Google claims its acquisition of Fitbit is not about data, but hardware. This is simply not credible. Data plays a crucial role in the Fitbit deal, as it did in almost every enterprise Google has engaged in so far.
Last November, Google announced its plans to acquire Fitbit, whose wrist-worn smartwatches and fitness trackers track people’s daily activities and relevant health information, such as calories burnt, heart rates, sleep quality and length, and weight, among others. Fitbit also controls one of the world’s largest health and fitness social networks and databases, which enables it to develop solutions to improve health outcomes and drive positive returns for health plans and health care systems.
By means of this merger, Google will receive tons of sensitive data on Fitbit’s customers and reinforce its data power over people who are customers of both firms.
The Google-Fitbit deal has called the attention of antitrust agencies across the globe. On June 18, the Australian Competition and Consumer Commission (ACCC) issued a statement of competition issues pointing out that “Google’s history of strategic acquisitions has enabled it to increase its touchpoints with consumers, accumulate additional data, and entrench and extend its market power.” And on August 4, the European Commission (EC) launched a Phase II investigation into the deal, having found that the “data silo” commitment offered by Google, which stated that certain data owned by Fitbit would not be available to Google for advertising purposes, is insufficient.
Google claimed that the deal is not about data, but hardware. This is simply not credible. Alphabet, Google’s parent company, reported revenues of $161 billion in 2019 and employs some of the most brilliant and talented computer engineers and programmers in the world—it has the money, brands, distribution channels, and the people to develop and sell hardware if it wants to. It did so with its Google Pixel phones in a market dominated by Samsung, Huawei, Apple, and Xiaomi. So, Google can also develop its own smartwatches and fitness trackers to compete with Apple, Samsung, Fitbit, and Garmin.
If the Fitbit deal is not intended as a way to harvest additional data, and Google is capable of entering into the hardware market, which amounts to a relatively small fraction of its turnover, then what is the point of acquiring Fitbit?
Google is virtually ubiquitous and has access to massive and granular information on its users via a multitude of ventures, such as Android (mobile OS), Calendar (time-management and scheduling assistant), Chrome (web browser), Drive (cloud solution), Gmail (email), Maps (including an extensive timeline with the locations you have visited), Nest (smart speaker for voice interaction with services through Google Assistant), Waze (real-time geolocation), and many others. But one thing Google does not have yet is a tool to directly monitor the daily activities and lifestyles of its users. Fitbit presents a singular opportunity to fill this gap.
This proposed acquisition is of particular relevance at a time when Google is reportedly exploring new projects in the health care industry, and the target company has almost 30 million active users and a decade’s worth of records of detailed health metrics. As an illustration of the comprehensiveness of the data held by Fitbit, it has recorded and validated more than 181 billion hours of heart rate data, 9 billion nights of sleep, 457 billion minutes of exercise, 175 trillion steps, and 10 million added female health tracking of menstrual cycles and fertility windows. Those pieces of information are extremely valuable for Google’s purposes in the health care area.
As noted by the ACCC, Fitbit has non-replicable and unparalleled datasets on its users, since a wrist-worn device that is used all the time collects metrics that cannot be captured accurately by other means such as browsing history, credit card spending patterns, smartphones, and cookies. In a recent paper with David Dinielli (Omidyar Network), Yale economist Fiona Scott Morton observed that after the Fitbit acquisition, Google could combine its super profiles with the vast trove of personal health information from Fitbit to monetize ads.
It is undeniable that data plays a crucial role in the Fitbit deal, as in almost every enterprise Google has engaged in so far. If data is not the cornerstone for acquiring Fitbit, maybe Google should only purchase manufacturing plants or enter into an agreement that permits Google and Fitbit to license patents and transfer technologies between each other. In this proposed scenario, both firms would continue to be independent of each other, and Fitbit’s databases would not be accessed or used by Google in any way. Google’s stated goals in pursuing the deal—namely, increasing its footprint in the hardware ecosystem—would be achieved without material adverse effects on data and market concentration.
At this point, it is unclear how antitrust authorities will handle this merger. Notwithstanding the quite-aggressive approach that has been adopted by the EC against Google in recent probes and the recent plans by the Federal Trade Commission (FTC) to reexamine previous acquisitions made by tech companies over the last ten years, both watchdogs did not block Google from taking over a number of established firms and start-ups.
Why Antitrust Enforcers Should Be Skeptical of Google’s Promises
The logic that guides the lack of antitrust intervention in conglomerate/vertical mergers, or where combined market shares are low and there is no significant risk of price increase, does not suffice in digital markets. Indeed, that was the very same approach responsible for letting Google become a digital behemoth to begin with.
For example, in Google’s acquisition of DoubleClick in 2007, the FTC decided not to proceed with a further investigation of the transaction since Google and DoubleClick were not direct competitors in any relevant market, and data and privacy matters did not provide a basis to challenge the transaction. At the time, the FTC also affirmed that neither data available to Google nor to DoubleClick constituted an essential input in the online advertising market, in which strong competitors like Microsoft, Time Warner, and Yahoo were then active.
Similarly, the EC cleared the Google-DoubleClick deal and asserted that internet service providers (ISPs) may extract much broader and richer information from their users compared to Google and DoubleClick. With the benefit of hindsight, the assumptions of data as an impertinent aspect to be considered in merger review and Google being potentially constrained by companies that ultimately never succeeded in online advertising (at least in a way comparable to Google) proved to be wrong.
But more importantly, apart from those conceptual and methodological considerations, antitrust enforcers should pay attention to facts linked to Google’s behavior. The company has a track record of breaking its word and modifying how it has operated across the years:
- Despite its promises in 2005 to only make small changes that would not hurt the privacy rights of its users, Google has amended its privacy policies 27 times since then in order to boost its collection and usage of highly personalized data;
- Google’s privacy policies as of March 1, 2012 established that no combination between DoubleClick’s advertising data and Google’s personally-identifiable information would take place without the prior consent of its users, but an updated version of those policies subtly allowed the integration of both databases regardless of prior consent of its users (this matter is currently subject to the ACCC’s scrutiny). It is also worth recalling that, according to the EC’s decision in Google-DoubleClick, Google submitted that as a result of contractual provisions, it would not be able to take advantage of a significant part of DoubleClick’s database, but this obstacle could be overcome by later contractual amendments;
- Google is currently being sued for surreptitiously intercepting the browsing history and private activities on phones of users who have opted out of Google’s tracking practices.
Thus, we should be careful about Google’s promises in the Fitbit deal.
Besides all the antitrust and privacy concerns raised above, in light of the peculiarities of the proposed acquisition of Fitbit, it seems rather difficult to design appropriate remedies to address the main issues found. First, there may be no reliable ways to determine how Google is handling Fitbit’s data. Second, antitrust remedies generally have an expiration term, so after that Google may acquire the ability to consolidate its databases with those of Fitbit. Third, it does not make sense to allow Google to purchase the entirety of Fitbit and, at the same time, prevent Google from benefiting from its investments.
Finally, from an antitrust perspective, it would be disproportionate to order Google to not use Fitbit’s data troves, but request that Google make those data troves available to third parties, as the EC is reportedly demanding.
The Fitbit deal is an opportunity for regulators to harness the power of Big Tech, at least in the health care industry: Google could provide health insurers, hospitals, and pharmaceutical companies with IT services, but not data as an input for marketing, pricing, or research and development. The past provides insightful lessons that could be applied in the merger review of Google-Fitbit, and perhaps the best solution is to block the deal instead of trying to figure out how to unwind it after it has already closed.
Google is right when it says that it will be an entrant facing head-to-head rivalry from Apple, Samsung, Garmin, and Xiaomi in the wearable devices industry. Nonetheless, that claim is too narrow and shallow for the Google-Fitbit transaction to be cleared by regulators.
Google is not an IT company. It is a data-oriented marketing conglomerate that sells highly customized ads targeted to its users. With health data on Fitbit customers, Google will be able to broaden its portfolio of data and ad services as it has possibly never done before. The least affected market will be that of fitness tracking devices, as no concentration is expected. The devil is in the details (and adjacent markets).
Disclosure: the views and opinions expressed in this article are those of the author and do not reflect the positions of former clients or employers. The author has not received any kind of financial support from Google or other tech companies with a stake in the Fitbit deal or the matters discussed in the article.