Google-Fitbit Merger Under Investigation – European Commission Opens Inquiry into the Tech Giant

August 14, 2020

Google-Fitbit Merger Under Investigation – European Commission Opens Inquiry into the Tech Giant

August 14, 2020

Miloš Velimirović

Miloš Velimirović

Partner

Katarina Živković

Katarina Živković

Senior Associate

In recent couple of months, a noticeable trend has been on the rise. Big Tech companies are facing scrutiny all across the world for various reasons. Just last month, CEO’s of Apple, Amazon, Google, and Facebook appeared in a virtual congressional hearing before the Judiciary Committee of the US Congress on the control of anti-competitive behavior and de facto monopolies through structures and business practices. Huawei and TikTok have faced data privacy concerns allegations in both US and Europe, while Google lost an appeal for a 50 million euro fine imposed by the French Data Protection Authority (CNIL).

Amidst of all these actions taken against the Big Tech, Google received unwelcome news from the European Commission (“EC”), as it opened an in-depth investigation of the Google-Fitbit acquisition.              

 

Competition Issues

 

As Google announced its merger deal with the smartwatch and fitness-tracker company Fitbit last year, consumer advocacy and anti-trust regulators have expressed concerns over the proposed acquisition. In response, the EC opened an official investigation to assess whether the said merger is in line with the EU Merger Regulation.

 After conducting the first phase investigation, the EC decided to proceed with an in-depth investigation (so-called “second phase”) as the concerns over Google’s market position in the online advertising markets remained an issue. More specifically, the main concern is that Google would gain access to Fitbit’s database through its acquisition and potentially use such data for personalization of advertising, thus raising barriers to entry and limiting the choices of its competitors in the market. Furthermore, Google would not only acquire the database of Fitbit, but also the technology which would enable Google to create a similar database itself.

 As it was determined in the first phase investigation, Google already has a dominant position in the supply of online search advertising services in the EEA countries, holds a strong market position in the supply of online display advertising services in at least 20 countries from the EEA, in particular in relation to off-social networks display ads and holds a strong market position in the supply of ad tech services in the EEA.

 The further in-depth investigation should determine whether Google could degrade the interoperability of rivals’ wearables with Google’s Android operating system for smartphones once it acquires Fitbit, and the effects the merger of these two companies would have in the digital healthcare sector in Europe.

 However, the opening of the in-depth investigation does not automatically mean that the proposed transaction will be blocked. The EC has until 9 December 2020 to issue its final decision in accordance with EU Merger Regulation and is in no way prejudicing what that decision will be.

 On the other hand, Google said it would cooperate with the authorities in providing safeguards to its consumers. It assured everyone that the data collected through Fitbit acquisition will not be used for personalization of advertisement and targeting of consumers. Rick Osterloh, senior vice president, devices and services at Google, even said in a blog post: “We believe that the combination of Google and Fitbit’s hardware efforts will increase competition in the sector, making the next generation of devices better and more affordable.”       

 

Data Protection Issues

 

Consumer advocates groups and anti-trust regulators were not the only ones who raised concerns over the Google-Fitbit merger. Privacy International, the digital privacy rights group, urged both the EC and national authorities to consider the data protection impacts this merger would have.

 Namely, Fitbit as a part of its fitness tracking options collects a vast amount of sensitive data that falls under special requirements in line with the General Data Protection Regulation (“GDPR”). By acquiring Fitbit, Google would gain access to a vast amount of sensitive personal data of its users, making it a sensitive issue from the GDPR perspective. Privacy International has argued that the merger would reduce what little pressure there currently is on Google to compete in relation to privacy options available to consumers.

 Be that as it may, the EC already cooperated with the European Data Protection Board during the first phase investigation. The EC will continue this cooperation also during the in-depth investigation, which should provide for sufficient oversight in relation to GDPR concerns over the Google-Fitbit merger

 

 

This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.

Contact:

Miloš Velimirović, Partner
milos.velimirovic@sog.rs

Katarina Živković, Senior Associate
katarina.zivkovic@sog.rs

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