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IPFS News Link • Business/ Commerce

Development of Robot Lawnmowers Will Be Delayed Thanks to New Antitrust Ruling

•, Isaac Schick

A merger between Amazon and robotic vacuum producer, iRobot, was terminated recently after the European Commission failed to approve the deal. Immediately following the deal's termination, iRobot announced it would be laying off roughly 31 percent of its workforce and ending research into new household products. The European Commission's reasoning for rejecting the merger is laughably bad, and it will cost the consumer the welfare that comes from innovation.

Though not the first time the European Commission has halted a useful merger, this case serves as one of the most clear-cut examples of runaway antitrust regulators harming consumers. To support its decision, the commission argued that Amazon possessed the power to foreclose other vacuum competitors operating in the marketplace.

The main problem is that Amazon did not have the incentive to foreclose iRobot's rivals, at least not one stronger than their incentive to maintain competition in the marketplace. iRobot's rivals, which utilize Amazon, still provide financial value for the company, and delisting them would come at a significant financial cost. Furthermore, Amazon has a reputation to maintain which would be tarnished through the foreclosing of rival brands. Reputational harm was accepted as a legitimate disincentive from foreclosure in Fed. Trade Comm'n v. Microsoft Corp. But it doesn't appear that the same argument is acceptable to the European Commission, and the FTC also denies this argument's acceptability in their Merger Guidelines, despite court endorsement.

Europe is not unique in this hostile approach to tech mergers. In late January, Federal Trade Commission (FTC) staff met with Amazon to inform the company that the Commission would file a lawsuit against the merger. However, the FTC likely knew the European decision was coming since the European Commission admitted to working with the FTC during their investigation into Amazon and iRobot. Though speculation, the timing seems to be more than a coincidence.

In lieu of a consummated merger, iRobot will be changing its focus to more marginal improvements, reducing its research and development (R&D) expenses, and pausing all "non-floorcare" products like its experimental robotic lawnmowers. A firm that could have spent years developing new technology to help automate household chores will now need to cut back and focus on just getting by.