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European Union regulators have sent Amazon a formal statement of objections setting out competition concerns over its proposed acquisition of robot vacuum maker, iRobot<\/a>.<\/p>\n The step does not confirm the EU will seek to block the deal but it shows antitrust regulators do remain concerned. It could therefore push Amazon to offer remedies to EU authorities to settle the investigation and avoid the risk of the acquisition being blocked.<\/p>\n Amazon has already lowered its acquisition price<\/a> for iRobot \u2014 which was originally an all-cash offer of $1.7BN back in August 2022<\/a> \u2014 by 15% owing to increased debt taken on by its target while regulatory snags delayed closing the deal at the original purchase price.<\/p>\n The bloc has been closely scrutinizing the Amazon-iRobot deal since July<\/a> when the EU announced its in-depth probe. The Commission said at the time it was worried the\u00a0transaction would allow Amazon to restrict competition in the market for robot vacuum cleaners (RVCs) and strengthen its position as online marketplace provider in a number of ways.<\/p>\n Today\u2019s announcement by the EU, following several months of in-depth examination looking at how the transaction might impact competition, lays out formal concerns for Amazon to respond to. The EU\u2019s objections focus on foreclosure risks.<\/p>\n The EU says its concerns focus on whether the deal will give Amazon the ability and incentive to foreclose iRobot\u2019s rivals by deploying strategies aimed at preventing competitors from selling RVCs on Amazon\u2019s marketplace and\/or making it harder for them to do so \u2014 such as by delisting rival products; reducing their visibility in both non-paid (i.e. organic) and paid results (i.e. ads) displayed on its marketplace; limiting their access to certain widgets it operates (such as the \u201cother products you may like\u201d feature) or \u201ccertain commercially-attractive product labels\u201d (e.g. \u2018Amazon\u2019s choice\u2019 or \u2018Works With Alexa\u2019); and\/or by directly or indirectly raising the costs of iRobot\u2019s rivals to advertise and sell their RVCs on its marketplace.<\/p>\n \u201cAmazon may have the ability to foreclose iRobot\u2019s rivals\u00a0because\u00a0Amazon\u2019s online marketplace is a particularly important channel to sell RVCs in France, Germany, Italy, and Spain,\u201d the Commission writes in a press release<\/a>. \u201cRVC customers in these countries particularly rely on Amazon both in terms of product discovery as well as for their final purchasing decision.\u201d<\/p>\n The Commission is also worried Amazon may have the incentive to foreclose iRobot\u2019s rivals because it may be economically profitable for it to do so.\u00a0\u201cThe merged entity would likely gain more from additional sales of iRobot RVCs, than it would lose from fewer sales of iRobot\u2019s rivals and other related products on Amazon. Such gains include benefits from additional data gathered from iRobot\u2019s users,\u201d it suggests.<\/p>\n Were Amazon to deploy such foreclosure strategies the Commission\u2019s view at this stage of the probe is it could restrict competition in the market for RVCs, leading to \u201chigher prices, lower quality, and less innovation for consumers\u201d.<\/p>\n The EU has reached this pass of laying out formal concerns after conducting what it describes as a \u201cwide-ranging investigation to understand the market and the potential impact of the deal\u201d, which it says included analysing internal documents provided by Amazon and iRobot and gathering views from market participants such as suppliers of RVCs and other smart home devices, as well as from providers of online sales channels.<\/p>\n It also says it closely cooperated with other competition authorities during both the initial investigation and the in-depth investigation, adding that it will continue to do so during the remainder of the in-depth investigation. Although the UK\u2019s competition authority already cleared the deal back in June<\/a>.<\/p>\n Amazon was contacted for a response to the EU\u2019s statement of objections. A company spokesperson sent us this statement in which it claims iRobot faces \u201cintense competition\u201d from other RVC suppliers:<\/p>\n We continue to work through the process with the European Commission and are focused on addressing its questions and any identified concerns at this stage. 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.<\/p>\n<\/blockquote>\n Late last year<\/a> the EU settled with Amazon over two earlier competition probes \u2014 one delving into antitrust concerns about Amazon\u2019s use of merchant data to bolster its own retail business; and a second one looking at how it operated the \u201cBuy Box\u201d and its Prime loyalty program.<\/p>\n In those cases Amazon agreed a series of commitments to end the probes \u2014 including saying it would stop using non-public data from its marketplace sellers and boost transparency for merchants; and pledging to treat all sellers equally, regardless of whether they pay for its logistics services.<\/p>\n At the time the EU\u2019s then competition chief, Margrethe Vestager, trumpeted the outcome as setting what she dubbed \u201cnew rules for how Amazon operates its business in Europe\u201d \u2014 arguing the settlement meant the ecommerce giant could \u201cno longer abuse its dual role\u201d as marketplace operator and own brand retailer; and further claiming the outcome would ensure \u201ccompeting independent retailers and carriers as well as consumers will benefit from these changes opening up new opportunities and choice.\u201d<\/p>\n Given the commitments the EU already extracted from Amazon after those earlier investigations it\u2019s interesting to see the bloc remains concerned over levers the ecommerce behemoth still has its disposal to potentially influence competitive outcomes on its marketplace vis-a-vis iRobot vs rival robot vacs.<\/p>\n\n