online market for robotic vacuum cleaners? Whatever the current state of the market, would Amazon’s acquisition be likely to substantially lessen competition? In sum, is the Mordor research that portrays a highly competitive market accurate? Let’s see what some basic web-surfing I recently undertook reveals.
A simple Google search on Jan. 20 that included the terms “Amazon” and “vacuum cleaners” linked immediately to a landing page entitled “2024 Best Robot Vacuums New Year Deals Today,” which stressed that “[w]ith a wide range of models available, you can find the perfect robot vacuum to suit your needs and budget. Some popular options include the iRobot Roomba, Roborock, the Eufy RoboVac, and the Shark IQ Robot.” The landing page featured equal-sized photographs with direct links and prices of 20 different robot vacuums (five made by iRobot) from eight different manufacturers (including one huge multinational, Samsung). The first of the four lines of photographed robots on the landing page included models by Roborock (“special deal”); iRobot (“special deal”); Shark (“special deal”); Eufy (“special deal”); and ECOVACS. The iRobot model had the highest price among the three “bargain-priced” first line robots.
A one-click Google search using the terms “Walmart” and “robot vacuum” linked to a Walmart landing page with an even larger number of robots, mostly priced lower than the Amazon brands. A one-click Google search under “robot vacuum” led to a large number of landing pages featuring many brands of robots at varying prices. A one-click Bing search using “robot vacuum” led to multiple landing pages (including Amazon’s). The top of the Bing search display was a New York Times link to a Wirecutter landing page with an article titled “The Best Robot Vacuums.” None of the three products featured in the article (two from Roborock, one from Eufy) came from iRobot.
Similar basic web searches featuring various related terms on Google and Bing yielded the same results: easy-to-find links to a wide variety of products, most of them not made by iRobot. Furthermore, reviews of robotic vacuum cleaners tout many non-iRobot products.
My “quick and dirty” anecdotal online searches undoubtedly are non-scientific casual empiricism, but they nevertheless are instructive. They reveal that, at this time, online shoppers enjoy a wide variety of robot vacuum choices from a large number of manufacturers in a range of prices, with iRobot devices being only a few of many. Moreover, iRobot does not appear to enjoy any particular online market supremacy, in terms of either pricing or prestige.
Amazon’s acquisition of iRobot would not, I believe, materially affect the thrust of my results for the casual browser entering basic search terms. Even with greater post-acquisition favoritism shown toward iRobot products on Amazon’s website, consumers would be offered a huge number of alternative attractive choices, easily accessible online. In short, it strains credulity to believe that Amazon’s acquisition of iRobot is a threat of any sort to effective competition in the robot vacuum-cleaner market (and, I suspect, in the market for other consumer robotic devices, based on my search).
But what if European Commission enforcers are concerned about Amazon strengthening its hand by giving specially favored treatment to iRobot devices? As noted above, even assuming this were the case, effective competition would almost certainly be preserved online. But apart from that, Amazon is one of the six gatekeepers subject to the EU’s Digital Markets Act (DMA), which (among other obligations) requires gatekeepers to “treat services and products offered by the gatekeeper itself more favourably in ranking than similar services or products offered by third parties on the gatekeeper’s platform.” Huge fines could be imposed on Amazon if it did not comply.
In short, the specter of DMA enforcement would short-circuit any conceivable incentive Amazon might have to engage in anticompetitive foreclosure post-merger. (Of course, that incentive was lacking in the first place, given the CMA’s findings. The real danger is that the hyper-regulatory DMA will harmfully interfere with efficient platform management by Amazon and other American platforms (see here and here).)
In short, a European Commission decision to block Amazon’s acquisition of iRobot would serve no procompetitive purpose. It would, however, preclude Amazon from realizing substantial efficiencies through iRobot, including promoting iRobot’s ability to introduce innovative new welfare-enhancing robotic products and to lower the prices of its entire lineup. As such, a Commission decision to prevent this merger would harm consumer welfare and innovation—a result at odds with sound competition policy.
Conclusion
Amazon’s acquisition of iRobot would likely promote efficiencies, raise welfare, and enhance competition. There is no sound justification for preventing this merger. Attempting to do so would not only harmfully undermine innovation in a highly competitive market, but would have broader ramifications, as well. It would dissuade large companies from contemplating welfare-creating complementary acquisitions, to the detriment of innovative welfare enhancement in a large number of markets. It would, once again, single out without justification a highly successful American digital platform, which, with its fellow U.S. platforms, has generated enormous welfare gains for consumers (see here).
The Chinese government and its large firms (which, by the way, are not listed DMA gatekeepers) must be laughing at the wounds the “sophisticated” Western world competition authorities continue unnecessarily to inflict on Western (and, in particular, American) technological giants—wounds that harm consumers and the Western economies.
In a normal world, the U.S. government, drawing on the expert advice of the FTC and the U.S. Justice Department (DOJ), would be working hard to convince the Commission not to block the Amazon-iRobot merger. Unfortunately, we are living in a world in which the FTC and DOJ have abandoned consumer-welfare promotion and sound economic analysis altogether, in their pursuit of fatuous neo-Brandeisian dreams. Let us hope that U.S. antitrust enforcers and their European counterparts both come to their senses soon.