The Financial Times, February 14, 2024:
Brussels has ramped up its fight against any anti-competitive behaviour by Big Tech giants…
Last month, Amazon abandoned its ambitions to buy Roomba maker iRobot for $1.45bn after it was facing a veto on the deal in Europe and a likely similar fate in the US. Amazon executives were quick to point out that their ditching of the deal would be bad for consumers and innovation.
David Zapolsky, Amazon’s senior vice-president, warned: “This outcome will deny consumers faster innovation and more competitive prices.”
Joe Biden’s FTC, run by Lina Khan, a central planner admired by “Khanservatives” such as Josh Hawley and JD Vance, celebrated Amazon’s withdrawal:
“We are pleased that Amazon and iRobot have abandoned their proposed transaction. The Commission’s probe focused on Amazon’s ability and incentive to favor its own products and disfavor rivals’, and associated effects on innovation, entry barriers, and consumer privacy. The Commission’s investigation revealed significant concerns about the transaction’s potential competitive effects.
Amazon had been going to pay $1.7 billion for Massachusetts-based iRobot.
iRobot Corp., the company that revolutionized robot vacuum cleaners in the early 2000s with its Roomba model, filed for bankruptcy and proposed handing over control to its main Chinese supplier.
At the time the deal was abandoned by Amazon, Amazon’s CEO commented that it would have helped give iRobot a competitive boost. This would not have come amiss as a Chinese challenge was mounting. After Amazon left the picture, reported the Wall Street Journal, “iRobot said it would cut 31% of its workforce and send overseas “non-core engineering functions to lower-cost regions.””
Today, Roombas are primarily made in Vietnam and Malaysia. Then came tariffs…
Commenting on iRobot’s bankruptcy, Kristina Minnick, a professor of finance at Bentley University, told CNBC that:
The iRobot case demonstrates that when regulators prioritize hypothetical future harms over present-day financial realities, they don’t protect competition; they destroy the target company. The bankruptcy of iRobot serves as a definitive cautionary tale for the current M&A environment, underscoring fears that regulators are dismantling the traditional safety net for struggling companies.
Acquisitions by large companies can be a good way for entrepreneurs to cash out, see their businesses move to the next case or, in some cases, be rescued, which explains why the EU’s involvement in forcing Amazon out in 2024 came under fire in Europe too.
The Financial Times:
Some entrepreneurs are concerned that if Amazon can’t buy a maker of vacuum cleaners, it sends a signal that it will be difficult for Big Tech to buy anything at all — and that might be a blow for their exit strategies and for innovation as a whole.
Stefan Moritz, secretary-general of lobbying group European Entrepreneurs, which represents 2.4mn companies employing more than 20mn people across all EU member states, is worried. “It’s a bad sign if the EU intervenes so heavily,” he said, referring to the iRobot deal. “In the long run nobody will want to be an entrepreneur, many companies will shut down or be bought if they have any remaining valuable assets.”
Andreas Schwab, the member of the European Parliament who, according to the FT, “steered the debate on the bloc’s flagship tech’s rules” saw that risk, but also reckoned there was a silver lining:
“It’s good for the economy that start-ups should not rely on a few Big Tech players but that we push innovative companies with new products to penetrate the market by themselves, thereby diversifying institutional channels.”
“We push.”
Because of course politicians and regulators know how companies should set their strategies. As far as I can see, Schwab has no long-term private sector experience. He was however once chosen as “Young European of the Year,” so there’s that.
Bentley’s Professor Minnick:
“The tragic irony is that instead of remaining an independent competitor, iRobot was forced into bankruptcy and is now being sold to one of its Chinese manufacturing partners. In their zeal to prevent Big Tech expansion, regulators effectively handed valuable IP and market share to the very foreign competitors that were crushing the company in the first place…”
That won’t worry Brussels overmuch. I wonder what the Khanservatives think.