The Australian Competition & Consumer Commission (“ACCC”) published today a Statement of Issues outlining its preliminary views on competition concerns arising from the proposed acquisition of Fitbit (a company that develops, manufactures and distributes wrist-worn wearable devices) by Google.
The Australian watchdog raises two main concerns regarding the proposed acquisition. First, that it is likely to result in an aggregation of data to the benefit of Google and the detriment of competition in several markets, by giving Google (which already collects troves of high-quality consumer data through its products) access to Fitbit’s voluminous, reliable and unique dataset of health and fitness data. Second, that it may lead to foreclosure of wearables manufacturers competing with Google.
Let’s look into these two concerns in more detail.
Concern 1: Aggregation of data
Google has a long history of strategic, data-driven acquisitions that have enabled it to increase its touch points with consumers, accumulate additional data, and extend its market power into emerging markets. With wearables being an emerging channel through which many services may be offered and data collected, it is imperative to ensure that the Google/Fitbit merger will not substantially lessen competition.
In particular, the ACCC is concerned about the impact of the Google/Fitbit merger on the supply of (i) data-dependent health services, and (ii) ad tech services that rely on the collection and analysis of large amounts of individual data, and in particular those services which enable targeting of online display advertising to consumer segments.
Impact on the supply of data-dependent health services
While Google and Fitbit are not currently competing head-to-head in the provision of such services, the ACCC is concerned about the loss of potential competition between Fitbit (either under current ownership or under alternative ownership) and Google. The ACCC notes that, independently of the proposed acquisition, Google will likely become a strong competitor in the supply of data-dependent health services, while Fitbit is in a strong position to enter and compete in data-dependent health markets due to the value of the health and fitness data it collects.
Moreover, the Australian regulator is concerned that the proposed acquisition may limit market entry in such emerging markets. Absent the acquisition, Fitbit will be more likely to partner with businesses endeavouring to develop new and innovative health services, and for which Fitbit’s data constitute an important resource.
Impact on the supply of ad tech services
The ACCC is concerned that the proposed acquisition is likely to entrench Google’s market power in the supply of ad tech services (and in particular of demand side platform (DSP) services), as it will increase the data advantages it already holds over its rivals. This may have the effect of reducing competition in the market and disincentivizing market entry. Moreover, the acquisition might reduce competition between Google and ad tech suppliers which, absent the acquisition, would be more likely to partner with Fitbit to obtain data necessary to improve their advertising targeting and increase the competitive constraints on Google.
In particular, certain wearables data are unique compared to other data sources such as smartphones, credit card spending patterns or data collected from website cookies, as wearables data include metrics that cannot be captured as accurately (or in some cases at all) by other means, such as heart rate, sleep activity or oxygen saturation. Thus, they deliver unique insights about users that are particularly valuable in the provision of targeted advertising. Moreover, Fitbit data are said to be superior to data from other wearable providers, due to Fitbit’s excellent sensor and sensor analysis software and the excellent time series of Fitbit’s dataset. Thus, data equivalent to that held by Fitbit are not currently available from third parties.
Concern 2: Ability and incentive for Google to foreclose competing wearable manufacturers
While Google is not currently a wearable manufacturer, the Tech Giant is a significant and indispensable supplier of key inputs necessary for the supply of wearables, such as Wear OS (wearable operating system), Google Maps, the Google Play Store and the Android smartphone operating system.
The ACCC adopts the preliminary view that the Google/Fitbit merger may provide Google with the incentive to foreclose or otherwise inhibit access to some of these products (e.g. restrict interoperability between wearables produced by its competitors and the Android smartphone operating system) in order to increase the sales of its own wearables to the detriment of its rivals. Moreover, the ACCC is concerned that if wearables are important for other segments of Google’s business, Google’s incentive to foreclose its competitors may further increase.
The ACCC invites interested parties to submit their observations until 10 July 2020, in particular on the following issues:
- The extent to which Fitbit’s data are unique and whether or not there are other sources of these data.
- The extent to which, absent the proposed acquisition, Fitbit and Google will compete or are likely to compete in the provision of data-related health services and certain ad tech services.
- The likelihood that, post-acquisition, Google could be constrained by other competitors in the provision of data-related health services or certain ad tech services.
- The likelihood that the acquisition will alter Google’s incentive to provide access to products such as Wear OS, Google Maps or the Google Play store.
The ACCC has set the goal of having a final decision on the proposed acquisition on 13 August 2020.
The Google/Fitbit merger has also recently been notified to the European Commission, which is set to deliver its decision on 20 July 2020.