Technology

Amazon Scraps Deal to Buy Roomba Maker iRobot Amid Scrutiny

Amazon said on Monday that it was abandoning plans to buy iRobot, the maker of the self-driving Roomba vacuum, after regulators raised concerns the deal would hurt competition.

The announcement is a rare admission of defeat by Amazon, which has in recent years acquired an eclectic mix of companies such as Whole Foods and MGM Studios, and is a sign of how the world’s largest tech companies are being forced to adjust their business practices, products and policies as a result of stiffening regulatory scrutiny globally, particularly in the European Union.

In November, E.U. antitrust regulators warned Amazon that they might try to block the deal because it could restrict competition in the market for robot vacuum cleaners. Officials at the Federal Trade Commission met last week with Amazon’s lawyers and told them that they planned to recommend the agency file a lawsuit to challenge the deal, according to a person familiar with the conversations.

Amazon was scheduled to have meetings early this week where it could make a last attempt to press its case with the commission, the person said.

Amazon, which will pay iRobot a $94 million termination fee, said in a statement that “disproportionate regulatory hurdles” caused it to step away from the deal, which was announced in 2022. IRobot’s products, which also include robotic mops and air purifiers, were to join a growing list of connected home products made by Amazon, including Ring home security systems and Echo smart speakers.

The online retailer said that rather than restrict competition, the deal would have given iRobot more resources to compete with other robotics companies.

“This outcome will deny consumers faster innovation and more competitive prices, which we’re confident would have made their lives easier and more enjoyable,” David Zapolsky, Amazon senior vice president and general counsel, said in the statement.

Margrethe Vestager, the European Union’s top antitrust regulator, said in a statement that the deal would have given Amazon the ability to undercut rivals in the vacuum and “smart home” market by restricting or degrading their access to Amazon’s online store.

“We looked closely at the dual role of Amazon as platform operator and market participant, and the implications of Amazon merging with the owner of a very successful product for which Amazon is already an important sales channel,” she said. She added that the E.U. had been in “close contact” with the F.T.C. during the investigation.

Amazon announced the deal to buy iRobot in August 2022, and just a few months later the company undertook a series of large layoffs. Its devices group was particularly hard hit. Last summer, Dave Limp, its longtime devices chief, left the company after more than 13 years. He was replaced by Panos Panay, a consumer electronics executive from Microsoft.

Amazon is not the only company facing hurdles completing acquisitions. In December, Adobe, the maker of Photoshop and Illustrator, scrapped a $20 billion takeover of Figma, a maker of design collaboration tools, after it was questioned by regulators in the United States, the European Union and Britain.

In the European Union, oversight of the tech sector is expected to intensify in the coming months as a new law, the Digital Markets Act, takes full effect with the aim of increasing competition in the digital economy. Last week, Apple announced a slew of changes to comply with the law, including allowing customers to use alternatives to the App Store for the first time. In the United States, regulators have filed antitrust lawsuits against tech companies, including an F.T.C. complaint arguing Amazon squeezed small merchants and artificially raised prices for consumers.

IRobot, a publicly traded company grappling with declining sales and mounting losses, must regroup without the financial backing of Amazon. The company’s stock price has fallen more than 60 percent in the past month as the fate of the deal with Amazon was thrown into doubt.

On Monday, iRobot said it would cut approximately 350 jobs, or about 30 percent of its work force, as well as reshuffle its management ranks.

“The termination of the agreement with Amazon is disappointing, but iRobot now turns toward the future with a focus and commitment to continue building thoughtful robots and intelligent home innovations,” Colin Angle, the company’s founder, who is stepping down as chief executive, said in a statement.

Glen Weinstein, iRobot’s executive vice president and chief legal officer, was appointed interim chief executive.

David McCabe and Karen Weise contributed reporting.