Antitrust Law Daily EC approves acquisition of Fitbit by Google, with conditions
Thursday, December 17, 2020

EC approves acquisition of Fitbit by Google, with conditions

By Peter Reap, J.D., LL.M.

In order to win approval, Google offered a package of commitments that includes restrictions on Google’s advertising and commitments related to availability of its android software and platform.

The European Commission (EC) has approved, under the EU Merger Regulation, the acquisition of Fitbit by Google, it announced today. The approval is conditional on full compliance with a commitments package offered by Google. The package includes the commitment that Google will not use for Google Ads the health and wellness data collected from wrist-worn wearable devices and other Fitbit devices of users in the European Economic Area (EEA) and several commitments related to availability of its android software and platform for both users of Fitbit devices and wearable device original equipment manufacturers (OEMs). The deal was announced in November 2019.

The EC investigation and concerns. The EC conducted an in-depth investigation of the proposed transaction, which combines Google's and Fitbit's complementary activities. Fitbit has a limited market share in Europe in the fast-growing smartwatch segment where many larger competitors are present, such as Apple, Garmin and Samsung. The proposed transaction leads to very limited horizontal overlaps between the activities of Google and Fitbit. The Commission's investigation focused on the data collected via Fitbit's wearable devices and the interoperability of wearable devices with Google's Android operating system for smartphones.

The Commission had concerns that the transaction, as initially notified, would have harmed competition in several markets, and market participants raised other concerns. In particular:

  • Advertising. By acquiring Fitbit, Google would acquire (i) the database maintained by Fitbit about its users' health and fitness; and (ii) the technology to develop a database similar to that of Fitbit. Thus, it would be more difficult for rivals to match Google's services in the markets for online search advertising, online display advertising, and the entire "ad tech" ecosystem. The transaction would therefore raise barriers to entry and expansion for Google's competitors for these services to the detriment of advertisers, who would ultimately face higher prices and have less choice.
  • Market for digital healthcare. A number of players in this market currently access health and fitness data provided by Fitbit through a Web Application Program Interface (API), in order to provide services to Fitbit users and obtain their data in return. The EC found that following the transaction, Google might restrict competitors' access to the Fitbit Web API. Such a strategy would come especially at the detriment of start-ups in the nascent European digital healthcare space. The investigation did not confirm concerns of some market participants who consider that, because Google has already a significant presence in the digital healthcare sector, Google may obtain a competitive advantage in this sector by combining Google's and Fitbit's databases to such a degree that competitors would no longer be able to compete.
  • Wrist-worn wearable devices. The EC was concerned that following the transaction, Google could put competing manufacturers of wrist-worn wearable devices at a disadvantage by degrading their interoperability with Android smartphones.
  • Privacy. Market participants indicated that it would be increasingly difficult for users to track what their health data would be used for. The Commission's investigation found that Google will have to ensure compliance with the provisions and principles of the GDPR, which provides that the processing of personal data concerning health shall be prohibited, unless the person has given explicit consent Such concerns are not within the remit of merger control and there are regulatory tools better placed to address them.

Proposed remedies. To address the Commission's competition concerns, Google offered the following commitments for a term of ten years that will be subject to extension. A trustee, who has to be appointed before the transaction can close, will monitor the implementation of the commitments:

  • Google will not use for Google Ads the health and wellness data collected from wrist-worn wearable devices and other Fitbit devices of users in the EEA.
  • Google will maintain a technical separation of the relevant Fitbit's user data, separate from any other Google data that is used for advertising.
  • Google will ensure that EEA users will have an effective choice to grant or deny the use of health and wellness data stored in their Google Account or Fitbit Account by other Google services.
  • Google will maintain access to users' health and fitness data to software applications through the Fitbit Web API, without charging for access and subject to user consent.
  • Google will continue to license for free to Android original equipment manufacturers those public APIs covering all current core functionalities that wrist-worn devices need to interoperate with an Android smartphone.
  • It is not possible for Google to circumvent the Android API commitment by duplicating the core interoperability APIs outside the Android Open Source Project (AOSP). This is because, according to the commitments, Google has to keep the functionalities afforded by the core interoperability APIs, including any improvements related to the functionalities, in open-source code in the future. Any improvements to the functionalities of these core interoperability APIs (including if ever they were made available to Fitbit via a private API) also need to be developed in AOSP and offered in open-source code to Fitbit's competitors.
  • To ensure that wearable device OEMs have also access to future functionalities, Google will grant these OEMs access to all Android APIs that it will make available to Android smartphone app developers.
  • Google also will not circumvent the Android API commitment by degrading users experience with third party wrist-worn devices through the display of warnings, error messages or permission requests in a discriminatory way.

EC conclusion. The Commission concluded that the proposed transaction, as modified by the commitments, would no longer raise competition concerns. This decision is conditional upon full compliance with the commitments, and is without prejudice to the EC's efforts to ensure fair and contestable markets in the digital sector.

U.S. concerns. In July, Senator Amy Klobuchar (D-MN) sent a letter to the Department of Justice to urge the Antitrust Division to conduct a comprehensive review of Google’s proposed acquisition of Fitbit. "Over the years, Google has completed more than 100 strategic acquisitions—including purchases of DoubleClick, AdMob, YouTube, Waze, and many other firms—virtually all of which cleared without significant enforcement action by federal antitrust enforcers," said Klobuchar. The senator advised the Antitrust Division to be extremely skeptical of unenforceable promises by Google not to employ Fitbit user data to support Google’s advertising and other businesses and to be wary of the risk that Google could use Fitbit’s data to lessen competition or foster monopoly positions in markets in which it is already dominant or approaching dominance.

Companies: Google, LLC; Fitbit

MainStory: TopStory AcquisitionsMergers Antitrust GCNNews ConsumerProtection Privacy

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