Several members of the U.S. Congress issued a letter to the Federal Trade Commission (FTC) over the announced acquisition of iRobot Corporation (NASDAQ:IRBT) by Amazon.com, Inc. (NASDAQ:AMZN).
Here’s why the lawmakers have concerns over the purchase.
What Happened: A letter recommending the FTC reject the planned acquisition of iRobot by Amazon.com was signed by some members of Congress.
“I have serious concerns about the Amazon-iRobot deal — dominant companies like Amazon shouldn’t be allowed to just buy their way out of competing,” Sen. Elizabeth Warren told Axios. “The FTC should oppose this proposed merger to protect competition, lower consumer prices, and rein in Amazon’s well-documented anticompetitive activities.”
The letter argued the acquisition could “harm consumers and reduce competition” in the home robotics segment.
“Given Amazon’s record of infringing on consumers’ privacy, and their ongoing history of anticompetitive mergers to increase their monopoly power, the FTC should use its authority to oppose the Amazon - iRobot transaction,” the letter read.
iRobot has a dominant market share in the smart vacuum market of around 75%, which could greatly impact competitors according to the letter.
The iRobot acquisition came after Amazon made several acquisitions in the home appliances space, as pointed out by the letter. This included Blink and Ring.
The letter stated Amazon had a history of using a strategy of acquiring companies with strong market share and crushing its rivals by offering discounts and utilizing its huge customer base. The letter called this “copy-acquire-kill.”
Data privacy concerns were also mentioned in the letter with iRobot giving Amazon access to mapping technology inside consumers’ homes. The letter said the acquisition of iRobot combined with ownership of Ring and Blink would give Amazon “eyes and ears inside the homes.”
The letter was signed by Warren along with the following members of Congress:
Rep. Mondaire Jones (D-NY)
Rep. Mark Pocan (D-WI)
Rep. Jesus “Chuy” Garcia (D-IL)
Rep. Pamila Jayapal (D-WA)
Rep. Katie Porter (D-CA)
Related Link: What Analysts Are Saying About Amazon's iRobot Acquisition
Why It’s Important: Amazon’s acquisition was already under an extensive review by the FTC and could face several challenges before approval.
Lina Khan, who chairs the FTC, has previously written antitrust concerns about Amazon, according to Axios. Amazon previously asked for immunity in rulings from Khan, given her past history of criticizing the company.
Amazon’s $1.7 billion acquisition would pay shareholders of iRobot $61 per share.
One big question about the acquisition would be if Amazon would be forced to continue selling iRobot devices through competitors' platforms instead of making the devices exclusive to Amazon’s e-commerce platform. This is one concern raised by the letter with the past acquisition of Kiva robotic technology becoming exclusive to Amazon’s warehouses after the deal closed. Kiva previously sold robots for warehouses to other companies.
The inclusion of Khan in the case by the FTC could lead to appeals and complaints from Amazon if the deal doesn’t go through as the company can make a case that she has a biased opinion of the company.
The acquisition is likely to see several antitrust complaints and could take a long time to get approval. The deal might also be rejected, which could send shares of iRobot down.
AMZN, IRBT Price Action: Amazon shares are down 3.24% to $114.19 on Thursday versus a 52-week range of $101.26 to $188.11.
iRobot shares are down 0.71% to $57.05. Shares of iRobot were down 16% year-to-date and trade at a 7% discount to the acquisition price.
Photo: Koshiro K via Shutterstock