The European Commission Conditionally Approved the Acquisition of Fitbit by Google

January 12, 2021

The European Commission Conditionally Approved the Acquisition of Fitbit by Google

January 12, 2021

Milan Samardžić

Milan Samardžić

Partner

Vanja Vujnović

Vanja Vujnović

Senior Associate

When Google announced its $2.1 billion merger deal with the smartwatch and fitness-tracker company Fitbit last year (“Deal”), consumer advocacy and anti-trust regulators have expressed concerns over the proposed acquisition. As a consequence, in August last year the European Commission (“EC”) opened an in-depth investigation to assess whether the said merger is in line with the EU Merger Regulation.

Following its investigation, EC had concerns that the transaction would have harmed competition in several markets.  The concerns raised by EC were in particular:

  1. By acquiring Fitbit, Google would acquire (i) the database maintained by Fitbit about its users’ health and fitness; and (ii) the technology to develop a database similar to that of Fitbit which could be used for the personalization of ads. As a consequence, Google’s competitors could be limited for similar or same services to the detriment of advertisers.
  2. Google might restrict competitors’ access to the Fitbit Web Application Programming Interface (‘API’) in the market for digital healthcare;
  3. Google could put competing manufacturers of wrist-worn wearable devices at a disadvantage by degrading their interoperability with Android smartphones.

Other market participants raised a privacy concern indicating that it would be increasingly difficult for users to track what their health data would be used for.

In order address concerns raised, Google offered the following commitments:

  1. Google will not use for Google Ads the health and wellness data collected from wrist-worn wearable devices and other Fitbit devices of users in the EEA;
  2. Google will maintain a technical separation of the relevant Fitbit’s user data for any other Google data that is used for advertising;
  3. Google will ensure that European Economic Area (“EEA”) users will have an effective choice to grant or deny the use of health and wellness data stored in their Google Account or Fitbit Account by other Google services;
  4. Google will maintain competitor’s access to users’ health and fitness data to software applications through the Fitbit Web API, without charging for access and subject to user consent;
  5. Google will continue to license for free to Android original equipment manufacturers (OEMs) those public APIs covering all current core functionalities that wrist-worn devices need to interoperate with an Android smartphone.
  6. To ensure that wearable device OEMs have also access to future functionalities, Google will grant these OEMs access to all Android APIs that it will make available to Android smartphone app developers including those APIs that are part of Google Mobile Services (GMS), a collection of proprietary Google apps that is not a part of the Android Open Source Project.
  7. Google will also not circumvent the Android API commitment by degrading users experience with third party wrist-worn devices through the display of warnings, error messages or permission requests in a discriminatory way or by imposing on wrist-worn devices OEMs discriminatory conditions on the access of their companion app to the Google Play Store.

Consequently, in December 2020 the EC approved the Deal, subject to the full compliance with the above-mentioned commitments. The duration of the commitments is set to ten years. However, due to Google’s entrenched position in the market for online advertisement the EC may decide to extend the duration of the ads commitment by up to an additional ten years, if necessary.

A trustee, who has to be appointed before the closing of the transaction will monitor the implementation of the commitments. The trustee will have far-reaching competences, including access to Google’s records, personnel, facilities or technical information.

As the Deal is a global merger, it has been notified in several jurisdictions, including the European Union, United States, Australia, South Africa, Canada and Japan.

In parralel with the EC’s investigation, other competition authorities including the Australian Competition and Consumers Commision („ACCC“) and U.S. Justice Department  also initiated  antitrust investigations into the Deal.

Following the EC’s approval of the Deal, Competition Commission of South Africa also conditionally approved the Deal.

However, despite the fact that the Deal has received conditional clearance in Europe and South Africa, other regulators are yet to make a decision.

Specifically, on 22 December 2020 the ACCC has announced that it will not accept a long-term behavioral undertaking offered by Google. The ACCC has extended its decision date for reviewing the transaction through to 25 March 2021 in order to continue its investigation and consider its legal options.

In ACCC’s official announcement it is stated: “The ACCC continues to have concerns that Google’s acquisition of Fitbit may result in Fitbit’s rivals, other than Apple, being squeezed out of the wearables market, as they are reliant on Google’s Android system and other Google services to make their devices work effectively.  While we are aware that the European Commission recently accepted a similar undertaking from Google, we are not satisfied that a long-term behavioral undertaking of this type in such a complex and dynamic industry could be effectively monitored and enforced in Australia.”

Therefore, the closing of the Deal is extended and is subject to the decision of other regulators and it remains to be seen what the final outcome will be. The EC’s approval is a major step toward closing the deal, but Google and Fitbit aren’t totally in the clear yet.

 

 

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:

Milan Samardžić, Partner
milan.samardzic@sog.rs

Vanja Vujnović, Senior Associate
vanja.vujnovic@sog.rs

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