|The Google/Fitbit deal could ultimately get blocked.|
Even though the European Union (EU) has signed off on Google’s acquisition of Fitbit with some conditions, the United States (U.S.) and Australia are still assessing the deal. Moreover, given that both nations are in the midst of acting against Google and other tech companies, one, if not both, may find the deal violates antitrust or competition laws and seek to force Google to reverse the merger.
In blog posting, Google Senior Vice President, Devices & Services Rick Osterloh stated “Google has completed its acquisition of Fitbit and I want to personally welcome this talented team to Google.” Osterloh asserted “[y]our privacy and security are paramount to achieving this and we are committed to protecting your health information and putting you in control of your data.” Osterloh claimed:
This deal has always been about devices, not data, and we’ve been clear since the beginning that we will protect Fitbit users’ privacy. We worked with global regulators on an approach which safeguards consumers’ privacy expectations, including a series of binding commitments that confirm Fitbit users’ health and wellness data won’t be used for Google ads and this data will be separated from other Google ads data. We’ll also maintain access to Android APIs that enable devices like fitness trackers and smart watches to interoperate with Android smartphones, and we’ll continue to allow Fitbit users to choose to connect to third-party services so you’ll still be able to sync your favorite health and fitness apps to your Fitbit account. These commitments will be implemented globally so that all consumers can benefit from them. We’ll also continue to work with regulators around the world so that they can be assured that we are living up to these commitments.
Last month, following the completion of its “in-depth” investigation, the European Commission (EC) cleared Google’s acquisition of Fitbit with certain conditions, removing a significant hurdle for the American multinational in buying the wearable fitness tracker company. In its press release, the EC explained that after its investigation, “the Commission had concerns that the transaction, as initially notified, would have harmed competition in several markets.” To address and allay concerns, Google bound itself for ten years to a set of commitments that can be unilaterally extended by the EC and will be enforced, in part, by the appointment of a trustee to oversee compliance. However, a number of these commitments are binding only in the European Economic Area (EEA) (i.e. the EU plus a handful of non-EU European nations).
The EC was particularly concerned about:
- Advertising: 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. By increasing the already vast amount of data that Google could use for the personalisation of ads, it would be more difficult for rivals to match Google’s services in the markets for online search advertising, online display advertising, and the entire “ad tech” ecosystem. The transaction would therefore raise barriers to entry and expansion for Google’s competitors for these services to the detriment of advertisers, who would ultimately face higher prices and have less choice.
- Access to Web Application Programming Interface (‘API’) in the market for digital healthcare: A number of players in this market currently access health and fitness data provided by Fitbit through a Web API, in order to provide services to Fitbit users and obtain their data in return. The Commission found that following the transaction, Google might restrict competitors’ access to the Fitbit Web API. Such a strategy would come especially at the detriment of start-ups in the nascent European digital healthcare space.
- Wrist-worn wearable devices: The Commission is concerned that following the transaction, Google could put competing manufacturers of wrist-worn wearable devices at a disadvantage by degrading their interoperability with Android smartphones.
As noted, Google made a number of commitments to address competition concerns:
- Ads Commitment:
- 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, including search advertising, display advertising, and advertising intermediation products. This refers also to data collected via sensors (including GPS) as well as manually inserted data.
- Google will maintain a technical separation of the relevant Fitbit’s user data. The data will be stored in a “data silo” which will be separate from any other Google data that is used for advertising.
- 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 (such as Google Search, Google Maps, Google Assistant, and YouTube).
- Web API Access Commitment:
- Google will maintain access to users’ health and fitness data to software applications through the Fitbit Web API, without charging for access and subject to user consent.
- Android APIs Commitment:
- 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. Such core functionalities include but are not limited to, connecting via Bluetooth to an Android smartphone, accessing the smartphone’s camera or its GPS. To ensure that this commitment is future-proof, any improvements of those functionalities and relevant updates are also covered.
- It is not possible for Google to circumvent the Android API commitment by duplicating the core interoperability APIs outside the Android Open Source Project (AOSP). This is because, according to the commitments, Google has to keep the functionalities afforded by the core interoperability APIs, including any improvements related to the functionalities, in open-source code in the future. Any improvements to the functionalities of these core interoperability APIs (including if ever they were made available to Fitbit via a private API) also need to be developed in AOSP and offered in open-source code to Fitbit’s competitors.
- 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.
- Google also will 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.
The EC allowed the deal to move ahead despite concerns about harms to users in the EU. Amnesty International (AI) sent EC Executive Vice-President Margrethe Vestager a letter, arguing “[t]he merger risks further extending the dominance of Google and its surveillance-based business model, the nature and scale of which already represent a systemic threat to human rights.” AI asserted “[t]he deal is particularly troubling given the sensitive nature of the health data that Fitbit holds that would be acquired by Google.” AI argued “[t]he Commission must ensure that the merger does not proceed unless the two business enterprises can demonstrate that they have taken adequate account of the human rights risks and implemented strong and meaningful safeguards that prevent and mitigate these risks in the future.”
In late December, the Australian Competition & Consumer Commission (ACCC) “announced that it will not accept a long-term behavioural undertaking offered by Google that sought to address competition concerns about its proposed acquisition of wearables supplier and manufacturer Fitbit.” In light of the ongoing fights between the ACCC and Google, this was hardly a surprising outcome. The agency added it “will therefore continue its investigation into Google’s proposed acquisition of Fitbit and has set a new decision date of 25 March 2021.” The agency said Google had offered a deal similar to the one accepted by the EC, but ACCC Chair Rod Sims remarked “[w]hile we are aware that the EC recently accepted a similar undertaking from Google, we are not satisfied that a long term behavioural undertaking of this type in such a complex and dynamic industry could be effectively monitored and enforced in Australia.”
The ACCC claimed:
- The proposed acquisition also further consolidates Google’s leading position in relation to the collection of user data, which supports its significant market power in online advertising and is likely to have applications in health markets.
- Google sought to address the ACCC’s competition concerns by offering a court enforceable undertaking that it would behave in certain ways towards rival wearable manufacturers, not use health data for advertising and, in some circumstances, allow competing businesses access to health and fitness data.
- The proposed acquisition has received conditional clearance in Europe, but several other competition authorities, including the U.S. Department of Justice, are yet to make a decision. Both companies are based in the U.S. and Fitbit’s market share is higher in the U.S. than in most other countries. The ACCC will continue to work closely with overseas agencies on these important competition issues.
In its June 2020 Statement of issues on the proposed merger, the ACCC turned up a reasons why Google’s offer to not use Fitbit data for Google Ads (an offer the EC accepted) will not stop the use and possible abuse of such data:
The health and fitness data collected by Fitbit will provide Google with access to consumer data that is likely to be an important element of services in several markets.
Google will not use these data in Google Ads, but what about Google Maps? Could it find ways to profitably use people’s health data in perhaps selling access to population level health trends to companies aside and apart from Google Ads? I would think the answer is yes even if my example is uninformed or unrealistic.
The ACCC added:
In relation to data-dependent health services, the ACCC is concerned that the acquisition may eliminate potential competition between Fitbit (either under current ownership or under alternative ownership) and Google. Google has a strong focus on new and developing markets and will likely become a strong competitor in the supply of data-dependent health services with or without the proposed acquisition. The health and fitness data collected by Fitbit puts Fitbit in a strong position to enter and compete in data-dependent health markets. The proposed acquisition eliminates this potential competition between Google and Fitbit.
The ACCC’s rejection of the terms accepted by the EU must be seen in light of other regulatory actions. In 2019, the ACCC announced a legal action against Google “alleging they engaged in misleading conduct and made false or misleading representations to consumers about the personal location data Google collects, keeps and uses” according to the agency’s press release. In its initial filing, the ACCC is claiming that Google mislead and deceived the public in contravention of the Australian Competition Law and Android users were harmed because those that switched off Location Services were unaware that their location information was still be collected and used by Google for it was not readily apparent that Web & App Activity also needed to be switched off.
In October 2020, the United States (U.S.) Department of Justice (DOJ) and a number of states finally filed the antitrust suit against Google that has been rumored to be coming since late summer. This anti-trust action centers on Google’s practices of making Google the default search engine on Android devices and paying browsers and other technology entities to make Google the default search engine. Of course, this type of conduct, even if true, does not necessarily bear on the DOJ’s deliberations on whether the U.S. should act against the Google/Fitbit deal. And yet, given the renewed focus on antitrust in Washington, the DOJ under new President Joe Biden might indeed take a look at the deal on the grounds that a massive company is getting much bigger.
In its press release on the October antitrust action, the DOJ claimed
Today, the Department of Justice — along with eleven state Attorneys General — filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to stop Google from unlawfully maintaining monopolies through anticompetitive and exclusionary practices in the search and search advertising markets and to remedy the competitive harms. The participating state Attorneys General offices represent Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina, and Texas.
The DOJ added
As one of the wealthiest companies on the planet with a market value of $1 trillion, Google is the monopoly gatekeeper to the internet for billions of users and countless advertisers worldwide. For years, Google has accounted for almost 90 percent of all search queries in the United States and has used anticompetitive tactics to maintain and extend its monopolies in search and search advertising.
The DOJ claimed:
As alleged in the Complaint, Google has entered into a series of exclusionary agreements that collectively lock up the primary avenues through which users access search engines, and thus the internet, by requiring that Google be set as the preset default general search engine on billions of mobile devices and computers worldwide and, in many cases, prohibiting preinstallation of a competitor. In particular, the Complaint alleges that Google has unlawfully maintained monopolies in search and search advertising by:
- Entering into exclusivity agreements that forbid preinstallation of any competing search service.
- Entering into tying and other arrangements that force preinstallation of its search applications in prime locations on mobile devices and make them undeletable, regardless of consumer preference.
- Entering into long-term agreements with Apple that require Google to be the default – and de facto exclusive – general search engine on Apple’s popular Safari browser and other Apple search tools.
- Generally using monopoly profits to buy preferential treatment for its search engine on devices, web browsers, and other search access points, creating a continuous and self-reinforcing cycle of monopolization.
These and other anticompetitive practices harm competition and consumers, reducing the ability of innovative new companies to develop, compete, and discipline Google’s behavior.
In December, two other suits were filed against Google, arguing that the company’s dominance in the search engine and online advertising markets. One suit is led by Colorado’s attorney general and the other by Texas’ attorney general. The two suits have overlapping but different foci, and it is possible these new suits get folded into the suit against Google filed by the DOJ. There are also media reports that some of the states that brought these suits may be preparing yet another antitrust action against Google over allegedly anti-monopolistic behavior in how it operates its Google Play app store. (see here for more detail.)
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