Amazon / iRobot merger inquiry
| Date | 06 April 2023 |
| Decision Date | 06 April 2023 |
| Subject Matter | Mergers |
| Court | Competition and Markets Authority (EW) |
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Anticipated acquisition by
Amazon.com, Inc of iRobot
Corporation
Decision on relevant merger situation and substantial
lessening of competition
ME/7012/22
SUMMARY
The CMA’s decision on reference under section 33(1) of the Enterprise Act 2002 given on
16 June 2023. Full text of the decision published on 24 July 2023.
Please note that [] indicates figures or text which have been deleted or replaced
in ranges at the request of the parties or third parties for reasons of commercial
confidentiality.
Overview of the decision
1. Amazon.com, Inc (Amazon) agreed to acquire iRobot Corporation (iRobot) for $1.7
billion on 4 August 2022 (the Merger). Amazon and iRobot are together referred to
as the Parties and for statements referring to the future, as the Merged Entity.
2. Following a phase 1 investigation, the Competition and Markets Authority (CMA)
does not believe, for the reasons summarised below, that it is or may be the case
that the Merger may be expected to result in a substantial lessening of competition
within a market or markets in the UK. On this basis, the Merger will therefore not be
referred for an in-depth phase 2 investigation.
3. The CMA’s investigation focuses on the impact of the Merger in the UK. The Merger
is also being reviewed in a number of other jurisdictions.
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About the businesses
4. Founded in 1994 by Jeff Bezos, Amazon has grown rapidly to become one of the
world’s largest companies, with a market capitalisation of $1.27 trillion. Amazon has
a range of activities in the UK, which is one of the company’s largest markets. In
online retailing (through Amazon.co.uk), Amazon offers products sold by Amazon as
well as products sold by third-party sellers on Amazon.co.uk. Amazon also offers
services to sellers such as delivery, logistics and warehousing. Amazon earns
revenue through its own sales, sales commission on third-party product sales, and
advertising. Amazon manufactures and sells certain electronic devices, including
devices for use in the home, designed to interoperate with a smartphone, smart
speaker or virtual assistant (smart home devices). Amazon also operates a virtual
assistant, called Alexa; virtual assistants are often used as the hub to control and
interoperate with smart home devices. Virtual assistants can be the “hub” for
broader smart home platforms, which are groups of connected smart home
devices.
5. iRobot is a technology company, founded in 1990, that designs and builds
consumer robots, including floor care products. The vast majority of iRobot’s
revenues in the UK come from the sale of its robot vacuum cleaners (RVCs),
including the well-known ‘Roomba’ brand, which vacuum and/or mop floors without
human intervention. These RVCs are sold on Amazon’s online store in the UK
(Amazon.co.uk) and can be operated using Amazon’s virtual assistant, Alexa.
6. While RVCs have been available to buy in the UK for around 20 years, the UK
market for these products remains small (and significantly smaller than in a number
of other European countries and the US).
The CMA’s assessment
Why did the CMA look at this merger?
7. The CMA’s primary duty is to seek to promote competition for the benefit of
consumers. It has a duty to investigate mergers that could raise competition
concerns in the UK, provided it has jurisdiction to do so, which it does in this case.
How did the CMA investigate the Merger?
8. At phase 1, the CMA needs to establish whether there is a realistic prospect of a
substantial lessening of competition (SLC) which merits a reference to an in-depth
phase 2 investigation. To understand the implications of the Merger on competition,
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the CMA gathered information from a wide variety of sources, including by using the
CMA’s statutory information-gathering powers, to ensure that the CMA had as
complete a picture as possible within the constraints of the statutory timetable.
9. The CMA gathered data and internal documents from the Parties, to understand
their businesses, competitors and plans for the future. The CMA also gathered
evidence from other market participants, such as suppliers of RVCs, UK retailers,
and smart home platforms.
10. The CMA used this evidence to assess whether the Merger could impact
competition in the following ways (referred to as ‘theories of harm’):
(a) Through a loss of future competition in the supply of RVCs in the UK (if
Amazon would have entered the supply of RVCs and competed against iRobot
absent the Merger);
(b) By limiting the ability of Amazon’s rivals to compete in the supply of smart
home platforms (on the basis of evidence that RVCs could be an important
input for the supply of a broader smart home platform); and
(c) By limiting the ability of iRobot’s rivals to compete in the supply of RVCs (on
the basis of evidence that Amazon.co.uk is an important route to market in the
UK for suppliers of RVCs).
Could there be a loss of future competition in relation to RVCs in the UK?
11. The CMA has considered whether, if the Merger had not gone ahead, Amazon
could have entered the RVC market with its own product, which could have
competed against iRobot, and whether, if so, any competition lost between iRobot
and Amazon as a result of the Merger could have been substantial.
12. The CMA has found, in light of Amazon’s broader business strategy and ongoing
product development activities, that there was a realistic prospect that Amazon
would have started to supply its own RVC product absent the Merger. The CMA
also found, however, that iRobot’s market position in the UK is modest and that it
already faces several significant competitors (including Ecovacs and Eufy, both of
which have a higher market share than iRobot, as well as Roborock, Samsung and
Dyson).
13. On this basis, the CMA has found that, even if Amazon would have entered the UK
RVC market absent the Merger, there would in any event be sufficient remaining
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