In August 2020, the European Commission (the 'EC') opened an in-depth Phase II investigation into Google’s proposed purchase of Fitbit.
EC’s preliminary concerns
Fitbit manufactures wearable fitness trackers, with an accompanying app so that users can track various health markers, such as weight, calorie intake, sleep etc. Google licenses its technology for certain smartwatches which also offer fitness tracking, as well as the Google Fit app. The Google Fit app allows users to track health markers on their mobile phones, without necessarily needing a smartwatch.
The EC has raised preliminary concerns over Google’s use of Fitbit user data. At this stage of the investigation, the EC considers that Google is dominant in the supply of online search advertising services and holds strong market positions in the supply of online display advertising services and the supply of 'ad tech services' (analytics and digital tools). The EC’s preliminary concerns are that the proposed transaction would further entrench Google’s market position and give it even more data to allow for more personalised ads and make it harder for Google’s competitors to match Google’s online advertising services. In particular, the EC is concerned that the proposed transaction would raise barriers to entry and expansion for Google’s rivals for these services, to the ultimate detriment of advertisers and publishers that would face higher prices and have less choice.
In addition to examining these issues in more detail during its in-depth investigation, the EC will also further examine the effect the deal may have in the digital healthcare sector, which the EC notes is still at a nascent stage in Europe.
Looking to the future
For some consumers, this might be a welcome merger as it is still not yet possible to directly integrate a Fitbit device with the Google Fit app (although Google Fit can sync with many other wearable devices) and the merger should allow for this technology to be developed. However, others worry that Google might stop the Google Fit app from integrating with wearables made by Fitbit’s competitors – another concern shared by the EC. There is also a broader concern that Google may seek to monetise Fitbit’s user data in ways users have never envisaged.
Google has offered commitments in order to obtain clearance from the EC, including keeping certain Fitbit user data siloed from other data within Google and not used for advertising. However, this was rejected by the EC as the data silo remedy did not cover all the data that Google would access as a result of the proposed transaction and would be valuable for advertising purposes.
The EC’s scrutiny of the deal comes at a time when Google’s market position has been of interest to the EC for some years: for example, following the antitrust investigations relating to (i) Google shopping; (ii) Google’s Android mobile phone operating system; and (iii) Google’s search engine and AdWords.
The EC has said that during its Phase II investigation, it will continue to closely cooperate with competition authorities around the world as well as with the European Data Protection Board. The EC’s deadline for its Phase II investigation is 9 December 2020.
UK regulators and big tech
In the UK, the Competition and Market Authority’s (‘CMA’) recent report on online platforms and digital advertising indicates that the CMA also has concerns in relation to Google’s market position in the online advertising market and its use of customer data. One of the CMA’s concerns was that large online platforms such as Google have access to rich user data and often limit the interoperability of such data with products of their competitors, which allows the larger technology and digital services vendors to create, and benefit from, economies of scale and establish themselves in new markets extremely quickly. The CMA has called for a new regulatory regime together with a regulatory body to address such concerns and indicated that the new regime could potentially be extended to the wider technology sector.
UK and EU competition authorities are by no means the only regulators currently undertaking close scrutiny of tech companies. The Information Commissioner’s Office has recently launched its guidance on artificial intelligence and data protection to address privacy concerns exacerbated by such technology. Ofcom is expected to be given the responsibility to regulate online harms. Both the UK and the EU are also looking into regulating consumer smart devices for cybersecurity and competition issues respectively. There is no doubt that as technology infiltrates our lives, tech companies will see more intense scrutiny from regulators on all fronts.
How can we help?
If you have any questions in relation to the issues raised in this article, please contact Chris Worrall, or your usual Burges Salmon contact.
Written by Shachi Nathdwarawala and Yunzhe Zhang