Google’s proposed acquisition of Fitbit “has the potential to be a game-changer”, the European Consumer Organisation (“BEUC”) warns in a report published recently outlining the merger’s competition concerns and harms to consumers.
The effects of the combination of Google’s unparalleled market power across several digital markets and Fitbit’s exceptional dataset could be felt, according to BEUC, in multiple markets, and raise horizontal, vertical and conglomerate issues. In its report, BEUC puts forward three recommendations with regard to the Commission’s future examination of the Google/Fitbit merger, urging the European watchdog to “not let this become another Google/DoubleClick or Facebook/WhatsApp moment”.
Recommendation 1: The Commission should consider potential uses of the data that Google would acquire and how this would likely impact different horizontal and vertical markets in which access to data from Fitbit would confer a major competitive advantage or potential asset for the development of new products and services.
While Fitbit and Google have stated that Fitbit never sells personal information, and that Fitbit health and wellness data will not be used for Google ads, BEUC notes that this statement does not exclude, inter alia, the use of Fitbit data for other Google services, the use of data collected by Fitbit which is not “health and wellness” data (including location data) for Google ads or the sale of Fitbit health and wellness data by Google to third parties for any purpose, including advertising.
BEUC points out that the proposed acquisition and the consequent combination of Google and Fitbit unparalleled amounts of data could have the following consequences:
- The merger would eliminate Fitbit as an independent competitor in data collection and supply, which is particularly critical in online advertising.
- It would increase Google’s market power, scale and network effects. Fitbit has the world’s largest database of validated health data. It gathers data not only from its 24/7 wearables, but also from its apps and scales. It has an integrated sleep tracker, and generates real time location data which are of high value to Google in online advertising. The variety, velocity, volume and value of Fitbit’s dataset means that its acquisition by Google raises significant competition concerns, as it will deprive third parties of their ability to use this data to compete effectively in advertising.
- It could harm innovation, as it will increase the size of datasets held by a super dominant player and will deprive SMEs from invaluable data they need to offer innovative services to consumers.
- It would grant Google access to commercially sensitive information regarding the upstream or downstream activities of rivals, as Fitbit collects data on users of third-party apps installed on the same smart mobile devices – in other words, Google could derive a list of customers of rivals on iOS and Microsoft devices.
- It would allow Google to expand its digital and other health businesses such as insurance.
Recommendation 2: The Commission should consider horizontal and vertical effects of the merger in wearables/smartwatches and related markets, and whether the acquisition would result in less consumer choice (including degrading data privacy options).
BEUC argues that the proposed acquisition could allow Google to leverage its market power, including its immense datasets, into the markets of wearable activity trackers/smartwatches, including wearable operating systems and fitness apps. BEUC refers to the following competition concerns:
- The merger could lead to the elimination of potential competition. BEUC invites the Commission to examine whether the proposed transaction constitutes a “killer acquisition” of a potential challenger to the Apple and Android duopoly.
- The merger could allow Google to degrade Fitbit’s current relatively better privacy rights and security protections, leading to reduced consumer choice in privacy options.
- It could lead to competitor foreclosure, if Google modifies Fitbit’s current data portability to/from other services. For example, Google could pre-install Fitbit on Android phones, thereby making consumer switching to competing wearables more difficult.
Recommendation 3: The Commission should assess conglomerate issues following from the acquisition and should consider platform envelopment theories.
BEUC points to potential foreclosure of competitors through tying/bundling, product integration or preinstallations, other technical restrictions or ecosystem issues.
Google is in the process of notifying the merger to regulators around the world. The proposed acquisition is currently under scrutiny by the Australian and US regulators. The US Department of Justice expanded its probe of acquisition, moving to a so-called second request review, asking for more documents and prolonging its investigation into the deal. The ACCC was expected to announce its findings – either issue a final decision or release a Statement of Issues – on 21 May. The announcement date is however delayed, as the ACCC is awaiting information from the parties.