The European Union’s executive, the European Commission, announced earlier this month its intention to block Amazon’s pending acquisition of iRobot, a robot vacuum company. It meant that Amazon and iRobot had no choice but to abandon the deal, leading to a mass layoff of 31% of iRobot’s global workforce. The failed Amazon-iRobot deal is the latest example of how regulatory delay and uncertainty can kill American jobs and chill innovation.
Amazon agreed to purchase Massachusetts-based iRobot for $1.7 billion in an all-cash deal in June 2022. The following month, the Federal Trade Commission announced its review of the transaction. Sen. Elizabeth Warren (D-MA) cheered on the FTC’s review and called for the agency to block the deal. The consequences of this protracted waiting period have been disastrous for iRobot. In 2022, iRobot’s annual revenue fell by 24% for a net loss of $286 million after turning a profit in 2020 and 2021. In the third quarter of 2023 alone, U.S. revenue fell by nearly 42%.
In July 2023, the United Kingdom Competition and Markets Authority determined after a monthslong inquiry that the deal should proceed because it would not result in a “substantial lessening of competition” in the U.K. Despite clearing the CMA’s notoriously stringent review process, the EC determined it would block the deal. Amazon originally offered to purchase iRobot for $61 per share. As of this writing, iRobot is trading around $15 per share and continuing to fall. iRobot’s CEO has also stepped down.
iRobot will likely die a slow death thanks to European regulators and left-wing politicians who enable their malfeasance toward American companies. There are three takeaways from this debacle.
First, regulators can kill a company simply by dragging the approval process out. While trillion-dollar companies like Amazon can easily afford to pay the cost of these delays, they often stretch smaller companies to their breaking point. iRobot was forced to take out a $200 million loan just to scrape through the review process. While Amazon’s $94 million termination fee will defray some of these costs, iRobot is on the hook for the rest.
Second, the failed Amazon-iRobot deal will discourage entrepreneurs from starting new companies. Half of startups say that their most realistic long-term exit strategy is acquisition by a larger company. If regulators continue to signal that they would rather smother a startup in the crib than allow it to be acquired, there is little incentive for an entrepreneur to take on the massive risk that comes with starting a company.
Third, communist China is the biggest winner here. Chinese robot vacuums made up 50% of the international market by the end of 2022. China’s dominance in the robot vacuum space will only grow thanks to European regulators blocking the deal.
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Make no mistake about it — this is a hostile act of regulatory aggression by unelected European bureaucrats. They decided that iRobot’s destruction was preferable to allowing Amazon to purchase the company. The longer-term consequences of this deal being blocked will continue to reverberate in the form of job losses, chilled innovation, and further Chinese encroachment on American industries.
Tom Hebert is the Director of Competition and Regulatory Policy at Americans for Tax Reform and executive director of the Open Competition Center.
