It's been a roller-coaster ride for iRobot (IRBT 13.15%) shareholders since the company agreed to be acquired by Amazon.com (AMZN 3.43%) nearly 15 months ago.

Shares of the home robotics company, best known for its Roomba line of robotic vacuums, soared nearly 40% last Friday after Reuters reported that Amazon was finally poised to receive unconditional European Union antitrust approval to complete the acquisition. On Monday, however, iRobot stock pulled back nearly 20% after the European Commission (EC) issued a "statement of objections" to Amazon, detailing its view that acquiring iRobot may restrict competition in the market for robotic vacuum cleaners (RVCs).

It's not just about the robots

For perspective, this is only the latest in a long-running saga surrounding the deal. The EC opened an in-depth probe into the acquisition back in July 2023 and is expected to issue a final ruling by Feb. 14, 2023.

Going further back, however, Amazon initially agreed to pay iRobot $61 per share in cash when the original deal was struck in August 2022. But the deal was effectively delayed when government antitrust regulators in both the U.S. and Europe promptly voiced concerns.

When iRobot subsequently had to take out a new $200 million financing facility to pay off existing debt and fund ongoing operations until the merger closed, the two companies, in July 2023,  agreed to lower the price that Amazon would pay to $51.75 per share (though the deal's $1.7 billion enterprise value was essentially unchanged).

So what's the real reason Amazon is going out on a limb to spend $1.7 billion -- a small fraction of its typical cash flow (free cash flow was nearly $9 billion last quarter alone) -- to buy iRobot?

In my view, the EC's latest objections to the iRobot purchase marks the latest proof that this is about much more than just adding iRobot's line of home robots to Amazon's product portfolio. Rather, it's about a combination of competitive concerns in the narrow RVC space, and -- more importantly -- the advantages Amazon will gain through iRobot's incredible data-collection capabilities in smart homes.

Amazon also owns Ring and Blink Home in the smart-home space and has deployed over 500 million devices enabled with its Alexa voice-assistant technology since introducing its Echo smart speakers in 2014.

Meanwhile, iRobot boasts over 19 million home robot users who've opted into its digital communications. And each of these users -- including myself -- happily allows their floor-cleaning robots to build detailed maps of their homes and habits.

iRobot's newest Home App can do everything from suggesting cleaning schedules based on when users leave their homes to allowing users to remotely "check in" on any room in the house using their Roomba's built-in cameras. I imagine Amazon -- the owner of the world's largest digital marketplace -- could leverage this kind of data in a virtually countless number of ways.

That concern sits atop the EC's statement of objections issued to Amazon this week. "The merged entity would likely gain more from additional sales of iRobot RVCs than it would lose from fewer sales of iRobot's rivals and other related products on Amazon," the EC warned. "Such gains include benefits from additional data gathered from iRobot's users."

Echoes of a previous antitrust challenge

Curiously, a subsequent Reuters report on Wednesday revealed that EC lawyers were initially opposed to sending the objections statement to Amazon -- indicating the initial report of an impending unconditional approval was likely accurate.

That said, I expect Amazon will ultimately receive EU approval to close the deal -- with conditions. Consider Google's previous acquisition of Fitbit in 2020, for example, for which the internet search giant only received EU approval after agreeing to restrict its use of customers' health-related data.

It remains to be seen exactly how restrictive regulators will ask Amazon to be with data collected from iRobot's products. But if they push too far, it could easily neutralize one of the most significant catalysts that drove Amazon to acquire iRobot in the first place.