Google’s deal to buy Fitbit is under intense scrutiny on 2 continents – here are the privacy and antitrust hurdles it must clear to land an ‘unprecedented’ merger (GOOG, GOOGL, FIT)

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  • Last year, Google announced it would acquire wearables maker Fitbit in a $2.1 billion acquisition that has drawn attention from antitrust regulators.
  • The deal is currently being probed by the Department of Justice, and will have to overcome several hurdles in order to be approved.
  • Google says it will not use Fitbit owners’ data for ad purposes, but there are plenty of unanswered questions about the other ways it could use that information.
  • In Europe, GDPR laws could put Google’s data handling under even more scrutiny. “There’s something very special around this deal,” said one expert.
  • Visit Business Insider’s homepage for more stories.

When Google announced it was acquiring wearables maker Fitbit for $2.1 billion, it felt like a perfect match: Fitbit, which has increasingly struggled to fend off Apple’s dominance in this space, was being thrown a lifeline; Google finally had a way into the health and fitness market.

But it also raised a lot of eyebrows: Google would not only be absorbing Fitbit’s products, but a treasure trove of 28 million users’ health data as well.

The merger is still far from done, and considering the size of both companies — and the vast amount of private user data at stake — this deal is attracting attention from antitrust regulators that could potentially keep Google and Fitbit sweating into 2021.

In fact, experts in both the US and Europe told Business Insider that they consider this merger to be “unprecedented.” In order to stick the landing, Google will need to prove both that absorbing Fitbit won’t be harmful for the market nor will it put users’ privacy at risk.

Google, for its part, has said that it will not use Fitbit users’ data for advertising purposes. “The company never sells personal information, and Fitbit health wellness data will not be used for Google ads,” the company said in a statement at the time.

But even if that data is not used directly for ads, there are plenty of other things Google could be doing with it.

When the merger was announced in November last year, Rep. David Cicilline, chairman of the House Antitrust Subcommittee, pressed the Department of Justice and Federal Trade Commission over how the acquisition could serve to further entrench Google’s data monopoly and put user privacy at risk. Since then, Cicilline has continued to voice concerns over the deal.

“Google has said they will not use this data for advertising purposes, but Google made the same promise or similar promises during its acquisition of DoubleClick in 2017 and later broke that commitment,” Cicilline told Business Insider.

“When a company makes the vast majority of its profits from digital advertising, I think it’s naive to think it won’t use all the data it can to boost its bottom line.”

Cicilline, who is currently leading a separate investigation into anti-competitive behavior among the big four tech companies, has called for a moratorium on major mergers during the pandemic, a provision he wants to include in the next relief package.

If the Google-Fitbit merger doesn’t happen this year, the companies can extend the process through May 3, 2021. But if the deal fails entirely, Google would have to pay Fitbit $250 million.

In the US, the merger is now being reviewed by the Department of Justice, which already has an ongoing, much wider antitrust probe into Google’s business practices, and took over from the Federal Trade Commission to dig into the Fitbit deal.

And it appears that big tech regulation isn’t slowing down in the pandemic. It was recently reported that the DOJ had moved the Fitbit deal to a second request review, where the companies must provide more documentation on the specifics of the deal. The probe is also being overseen by Attorney General William Barr.

Furthermore, just last week, two public advocacy groups wrote a letter to Barr urging closer scrutiny of the deal. “We are very concerned about the potential harms to competition that may arise from the acquisition of Fitbit by Google parent company Alphabet,” reads the letter sent from the groups Consumer Federation of America and Public Knowledge.

The groups are concerned that swallowing Fitbit would give Google a dangerous amount of market power, and argued the merger should be rejected “if the Justice Department finds that it may substantially harm competition.”

Under US antitrust law, the merger could be blocked if it’s considered to “substantially lessen competition.” Google argues that it doesn’t currently have any products in the fitness wearables sector, but according to Maurice Stucke, former DOJ antitrust official and University of Tennessee College of Law professor, user data and privacy still falls squarely under concerns around competition.

“What’s clear now among privacy officials from around the world is that privacy and competition can intersect,” said Stucke. “The collection of data in and of itself can contribute to market power.”

That means regulators are closely looking at how this merger will further consolidate Google’s already-huge data empire.

In the letter sent by public advocacy groups last week, it was pointed out that even if Google doesn’t use Fitbit’s data for its own advertising, by taking Fitbit off the market it is keeping that trove of data out of the hands of a potential competitor’s advertising business.

For the merger to be approved, regulators will need to be convinced that obtaining Fitbit’s database of intimate health data won’t give Google monopoly power.

Google also potentially faces even deeper scrutiny in Europe, where the merger will need to be signed off by the European Commission.

Some experts believe that could be the part that delays the merger, especially as it is also being closely watched by the European Data Protection Board (EDPB) to ensure Google is complying by the laws of General Data Protection Regulations (GDPR). 

It’s certainly not first major tech acquisition to pass through European regulators, but Paul d’Amecourt, a strategy consultant for Vae Solis Europe who specializes in working with tech companies, says it is the most significant to happen since GDPR came into force.

“There’s something very special around this deal,” Paul d’Amecourt told Business Insider. “The name, the environment, the size of it, and the fact we’re talking about health issues.”

According to d’Amecourt, there is the potential for a risky situation where the European Commission could sign off on the deal and then the EDPB contests that Google has violated GDPR afterwards.

Something similar happened in 2017 during Facebook’s merger with WhatsApp, where the European Commission slapped Facebook with a €110 million fine for merging user accounts despite telling the Commission it wouldn’t.

That case will cast a shadow over the EC’s decision regarding Google and Fitbit. To get around concerns that it could violate GDPR, Google may have to offer up certain concessions to the European Commission about how it will handle users’ data.

Google and Fitbit also will likely be asked to provide information on how data is stored on their various databases, as well as detail how they will be able to carry out internal audits to continually reassess their compliance with GDPR rules, said experts.

And although Google has vowed not to use Fitbit owners’ data for advertising purposes, it will need to offer more guidance on what it intends to do with that information.

“They said they won’t directly use it directly for advertising purposes, but it’s very hard to monitor how they’re going to use that data,” former DOJ antitrust official Maurice Stucke said.

“They’re not using it directly for advertising purposes, but let’s say they use it to give you better search results. And then they use their current other data for advertising purposes to target you. In a way, it helps Google maintain its dominance in search, which helps it maintain its dominance in search advertising. The point here is that you could use it indirectly in ways that would be very hard for the agency to monitor.”

This Google-Fitbit merger is notable for the way it combines privacy, competition, and consumer protection concerns in one case, which has fired up a lot of debate. Stucke says it’s the convergence of these three parts, all of which which regulators must take into account, make this a particularly intriguing case that could itself set a precedent going forward.

“This merger is the intersection of those three elements – that’s why it’s so interesting.”

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