Antitrust enforcement can be a tough business. Enforcers, and ultimately the courts, referee the markets, calling balls and strikes on consolidation and business conduct that is benign or even pro-competitive, versus anti-competitive and harmful to consumers. For the most part, U.S. antitrust enforcement has gotten it “right.” This is remarkable, given that enforcers don’t have a crystal ball to predict market outcomes. But it also means that unpacking lessons learned from both successes and failures is essential for improving antitrust enforcement moving forward.
Case in point. Take iRobot, the original maker of the Roomba robotic vacuum cleaner (RVC) that filed for Chapter 11 protection in U.S. bankruptcy court this week. This is the iRobot that Amazon proposed to acquire and integrate into its e-commerce marketplace in mid-2022, but was, instead, forced to abandon in early 2024. iRobot was acquired in a private transaction by the Chinese company, Picea Robotics, which owns a competing brand. With the sale to Picea, iRobot will no longer be a standalone competitor, and Picea will grow larger. Together with newer and more innovative RVC rivals, these developments have restructured the RVC market.
All of this comes two years after the European Commission (EC) and U.S. Federal Trade Commission (FTC) signaled they would move to block Amazon’s $1.65 billion acquisition of iRobot, effectively forcing Amazon and iRobot to abandon the deal. The EC’s statement of objections in late 2023 flagged the concern that Amazon could restrict competition in the market for robotic vacuum cleaners (RVCs), hampering rival RVC suppliers from competing effectively. After an extended merger review that increased the financial burden on iRobot, the Biden FTC under Chair Lina Khan followed the EC’s lead. FTC staff issued an unusual statement in early 2024, noting the agency’s pleasure that Amazon and iRobot had abandoned the deal.
To understand the implications of this enforcement outcome, let’s gather some relevant history. In early 2021, iRobot’s stock price was at an all-time high of about $133 per share. At the time the acquisition was announced in mid-2022, it was at about $60 per share. At the end of 2023, the stock price was at about $38 per share, and this week it fell to under $1 per share. This precipitous devaluation was accompanied by a decline in iRobot’s capitalization.
iRobot also reduced its workforce by close to 50% since 2024, laying off hundreds of workers located at the company’s headquarters in Massachusetts. Massachusetts is home base for Senator Elizabeth Warren, who issued a strong letter urging the FTC to block the deal. The letter’s conclusion that Amazon’s “anticompetitive policies [that] put consumers and their privacy at risk,” however, seems knee-jerk — devoid of any understanding of the competitive dynamics of age-old retailing methods where companies maintain robust competition between their private labels and competing brands.
To be sure, the Trump Administration’s crushing import tariffs have not made it easier for iRobot to survive. But iRobot’s downward spiral — which entirely predated the impact of tariffs — openly signaled a company in distress, even as antitrust enforcers moved to block its sale to Amazon. That in itself was not enough evidence to support calling the antitrust referees off the field at the time Amazon made its bid for iRobot. For example, the “failing firm” defense may apply when the assets to be acquired “would imminently cease playing a competitive role in the market even absent the merger.” But the courts hold parties to a merger to a very high standard in invoking the failing firm defense.
Given this, the EC’s and FTC’s rejection of any failing firm defense is not unusual. What is unusual is that the EC and FTC needed to, but did not consider, more evidence when deciding to move to block Amazon’s purchase of iRobot. Take the JetBlue-Spirit merger, which the DOJ successfully blocked in 2024. Spirit was also in visible distress and subsequently entered into Chapter 11, but the company continues to operate as a viable entity. The DOJ noted, in particular, that the markets for air passenger service feature high entry barriers that limit the role of potential entrants in deconcentrating the market.
How about white goods manufacturer Whirlpool’s acquisition of rival Maytag in 2006? At the time, Maytag was also in financial distress, but the DOJ decided not to block the deal. The merger would have significantly increased concentration, but the imminent entry of Asian white goods manufacturers such as LG, Samsung, and Haier was expected to deconcentrate the market.
Unlike in Spirit-JetBlue and Whirlpool-Maytag, antitrust enforcers missed the elephant in the room in Amazon-iRobot. That is, namely, the role of newer and more innovative players in deconcentrating a market by turning up the competitive pressure on incumbents with better technologies and business models that lower cost and improve quality. Whether this reflects incomplete analysis or the politics of the Biden FTC’s hunt for antitrust violations involving e-commerce markets doesn’t really matter. Every merger investigation should cover all the bases, like a good referee.
