EC probes Google’s takeover of Fitbit

  • August 13, 2020
  • Steve Rogerson

The European Commission is investigating the proposed acquisition of Fitbit by Google under the EU’s merger regulations.
The commission is concerned that the proposed transaction would further entrench Google’s position in the online advertising markets by increasing the already vast amount of data Google could use personalising the ads it serves and displays.
“The use of wearable devices by European consumers is expected to grow significantly in the coming years,” said Margrethe Vestager, the EC’s executive vice-president responsible for competition policy. “This will go hand in hand with an exponential growth of data generated through these devices. These data provide key insights about the life and the health situation of the users of these devices. Our investigation aims to ensure that control by Google over data collected through wearable devices as a result of the transaction does not distort competition.”
Following its first phase investigation, the commission has concerns about the impact of the transaction on the supply of online search and display advertising services, as well as on the supply of analytics and digital tools used to facilitate the programmatic sale and purchase of digital advertising.
By acquiring Fitbit, Google would acquire the database maintained by Fitbit about its users’ health and fitness, and the technology to develop a database similar to Fitbit’s.
The data collected via wrist-worn wearable devices appear to be an important advantage in the online advertising markets. By increasing the data advantage of Google in the personalisation of the ads it serves via its search engine and displays on other internet pages, it would be more difficult for rivals to match Google’s online advertising services. Thus, the transaction would raise barriers to entry and expansion for Google’s competitors for these services, to the ultimate detriment of advertisers and publishers that would face higher prices and have less choice.
The commission sees Google as dominant in the supply of online search advertising services in Europe and that it holds a strong market position in the supply of online display advertising services.
The commission will now carry out an in-depth investigation into the effects of the transaction to determine whether its initial competition concerns regarding the online advertising markets are confirmed.
In addition, the commission will also further examine the effects of the combination of Fitbit’s and Google’s databases and capabilities in the digital healthcare sector, which is still at a nascent stage in Europe. It will also look at whether Google would have the ability and incentive to degrade the interoperability of rivals’ wearables with Google’s Android operating system for smartphones once it owns Fitbit.
In response, Google says it will create a data silo where certain data collected through wearable devices would be kept separate from any other dataset within Google. The data in the silo would be restricted from use for Google’s advertising purposes.
“This deal is about devices, not data,” said Rick Osterloh, senior vice president at Google. “We’ve been clear from the beginning that we will not use Fitbit health and wellness data for Google ads. We recently offered to make a legally binding commitment to the European Commission regarding our use of Fitbit data. As we do with all our products, we will give Fitbit users the choice to review, move or delete their data. And we’ll continue to support wide connectivity and interoperability across our and other companies’ products.”
However, the commission considers the data silo commitment proposed by Google as insufficient to dismiss clearly the serious doubts identified at this stage as to the effects of the transaction. Among others, this is because the data silo remedy did not cover all the data Google would access as a result of the transaction and would be valuable for advertising purposes.
The commission has until 9 December 2020 to make a decision.