Amazon is ending its plan to buy Roomba developer iRobot for $1.7 billion, blaming the deal’s collapse on government regulators.
“This outcome will deny consumers faster innovation and more competitive prices, which we're confident would have made their lives easier and more enjoyable,” Amazon SVP David Zapolsky said on Monday.
The e-commerce giant is pulling the plug on the deal after the European Commission said in November that the Amazon-iRobot merger might “restrict competition in the market for robot vacuum cleaners” within the EU. The Commission cited how Amazon could delist or bury the product listings for rival robot vacuum makers on Amazon.com, forcing rivals to pay more in advertising in order to stand out.
“Such foreclosure strategies could restrict competition in the market for RVCs (robot vacuum cleaners), leading to higher prices, lower quality, and less innovation for consumers,” the Commission said. Another concern was that Amazon could extract more data from users through the sold Roomba devices.
In terminating the deal, Amazon didn’t name the EU by name. But the e-commerce giant said the “undue” regulatory scrutiny threatens competition since some tech companies hope to grow precisely through an acquisition.
In response to the deal’s collapse, iRobot also announced it’s been forced to restructure to stabilize the company in the “current environment, while focusing on profitability and advancing key growth." As a result, the company is laying off 350 workers or about 31% of its staff. In addition, iRobot CEO Colin Angle is stepping down. The company’s chief legal officer Andrew Miller is taking over as interim CEO.
Amazon is paying iRobot a $94 million break-up fee. Nevertheless, the Roomba developer has been posting quarterly losses amid falling revenues. The restructuring is expected to net iRobot $80 to $100 million in cost savings while also reducing its R&D spend by $20 million per year.
The company has also decided to pause “non-floorcare innovations, including air purification, robotic lawn mowing and education.”